What is cryptocurrency

Table of Contents


1 The Birth of Bitcoin

2 The Age Old Problems With Fiat Currency

3 Cryptocurrency, The Solution to Fiat
     Cryptocurrency Advantages

4 The Bitcoin Machine

5 The Problems Bitcoin Faces

6 Altcoins, the Bitcoin Alternatives

7 The Future of Crypto

8 Stablecoins – The Next Evolution


What Are Cryptocurrencies?

Cryptocurrencies are the foundation and principal point of concern in blockchain technology. Despite certain slight variations, the two are intertwined. Cryptocurrencies are digital assets that can be traded for goods and services instead of tradable currencies, such as the US dollar, European euro, Japanese yen and British pound, to name just a few. Cryptocurrencies’ true strength comes with the opportunity to cut the middle man out. You don’t need to have a central authority in between you and the individual or service you pay. You are running a wallet and taking complete control of your own assets.

Cryptocurrency is just like the money you put into a bank, in basic terms. You take physical coins and notes, although with cash. Cash, however, is nothing more than restricted entries in a physical account, balance and transaction database which can only be updated if you meet certain requirements. For cryptocurrencies, you have money to purchase things, but only in digital form, on the internet or some other peer-to-peer exchange.

It has been a difficult road from an idea to a global trend. Bitcoin, the world’s largest cryptocurrency, has been little recognized for years with many ups and downs in its price. Yet, Bitcoin skyrocketed to $20,000 per coin in December 2017.

Although the price of the major cryptos is rapidly rising, the technology is continuing to evolve at lightning speed. Today, several major players are still working on a stable, globally available digital currency which will form the foundation for a new global monetary system.


1. The Birth of Bitcoin 

The cryptocurrency scene rarely gives anyone involved a boring moment. And the story about the roots of Bitcoin is very straightforward. It began just 10 years ago. Clearly none at the time had ever predicted it to be the global phenomenon it turned out to be.

The greatest enigma in the world of cryptography is the question yet to be solved. Who’s Bitcoin’s founder, the worlds first and still largest cryptocurrency? In 2009, the person or community named Satoshi Nakamoto launched Bitcoin with the goal of creating an online peer-to-peer cash network.

The Cryptocurrencies’ Exciting and Troubled History: 

2008: The Bitcoin.org domain name was published on August 18, 2008. A mysterious being identified online as Satoshi Nakomoto published Bitcoin on October 31 of the same year: a peer-to-peer Electronic Cash Network. Bitcoin has had a value of a little over one cent per coin during this period.

2009: On 12 January 2009, Nakamoto sent Hal Finney, a computer programmer and colleague, 10 Bitcoin (BTC). It was the first transaction Bitcoin has ever made. It was the same year too that the value of Bitcoin exploded. It soon grew to $27 per coin.

2010: the Bitcoin blockchain was hacked on 15 August 2010, exposing its significant vulnerabilities. Jeff Garzik, the Bitcoin developer, has reported an unusual transaction involving BTC 184 billion. He said, “We had a problem here.” The same year, the world’s first real-world crypto-currency transaction took place in what is now a legendary occurrence. A user of Bitcoin named Laszlo Hanyecz traded 10,000 BTC for 2 pizzas. It was both a groundbreaking and eventually a very important step to move Bitcoin towards cases and recognition of real-world use. Many people laugh at how much worth the same Bitcoins are now. Although at the time just worth $30, 10,000 Bitcoin today is priced at about $65,000,000.

2011: Rivals such as Namecoin, Swiftcoin, and Litecoin made their debut in 2011, while Bitcoin was accused of engaging in the “dark web,” particularly on sites such as Silk Road. But as bad advertisement is still an advertisement, the prices of Bitcoin are skyrocketing during this period until it is dropping again.

2012: Bitcoin made a common conscious appearance when it was used in an episode called “Bitcoin for Dummies” in the third season of the US drama “The Good Wife.” 2013: Blockchain split into two when Bitcoin holders struggled to agree on transaction laws. Two networks served for six hours, which culminated in a major decrease in value.

Several countries in other parts of the world have had various responses to bitcoin use. Bitcoin was not accepted as an official currency in Germany but as a “unit of account,” leading to potential taxation on Bitcoin-based transactions. And the first-ever bitcoin ATM was installed in Vancouver, Canada. In China and Thailand, however, it was banned and considered illegal.

