“Crypto, the best money we’ve ever had,” is a quote many may have been hearing lately. The advent of the cryptocurrency revolution has brought stories of fortunes made and lost with a never-ending fear of missing out maintaining a grip on those involved. Those with no knowledge of what cryptocurrency is, what it does or what it has to offer might ask how it works and whether it’s money.
The beginnings of cryptocurrency can be traced to the mid-1980s to 1990s when computer scientists began researching concepts in decentralized, fungible currency. Decentralizing currency means a whole new system would be employed in tracking and verifying transactions and funds. Fungible is a word that describes mutually interchangeable items.
The eventual solution was developing a system called a blockchain. In this system, the currency could be verified in a peer-to-peer transaction database. This may all seem a bit complicated, but as explained by Gavin Roberts, assistant professor of economics at Weber State, the blockchain is the medium for decentralization with crypto. The blockchain also provides a level of anonymity and security.
With a peer-to-peer transaction verification model, the next question one may ask is: how does one protect their digital assets and data from theft, fraud or malignancy? The solution is for the blockchain to act as an infinite algorithm. Each time a transaction is made, an addition in data is made to the blockchain algorithm. No buyer or seller information is available.
As explained by Roberts, this is why crypto trading takes so much computing energy, because the computers are in a constant state of verifying increasingly complicated algorithms. This also means a very low probability of theft.
However, if a government wanted to seize coins from a blockchain, it is possible, as proven by the case of the Colonial Pipeline ransom, where eastern European hackers received $2.3 million in bitcoin. Federal authorities were able to retrieve all of the ransom. This has drawn into question the traceability of bitcoin and cryptocurrency.
Bitcoin is the most widely known cryptocurrency in circulation at the moment. Its current price sits just above $35,000. To think that just a decade ago, bitcoin was worth only cents is a true testament to the growth we have seen in the cryptocurrency markets.
Bitcoin’s origin is shrouded in mystery. Some say the coin was developed by an individual or group of individuals using the name Satoshi Nakamoto. Others point to the well-known Winklevoss twins as main proprietors in Bitcoin’s success. The value has seen explosive growth in the past several years. However, extreme volatility in Bitcoin, and all cryptocurrency, make speculative value very risky.
Whether Bitcoin, Ethereum or Dogecoin, cryptocurrencies are here to stay and will continue to influence the world around us as technology, economies and mediums for exchange advance. With more and more platforms such as Robinhood, Webull and Coinbase allowing the streamlined process of trading cryptocurrencies, the action is now accessible on every smart phone.