21st-century unicorn – or the money of the future?
The inventor of the most famous cryptocurrency today – Bitcoin – attempted to build a “peer-to-peer electronic cash system”. This had been tried many times before but the main point of difference between Bitcoin and previous efforts like Digicash was that it was to be entirely decentralised. Without an overarching entity controlling the currency, the notion of “trust” would be removed from the system.
To combat “double spending”, the major flaw in all digital cash systems at that point, Bitcoin inventor Satoshi Nakamoto proposed a revolutionary technology known as the blockchain to record all the transactions made with his currency.
For any single balance, transaction, or change to the network to take place, there would need to be a consensus amongst those validating the network – the miners. Since Bitcoin’s invent, many other programmers have attempted to use the model and tweak it to provide what they consider to be a more functional form of digital cash.
Other cryptocurrencies include Litecoin, Monero, Ether, and New Economy Movement. Many of these efforts tailor their currency for a special purpose. Speed, price, and privacy are among the most common.
What is it used for?
Being such a new technology, it may be that cryptocurrency has not been used for its eventual use case. Still, today it is used for many purposes. These include, but are not limited to the following: remittances, trading, investment, payment for goods and services, private monetary transactions, gambling, and as a hedge against national currencies suffering rapid devaluation (Venezuela, Greece for example).
“Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” – Thomas Carper, US-Senator
But beyond the noise and the press releases the overwhelming majority of people – even bankers, consultants, scientists, and developers – have a very limited knowledge about cryptocurrencies. They often fail to even understand the basic concepts.
Why are Bitcoins worth so much
Bitcoins do not have value as a physical commodity like gold and are not widely accepted as legal tender like dollars. Rather, Bitcoin appears to have value for the following reasons: It is popular. In short, people accept and trade in Bitcoin because other people accept and trade in Bitcoin
Where does the money come from in Bitcoin?
How is the value of a Bitcoin determined?