Generally, when the question: “what exactly is a cryptocurrency” comes up, it is easy to reply; “Digital Currency”. Well, yes, but no. Let’s start at the top. Basically, cryptocurrency is the usage of digital files as money/currency. The name is coined from two terms:
Cryptography: The science of hiding information
Currency: Accepted system of money.
Think you can properly define what a cryptocurrency actually is now? Exactly, “Digital Currency” is easier.
The idea of a cryptocurrency first came up in 1980, based on making anonymous transactions that would not require centralized authorities like Banks. Building on this notion, the first cryptographic electronic currency was developed, called Digicash, by David Chaum, an American cryptographer, in 1995. In 1998, another e-currency called Bit Gold was designed by Nick Szabo.
While the Digicash required specific software and encrypted keys before transactions could be made, the Bit Gold required it’s users to gain by dedicating digital power to solving cryptographic puzzles. Combining these two ideas, the basic concept of the first usable cryptocurrency; Bitcoin, was born. Although, this would not be untll a decade later.
Due to the fact that neither Chaum nor Szabo could solve the authenticity issue of their cryptocurrency, progress in this field was stunted until a white paper titled Bitcoin – A Peer to Peer Electronic Cash System, was published by a person or group of persons under the pseudonym Satoshi Nakamoto, on 31st October, 2008. This heavily described the functionality of a workable cryptocurrency based on the usage of it’s Blockchain Technology. It is worth noting that neither Bitcoin nor any other subsequent cryptocurrency would be possible without the advent of the Blockchain Technology, but this is a topic for another day.
With Bitcoin truly underway and functional, other cryptocurrencies were being developed and launched, such as Litecoin and Namecoin in 2011, Peercoin in 2012 , Dogecoin, Primecoin, Ripple and NXT in 2013. Within the decade, a host of other digital currencies came into light with varying degrees of success. There are currently over 2000 Cryptocurrencies in existence.
Cryptocurrency, given it’s development and implementation, has to have a lot of benefits to go with the amount of work put into its development.
One of the most important benefits of Cryptocurrency would be Low-Cost Transaction Rates. For instance, a particularly recent $99 Million Litecoin transaction was made and concluded in just under 3 minutes, and cost the initiator of the transaction a whopping $0.40, yes, you read that right. 40 cents! This makes cryptocurrency the go-to currency for international transactions.
Another benefit would be Private Transactions. The idea of explaining why you’re spending a particular sum of your own money to the bank is irksome. Essentially, your transactions do not go through long bureaucratic processes, which makes for even swifter transactions.
The last benefit we would be discussing is Total Ownership of your Funds. Given the development and ‘decentralization’ concept of cryptocurrency, no central entity or authority could place a censor or freeze your financial assets. Since most of the time, all it takes for one’s accounts to be frozen are barely proven accusations, usage of cryptocurrency like Bitcoin, provides censor-resistant alternatives.