Cryptocurrency has become a buzzword over the past decade and has changed the way people view ‘money.’ What exactly is a ‘crypto currency?’ And how is it changing money as we know it today? Read on to find out!
What Is Cryptocurrency?
According to Investopedia, “A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.” But what does that even mean? In simpler terms, cryptocurrency is decentralized digital money, a form of payment that can be exchanged online for the world without the need for a bank. Cryptocurrencies use a technology called ‘blockchain’ in order to function. Another term! Blockchain is a decentralized technology that manages and records transactions.
What Can Cryptocurrency Be Used For?
Just like regular currency in our world - such as Canadian Dollars or Euros - cryptocurrency can be used to purchase services or goods. However, it isn’t exactly regulated to do so during our day-to-day lives since not everyone has access to these ‘tokens.’ Furthermore, cryptocurrencies can be used for secure online payments in terms of virtual tokens.
How Do Cryptocurrencies Get Value?
Similar to any other currency, cryptocurrency gains value based on how much people engage in its use. A ‘coin’ receives value by becoming useful in some sense. It is first created through a decentralized digital ledger, also known as the blockchain ecosystem. A certain cryptocurrency can increase in value depending on a couple of factors: partnerships established between the coin’s maker and lucrative companies, the launch of user-friendly software to exchange the coin, and an increased amount of people using the coin. However, when it comes to value, cryptocurrencies are considered ‘volatile’ as their values frequently fluctuate due to trends and interest given by influential individuals in society.
The Rise of Bitcoin
If there’s any type of cryptocurrency you’ve heard of, it’s probably along the lines of the word ‘Bitcoin,’ which is the most recognizable cryptocurrency globally and the world’s largest cryptocurrency in terms of market capitalization. Bitcoin was created in 2009 by an individual who went by the pseudonym Satoshi Nakamoto. At the time this article was written, 1 bitcoin has the value of $59,764.50 CAD Dollars. The increase in bitcoin, a boom that occurred first in 2017 then more recently in 2020, could be attributed to partnerships between Bitcoin and other platforms (such as when PayPal revealed that they would allow users to use it as a mode of exchange), as well as the increase in its usage by people who are buying, owning and using it.
Other Types of Cryptocurrencies
Bitcoin might be a popular cryptocurrency, but it’s not the only one. Here are some examples of other coins:
Litecoin: This is similar to Bitcoin in function, but it was created with the goal of having shorter transaction times and lower fees.
Ethereum: This coin focuses on decentralized applications (like phone apps) rather than being a digital currency, with the hope of using tokens (Ethers) to provide currency used by app developers and users in order to remove the middle person in app control.
Ripple: This is not blockchain-based (as many coins are). Instead, it is meant for larger companies and corporations to help each large money transfer to different parts of the world.
Stellar: This coin focuses on making transfers across the globe quicker and more efficient. It was originally created to help establish economies that may not have access to traditional banks and investment opportunities.
IOTA: This coin stands for Internet Things Application. It uses blockchain, but within smart devices on IoT (Internet of Things: referring to the billions of physical devices globally which are connected through the internet). It also allows for devices to purchase items (electricity, storage, data) when they require them and sell when such resources are not needed.
The Future of Cryptocurrency
So what is to come in the future in terms of the evolution of cryptocurrency? It’s important to understand that this form of currency is still quite new for the majority of the world. Additionally, there are still concerns regarding the technology behind this currency, and its impact on disrupting financial systems that are currently in place. Some people see the future of cryptocurrency as one filled with endless possibilities and potential for its use globally, while others believe it comes with too much risk. There is still so much to discover to learn about cryptocurrency and how different types of coins work - feel free to consult the sources below for more information!
Bitcoin price index — CoinDesk 20. (2020, July 15). CoinDesk. https://www.coindesk.com/price/bitcoin
Bitcoin. (n.d.). Investopedia. https://www.investopedia.com/terms/b/bitcoin.asp
Butler, G. (2020, November 19). Bitcoin just blew up: Here’s what you need to know. VICE - VICE is the definitive guide to enlightening information. https://www.vice.com/en/article/xgzdjn/bitcoin-just-blew-up-heres-what-you-need-to-know
Frankenfield, J., & Sonnenshein, M. (2020, May 5). Cryptocurrency. Investopedia. https://www.investopedia.com/terms/c/cryptocurrency.asp#:~:text=A%20cryptocurrency%20is%20a%20digital,a%20disparate%20network%20of%20computers
The future of cryptocurrency. (n.d.). Investopedia. https://www.investopedia.com/articles/forex/091013/future-cryptocurrency.asp
Ranger, S. (2020, February 3). What is the IoT? Everything you need to know about the Internet of things right now. ZDNet. https://www.zdnet.com/article/what-is-the-internet-of-things-everything-you-need-to-know-about-the-iot-right-now/
The social trading & investing network. (n.d.). NAGA - Social Trading and Investing platform, authorized online broker. https://naga.com/blog/where-do-cryptocurrencies-get-their-value-10996744
Understanding the different types of cryptocurrency. (2021, February 25). SoFi. https://www.sofi.com/learn/content/understanding-the-different-types-of-cryptocurrency/?__cf_chl_jschl_tk__=62e0fe1ad425503df6946a74be11cb05c8828e66-1614307532-0-AXCCMj9n2lI1l8zA_Jw7Qa3J8ouTBnMscvLQ1QRmttodm3jNSmTiwrYWrsS1Nju0yacJnT5VBBedeoQYDVkb-WBURDBSKbGlhCUIPiVmazEMcVi_cqLUJYx5ipp8blF1Iv0lIXgNyL306YEK0SciqcFCE4ziduh2JbdSFQkuQCmpk8V9KuyXmEic9wRJPwB4HB1f_mIPFFmgdAgTOmaW1oeI_pEP15jjdja9FI4uMX1GBXrqVDOJL02hBvlR2wfI64vff1uLQQwOYftgVl51p34aVTLoUATjJhvqwNSGHQuIlZtLyGqVeG7Ih3hnjTZlx9FZBXu65ov7glSz_JCwQuNldu64wA0hYb3mYK6_Vt409hxPXgCZF1EHhYIS_x7bEqBU1BxSgAJqkgAQGBiKuUM0QOS3_Ok-I3AXFHovScw_CQi11iXpWeMC_aObgRYvPMJ5f9c2yjU-n8oXO8XWbUg
What does the future hold for cryptocurrency? (n.d.). Learning for a Lifetime | Stanford Online. https://online.stanford.edu/future-for-cryptocurrency
What is cryptocurrency? Beginners guide to digital cash. (2018, January 11). NerdWallet. https://www.nerdwallet.com/article/investing/cryptocurrency-7-things-to-know
Article Author: Asima Hudani
Article Editors: Stephanie Sahadeo, Victoria Huang