2014: Japanese Bitcoin trading platform Mt. Gox went down in one of the most notorious events in the history of bitcoin and filed for bankruptcy protection. Investors lost everything at the moment, and are still battling for their rights to this day. There was also some new ground gained in acceptance, with Microsoft and others allowing users to buy games using the bitcoins, acknowledging the cryptocurrency’s popularity and potential.

2015: The launch of Ethereum as well as other blockchain altcoins throughout this year. Coinbase, now one of the west’s largest and most successful exchanges, raised $75 million in funding. That was the biggest for a bitcoin company at the time.

It was also during this period that Bitstamp was hacked by European-based bitcoin exchange company. They resumed days later, assuring their creditors there was no effect on their assets.

2016: During this time Cryptocurrencies became more common. The number of ATM machines actually went up from 500 at the beginning of the year to 900 by the end of the year.

It was also in 2016 that Bitcoin payments began to be approved by Uber Argentina, the Swiss national railway, and Steam, a software company It represented yet more global acceptance of what was starting to look like a promising new form of payment.

Through venture capital, DAO (Decentralized Autonomous Organization) was created and financed on the Ethereum blockchain in May 2016. This was the biggest crowdfunded crypto project ever. Sadly, just a month after it was released it was hacked, and all their money were lost. It was another high-profile multi-million-dollar breach in the crypto industry which highlighted the need for improved security measures.

2017: The scaling controversy in Bitcoin was briefly resolved by the hard fork “Bitcoin cash” after much criticism from supporters and increased uncertainty. That caused a split in the Bitcoin community and the miners about which version of Bitcoin to support. Today the key Bitcoin legacy chain coin still remains, and the fork is branded as Bitcoin Cash.

In pioneering international news, Japan introduced new laws that make Bitcoin a legitimate means of payment, while Norway’s Skandiabanken accepts Bitcoin as both a payment mechanism and an investment asset.

2018: Major electronics manufacturer Samsung has announced that it will begin to produce computer chips specifically to mine coins. Similarly, numerous European countries passed legislation on cryptocurrency while others formed partnerships with high profile crypto companies. It was also this year that Ripple launched an international money transfers service with Santander.


2. The Age-Old Problems With Fiat Currency 

Adam Smith summed up the issue well: “The problem with fiat money is that it rewards the minority who can afford it, but undermines the group that has invested and saved money.” Former IMF (International Monetary Fund) Chief Economist Kenneth S. Rogoff wrote a book called “The Curse of Cash,” in which he recommended that governments abolish cash notes entirely.

He wrote that cash takes money off legal free enterprise and then places it on the black market. He also accused the central banks of supporting the black market through the sale of paper bills around the world.

Formerly the gold standard in foreign-currency reserves was the US dollar. It retained real-world interest because it was linked to the US Treasury’s actual gold bullion. The relationship between the gold and the US dollar was, however, broken in 1971.

Which means the entire finance industry is based on price expectations, and supply vs demand, but not of intrinsic value. So when the American government can’t cover its tax revenue spending, they only print more money. By doing so, the dollar’s value plunged as gold grew.

Another critical aspect of fiat currencies is that it pressures people to embrace them. For example, in the United States, the use of legal force in 1933 was used to compel citizens to accept irredeemable Federal Reserve Notes which replaced gold-back money.

This makes fiat currencies unethical since they are made permissible by coercion. Apart from that, schemes emerging around fiat currencies allow those who regulate these payment structures to redistribute wealth by altering the amount, availability, and distribution that can be called legalized robbery.


3. Cryptocurrencies, the solution to fiat currencies

A group of people saw the shortcomings of conventional banking structures. They saw that these could put the property, privacy and peace of mind of people at risk. This led to the emergence of cryptocurrencies-something that a single person can not regulate. They also built something that will allow anyone power over such currency, which will require internet access only, not regulatory agencies, regional boundaries or governments.

Although cryptocurrencies do not automatically usurp the importance of conventional banking and fiat currencies, there are many advantages that the traditional payment systems do not have.

Advantages of Cryptocurrency 

1. Taking the middle man away: No government or private company can monitor cryptocurrencies. And when you buy a property or make purchases, you can do so without third-party requiring. This reduces the time taken to settle payments and makes transactions fairer. In addition, any government can’t devalue or take away cryptocurrencies from you.

2. Open to anyone: Not everyone has conventional banking structures available. Yet with cryptocurrencies, anybody with internet access can have a crypto-wallet. That makes cryptocurrencies useful in countries underdeveloped.

3. Prevents fraud: It makes cryptocurrencies fraud-proof by default since they are decentralized. Unlike paper money, they can not be counterfeited.

