Cryptocurrency, also known as crypto, is any digital currency that can be used to purchase goods and services.
This currency uses an online ledger that has a strong level of cryptography attached to it to secure each and every transaction. As such, many companies have indeed issued their own currencies which are known as tokens.
These can be traded specifically for the goods and services that the company in question provides. These can be compared to casino chips that work in the same way, where you can exchange real currency known as FIAT currency for cryptocurrency to access the goods or services.
A FIAT currency or FIAT money is any money that is accepted by a government for paying taxes or debt, but it is not pegged to or backed directly by gold or other valuables.
Cryptocurrency works through the usage of technology called blockchain, and blockchain is a decentralized technology that is spread across many computers that manage and record transactions.
To summarize, a cryptocurrency is a digital currency that is designed to work as a medium of exchange much like FIAT currency. It uses cryptography to secure and verify the transactions made, and even has control over the creation of new units of a certain cryptocurrency.
These are limited entries located within a database that cannot be changed unless conditions that are very specific are fulfilled.
The history of Cryptocurrency
Throughout the 90s, there were multiple attempts at the creation of a digital currency.
Numerous systems were developed, such as DigiCash, Beenz and Flooz. Unfortunately, all of these failed to make an impact. The main reasons why most of them failed included financial problems, and even fraud, however, most of the time it was due to differences between company CEOs and staff members.
The common similarity among all of these systems shared is the fact that they took advantage of a Trusted Third-Party approach to doing things. This means that the companies that developed them can verify and facilitate each of the transactions that were made.
These attempts had their own after-effect, as many companies saw digital currencies as a lost cause, an assured failure, and an unworthy investment.
Fast forward to 2009.
In 2009, an anonymous programmer or group of programmers (it’s not clear) using the pseudonym Satoshi Nakamoto created Bitcoin. He or they described Bitcoin is described as the first decentralized, peer-to-peer electronic cash system.
A decentralized system is a system where no servers are involved, and it has no authority controlling it, much in the same way as peer-to-peer networks work when you share files online.
Let’s talk about why this was necessary…