What is the difference between a bitcoin and a real coin? Why do they look like Mario Brother’s coins online? Is this sort of currency trustworthy or valuable? Can we say goodbye to debit cards in the near future?
Cryptocurrency is a virtual currency. Any central authority or government does not issue this digital currency. Rather, cryptocurrencies are often decentralized networks that rely on blockchain technology, where information is stored in a ledger secured through cryptography.
Though there is potential to make a lot of money, there is also a risk in relying on this digital income as the value of the coin can change hourly. One example of a cryptocurrency is bitcoin. Bitcoin is similar to a real coin in the sense that its value is determined by the gross imports and exports of the currency but different from the physical currency that we use today, which is managed and printed by governments. With physical currency, banks end up charging service fees for banking accounts and attach tariffs to large transactions because they have to send the money to a different country. On the other hand, cryptocurrencies are created by the public through a process called mining.
Mining crypto is where people offer their valuable resources such as their computer’s processing power to decipher massive algorithms that, in the end, add a new “block” to the chain. When these blocks are added to the chain, everyone who participated in its creation gets a percentage of the cryptocurrency. Its value is then determined based on the people’s dedication to that currency. In other words, the blockchain technology that cryptocurrency relies on is a shared public ledger where all transactions are recorded and secured through cryptography. In the ledger system, each block has to be cryptographically verified based on the one that came before it and the one after it, forming a secure chain of blocks. Blockchain technologies can quickly decipher these massive blocks thanks to Big Data and determine if things truly happened as long as every request to the blockchain comes from a verified source. It transforms how money is accessed, traded, and grown through a peer to peer system.
So what does this mean for banks and the overall centralized financial system? Banks control the price to access your funds based on the market’s inflation and have the potential to freeze your funds if the financial system collapses. On the other hand, cryptocurrency enables higher financial freedom and easy offshore banking through peer to peer lending. People can instantly send crypto to each other without any transaction fees and no longer need to apply for a business bank account, which creates a trusted transaction network between individuals and their money without relying on governments or central banking systems.
You can pay for goods or services, invest or exchange funds with others through this digital currency, which challenges the modern banking system. Cryptocurrency is owned and validated by the collective mass authority of millions of people. Will people start to trust this more than prices set by central banks? Today, it is easier than ever to begin mining or investing in digital money. Some of the top cryptocurrencies used today include Bitcoin, Chainlink, Litecoin, Pi, Ethereum, Binance Coin, and Tron. The more people that use these networks, the more secure they become. If investing or mining in cryptocurrencies is something you are interested in, make sure to do your own research. Today I have just scratched the surface about this new form of digital currency, and there is a lot more to be said about this complex and ever-shifting form of financial freedom.
Kirstin Corbett is a professional communicator dedicated to promoting new sustainable initiatives and technologies. Her background in Anthropology and Communications can explain her passion for writing about social injustice issues, as well as the cultural impacts of new technologies. Her goal is to educate and enlighten others through the content she creates.