Furthermore, trades are done for cryptocurrencies using “push transfers,” which ensures that someone who makes a transaction sends just the sum of currency they want to make to a seller and nothing more. However with conventional credit and debit transactions, which are called “pull transactions,” anyone you send money will be able to pull your personal details as well as the payment. Therefore, the risk of fraud or identity theft will increase.

4. Fast and simple payments: The transfer is completed in only a matter of seconds by using cryptocurrencies. You don’t have to include any personal information – all you need is the wallet address of the person or individual to whom you want to send the payment.

Since you only need internet access to be able to make transactions, cryptocurrencies make it possible to make quick payments and lower fees. This is also due to the absence of the middleman who usually benefits from the fee transactions.


4. The Bitcoin Machine

The primary reason why Bitcoin was first developed was to cut out the middleman-conventional banks. This is because they usually eat up a big piece of your bill.

You would have to pay a real estate agent, who is the middleman, his six per cent fee when you purchase a home. If you are transferring money to a bank in another country, you will also have to pay a processing fee.

In addition to removing the need to pay high commission sums or handle payments to intermediaries, cryptocurrencies can also solve fraud concerns when making any payment. You’ll need to share private details using conventional payment systems, which could be used fraudulently.

How Bitcoin Operates: Bitcoins are stored and exchanged in the Bitcoin database, referred to as a distributed ledger. It can then be accessed using the blockchain which calculates every bitcoin wallet’s spendable balance. Often, it will test new transactions.

Private Keys: These are pieces of data contained in wallets for bitcoin. They are used between the Bitcoin wallets to sign transactions or value transfers. They’re just to be found once. Blockchains can also confirm whether a specific transfer originates from the wallet owner. To ensure that no unauthorized transaction will be made, you need to keep your private key secured.

Mining: This is a distributed consensus network, which confirms pending blockchain transactions. It’s also the method of chronologically positioning all the private keys in a blockchain.

Mining also lets various computers agree on the state of the network. Following that, transactions would be stored in a block that meets strict rules as checked by the network, preventing the alteration of other blocks that would invalidate subsequent blocks.

Bitcoin transactions are worldwide checked by the mining machines. Such machines need to prove that they are true and are properly adding a math problem to the ledger by solving it. Since mining requires plenty of energy, the miners are being compensated for their efforts with new bitcoins. This cycle is what allows people to become involved in the network and keeps it going.


5. Bitcoin Faces Problems 

Since Bitcoin has been embraced by many merchants around the world, it’s not the easiest cryptocurrency to use. Here are some of the drawbacks of Bitcoin: 

  1. Higher fees: Due to the number of people using Bitcoin, the network was over time congested. Because people are able to pay more to get their transactions done quicker, this leads to higher and higher fees. Developers have sought to fix this problem and so far prices are beginning to decline again.
  2. Not easy to use: people who are not educated about computers would find it difficult to use cryptocurrencies, such as bitcoins. After that, you’ll need to keep a long series of numbers (private keys) secure for a transaction to be made.
  3. Energy needs: Mining requires a lot of energy which is detrimental to the environment. But it’s pretty expensive. Average mining electricity worldwide is estimated to rival a small country’s annual consumption.
  4. Used for illegal activities: When you use bitcoin, you don’t have to use your own name. This makes the use of Bitcoin for illicit activities such as money laundering and drug transactions simpler for criminals.


6. Altcoins

The Altcoin Bitcoin Alternatives is a term historically referring to something that isn’t Bitcoin. There were many who have come and gone over the years. Some have unsuccessfully sought to be challengers to the Bitcoin throne. Those altcoins have tried in the past to fill a void that Bitcoin lacks. There are thousands of such altcoins available today, many perfecting their own functions to which Bitcoin was never intended.

Here’s a rundown on some of the popular altcoins that emerged to fix the most obvious shortcomings of Bitcoin over the years:


It is an older open-source decentralized platform that was born two years after Bitcoin. To boost stability, censorship resistance, decentralization, privacy, and speed of certain elements, such as identities and DNS, it was intended to replace the domain name system. However, while it had some high ambitions, it never really caught on.


Litecoin was born on 7 October 2011 and went live 2 days later, after Namecoin at some point. It was developed by ex-Google employee Charlie Lee who envisaged developing a lighter, cheaper Bitcoin version. Although Bitcoin was called “gold,” Litecoin was the “silver,” a way of making transactions cheaper than ever.

