In the interest of giving out a well-rounded viewpoint on Cryptocurrency I first ran several polls on popular blogs and sites asking readers out there what they know about Cryptocurrency (no - not Superman’s Achilles heel in money form) and the results were shockingly limited!
So before I get into expressing my view points in my next set of articles, I thought hey let’s break it down for all our TD readers out there who need a fast-track insight into what it is.
To be fair, if you’ve continued reading, I coined the article title because maybe like some of you, my first foray into the Tech world started with several “for Dummies” self-help books (yes books not e-guides) and so being appreciative of how fast the Tech space has evolved in such a short span of time, I respectfully used the reference to those books which actually did start me on a roll-coaster journey, a ride which I have no intent of hopping off!
Back to Cryptocurrency!
As any honest inventor will tell you, a lot of new inventions and concepts come about because they stumbled into it when working on something altogether different (although they may state later that was what they were thinking about all along). Cryptocurrency is like all those inventions. It was never intended. It evolved as a byproduct from the creation of Bitcoin. Again another invention which when it set out was not created with the intent of what it is today, a digital or virtual currency.
Bitcoin is a type of Cryptocurrency but it is by no means the only one. Most cryptocurrencies adopt the principles of Bitcoin with regards to the design (their creation and protocols) for the set of rules governing them.
In 2009, an unknown inventor/ programmer/group of programmers going by the pseudonym, Satoshi Nakamoto, introduced Bitcoin an open-source software.
Relevant to Cryptocurrency is that Nakamoto built a decentralized digital cash system or a digital cash system without a central entity.
The currency world you’re familiar with (Fiat Money) works on a centralized monetary system wherein each country has their own central bank that regulates everything associated with their currency. So for all of your normal financial transactions, for example getting paid your wages, on-line shopping or even sending money to your always-in-need friend you would do so via a bank. The value of your money in the bank and the way its transacted is all managed and controlled by the government and the central bank. Decentralized currencies on the flip side don’t work off interest rates, monetary policies, or anything related including the creation of physical money.
(Fiat Money: Most of the world’s money [Paper Money & Coins] is called fiat money. Meaning we accept it as money because a government says that the paper currency it prints is the accepted medium or legal tender for making financial transactions, with the value of the medium showing on it.)
Cryptocurrency removes the 2 key elements in the management of money and finance: Trust and Centralization. That means no Governments and no Banks interfere in the actual cryptocurrency transaction between the two users (the buyer and the seller). However, Governments can still tax you on your Cryptocurrency transactions and the Banks actually do hold your fiat money which you need to buy Cryptocurrency with.
So thus far you know that
- Cryptocurrency is a form of digital or virtual currency
- It is not issued by any central bank or authority and the transactions are recorded between two users without any outside influence.