With the bitcoin fever, much has been said about such cryptocurrencies, but little is known about exactly what that kind of money is. By the way, did you know that bitcoins aren’t the only cryptocurrencies? Yeah, there are several others. In this article, you will come to know what a cryptocurrency is about, how they came about, what the various types are, and what the challenges are for the future of cryptocurrencies. With Bitblender you can reach the best deal here.
What Is A Cryptocurrency?
Cryptocurrencies are nothing more than virtual currencies used for making payments in business transactions. That is, they have the same function of buying goods and services as the currencies you already know, such as the Dollar. But what is the difference between cryptocurrencies and regular currencies?
Besides being completely virtual, there are three basic characteristics that differentiate cryptocurrencies from regular currencies: decentralization, anonymity and zero transaction cost.
Decentralization essentially means that these currencies are independent of a central bank or state for their regulation, that is, their price swings occur according to the very economy behind the currency, having less state interference than a regular currency would have.
The only central element in the process is the Blockchain system, a kind of electronic book that accounts for all transactions made. Transaction logs are stored by a large community of users around the world, not in one place. This allows access to public and fast database verification and makes hacking difficult. The complex data technology behind Blockchain ensures that transactions are reliable.
Cryptocurrency transactions also guarantee relative anonymity to the user. Most do not require any personal information to start using the service, which leads some to argue that illegal activities, such as drug and weapons trafficking, could be facilitated by this means.
Zero transaction cost is another major differential of the service. There is no central authority to interfere by imposing any kind of fee on cryptocurrencies. Regular currencies are usually issued by central banks or government institutions, and the entire apparatus behind transactions between individuals is tied to rates set by the government and banks where the transaction takes place. In the case of cryptocurrencies there is no central authority, so the cost of transactions is zero. For this reason, cryptocurrencies have become a viable alternative especially for international transactions, where rates can be quite high if carried out by regular means.
How Did Cryptocurrencies Come About?
With the advance of cryptographic studies in the 1980s, the possibility of creating completely virtual currency systems began to be pursued. Notably, a group of self-styled cyberpunks developers and encryption enthusiasts, would lay the groundwork for the creation of cryptocurrencies. This group aimed at creating a transaction system in which individuals could enjoy total freedom and privacy away from the eyes of “Big Brother”, which speaks of “Big Brother” as a figure of authoritarian government with excessive control over the privacy of the population. The group’s meeting culminated in the writing of A Cyberpunk’s Manifest, which spells out their liberal ideas about inalienable inherent human privacy.
In addition to the group, a software engineer had also been developing his version of virtual currency. The concept of the so called b-money, name given to the currency, was shared through two protocols. In them were features common to today’s cryptocurrencies, such as decentralization and anonymity. However, b-money was never widely used.