Both Bitcoin and Litecoin use consensus proof-work mechanisms that help secure the networks from attacks and abuses. Miners use their computing capacity to solve complex cryptographic puzzles. Litecoin and Bitcoin’s biggest distinction lies in its mining method.

You need a very strong machine to mine with Bitcoin which is called ASIC miners. In reality, to process Bitcoin mining entire warehouses were built. Experts agree this activity carries a risk. Total supply of Bitcoin may be regulated by a small number of people – something that would contradict the justification for the existence of bitcoin, which was to distribute wealth equally among all citizens.

Charlie Lee developed Litecoin, using ordinary computers to be mined. It means more people will be motivated to get involved.

Bitcoin uses the SHA-256 algorithm which promotes processing power when cryptocurrency is mined. At the other hand, Litecoin uses “script algorithm” which gives priority to those with high-speed random access memory rather than processing power.

Litecoin is the second most forked cryptocurrency, and it varies from Bitcoin with certain improvements in parameters in addition to the mining puzzle. The time between block formation, for example, is 4 times shorter than that of Bitcoin, which takes 10 minutes.


DogeCoin is a very controversial cryptocurrency that started as a joke but spread rapidly as a large community formed around the new coin. It was born from a meme that at the time was common, and hence the Shibu Inu dog from the internet meme “Doge” on its logo.

Dogecoin was founded on 6 December 2013 by Billy Markus and Jackson Palmer with the goal to make an interesting digital currency that would attract more people than Bitcoin. It did fund several marketing campaigns and public events.

Another important distinction between Dogecoin and other cryptocurrencies was the notion of random block rewards. In Dogecoin, instead of being set, each block bonus is random, based on a pseudo-random feature used on the previous block hash. It helps miners to decide whether a reward is low or high, while allowing them the ability to mine other cryptocurrencies.

Sadly, a few months later, the feature was dropped. Today the block reward scheme for this cryptocurrency is set as since February 2015 all halving events have been completed.


Ethereum is the first cryptocurrency allowing the development of smart contracts using a Turing-complete programming language. This was built with the idea that contracts that conform to a computer program and can be fulfilled and implemented using a set of conditions that must be fulfilled. Such contracts are known as “smart contracts” and are a pillar of Ethereum.

Users must pay in Ether to get a smart contract built and run on a peer-to-peer network. Ether serves as both the Ethereum network’s contract power and crypto-currency.

Other applications for the Ethereum network include financial markets, electoral systems, domain name registration, and crowdfunding platforms among many others. Ethereum also gained popularity as # 1 forum for other businesses to create their own cryptocurrencies and ICOs with via 2016 and 2017.


Monero is a Personal, Free and Untraceable Cryptocurrency. It uses a ring signature algorithm where multiple participant signatures are required for making monetary exchanges. A transaction can be connected to, but can not be tracked back to, a community of users. This currency is also fungible, meaning that any circulated coin is completely equivalent to other circulating coins.

For privacy security Monero allows a sender to indicate a payment ID of their choosing. The recipient would, therefore, have no knowledge of the origins of the funds. Together with the payment ID you can also create an integrated address for faster transactions.


Cardano is a third-generation cryptocurrency intended to protect user privacy while facilitating the implementation of regulations. The roadmap continues to grow since its launch in 2015. It eventually reached the spot in the top 10 market cap cryptocurrencies early in 2018.

Unlike other early-born cryptocurrencies, Cardano is high-speed, allows for money ownership, anonymity and pseudonymity, supports the side-chain principle, and allows extensible applications such as gaming and gambling, identity management, and verifiable computations.

Which makes Bitcoin special from Cardano? It has an advanced multi-layer architecture that while incorporating regulations, protects an individual’s privacy rights in financial transactions.

Cardano Settlement Layer (CSL) 

Cardano Settlement Layer is a blockchain of its own with ADA as a token. It stores and accounts for transaction interest, and supports an extension of the Control layer. The settlement layer in gaming and gambling helps verify how honest numbers were produced and how a game’s results were.


In the year 2012, Chris Larsen and Jed McCaleb launched Ripple Ripple. Compared to Bitcoin, it is more oriented on becoming a digital payment network. The aim is to “do for payments what SMTP did for email, allowing different financial institutions’ systems to interact directly,” which enables banks and other financial institutions to integrate Ripple into their own systems.

Ripple was developed to operate on a decentralized open-source and peer-to-peer network that allows users to perform financial transactions in any currency, whether in Litecoin, bitcoin, USD, yen or other currencies.

How Ripple works can be a bit complex. Person A, for example, wants to give a $100 payment to Person B, who is from another area. Person A does this with a password via Agent A which requires that person B respond correctly. Agent A must warn the transaction information of Person B’s partner, Partner B, consisting of the password, recipient and sum to be reimbursed.

That makes the method complicated, is that the funds that Agent B must transfer from his / her own account to Agent A, Person A’s representative. That means Agent A is owing Agent B the $100 number. Agent B will record the transaction also known as IOU, which Agent A will pay on a day decided, balancing out the debt.

Both these activities will be carried out via a platform called Gateway, which acts as a link in the trust chain. This medium also acts as a credit intermediary by which currencies are sent and received over the network. The Ripple network needs trust to initiate these transactions in the light of this example. Unlike Bitcoin and other cryptocurrencies, Ripple doesn’t run a proof-of-work or stake evidence scheme.


7. The Future of Crypto

The birth of Bitcoin and the subsequent evolution of cryptocurrencies that has been going on since 2009, were astounding. In less than a decade, there has been so much data collection in the real world that it is much easier to foresee how cryptocurrency can grow on the road to being a viable replacement for the global currency.

Last May 2018, a renowned venture capitalist, Tim Draper predicted Bitcoin’s fate. He said by 2022 it would be over $250,000. During 2014, Draper also made a bet, claiming Bitcoin would be worth $10,000 within three years. His first prediction came true, since in 2017 BTC hit a $10,000 mark. In reality, by the end of 2017, it had made an all-time high valuation of $19,783.

When asked by Rachel Wolfson, a Forbes reader and cryptocurrency writer herself, what was his reason for his prediction, Draper said it “focused on the assumption that Bitcoin will be easy enough to use in the future and that people will be able to start dealing with it and using it as a store of value.” Draper also assumes that more and more people would start spending on currencies. He also said cryptocurrencies would kill fiat currencies altogether.

Cryptocurrency has, it is true, had its fair share of ups and downs. Yet business dynamics make it easier for people to make forecasts about what to expect in the near future practically accurate.

Experts expect that there will be more support from institutional investors for Bitcoin and other digital currencies Less and more governments are looking to control cryptocurrencies, giving investors more confidence to put their hard-earned money into them. In addition, more people are realizing the value of cryptocurrencies as a viable asset for attracting returns.

Some experts, however, claim that given the steps taken to govern these digital currencies, so many factors still remain that make them volatile:

  • Institutional capital shortage 
  • Insufficient intrinsic value 
  • Implementation of regulations

Many who have their eyes on the cryptocurrency market assume that as cryptocurrency becomes more common, a rhythmic pattern of volatility will emerge.


8. Stablecoins – The next evolution

It is known that the Next Evolution Cryptocurrencies are volatile no matter what will be done to fix this problem. This is the very reason why they developed Stablecoins.

Stablecoins are a type of digital currency which was created specifically to tackle cryptocurrencies volatility. There are actually two distinct categories: fiat-backed Stablecoins, backed up by real-world fiat currencies, such as Euro, US dollar and British pounds, and crypto-backed Stablecoins, backed up by a second cryptocurrency.

It is assumed that another kind of Stablecoin would very soon become popular. Such Stablecoins are funded by commodities, such as oil, and precious metals, including gold. An upcoming Stablecoin is expected to become the leader in this emerging cryptocurrencies market. This latest Kinesis is a Stablecoin. It is designed to give its users incentives, as well as to provide a versatile and secure digital monetary framework.

Kinesis blends security, cryptographic technology and yield, making spending simpler for users and preserving their token value at the same time without fear of uncertainty. The Kinesis team said, “We can take the largest store of value, gold, and make it an efficient medium of exchange through blockchain and crypto-currency technology under the Kinesis Monetary System, then stimulate money velocity and economic activity through a multifaceted incentive yield program. Kinesis is neither abstract nor theoretical, it has been carefully developed.”

An instrument such as these Stablecoins has long been needed. Especially exchanges are in desperate need of an asset which can make a suitable pairing for other cryptocurrencies. Although USD has been the go-to for a long time, Stablecoins provide all the functionality and features of normal cryptocurrencies in which USD simply can not compete. It will enable the onramp of millions of dollars from investors who can not trust the volatility of other cryptocurrencies and eventually provide one of the initial goals of cryptography, a useable store of value for daily transactions and exchanges.

Stablecoins will inaugurate the next age of cryptocurrencies and lead to mass adoption in daily circumstances for which crypto has been struggling from the start.





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