by: @ECHO22
Cryptocurrency has been around for almost 12 years. In 2008, an unknown person or group of people going under the name Satoshi Nakamoto invented it. It made the headlines; and many people bought some, then Soo forgot about it while it grew in value. Today, a single Bitcoin is worth almost $12,000, and there are many other cryptocurrencies out there. Many people still don’t understand the concept of a digital money that’s instant, private, and free from bank fees. However, in an increasingly cashless world, cryptocurrency may become the main currency we use, which will change everything.
What is Money?
Before we delve into the creation of cryptocurrency, it is important to understand how money was created in the first place. Humans are social creatures, so we have always traded and bargained. Back in 5,000 BCE, people began using metals to create coins that were worth a certain amount. Basically, we leveled up from “I owe you a favor for giving me this apple,” to “here is a coin that this apple is worth.” While in the past, money was based on actual objects of value, such as gold, today it is created differently.
Today, money is created by private corporate banks that offer loans to people and governments. The money is created by these banks out of nowhere. This money is essentially debt, and this cycle is decidedly endless. Certain banks have restrictions on how much money they can create, while others can create money at will and without limit. Since their job is to keep the economy stable, they must follow certain principles when creating money.
What is Cryptocurrency and How is it Created?
Cryptocurrencies are digital or virtual currencies that are secured by cryptography. This makes it impossible for them to be counterfeited or double-spent. Many are decentralized networks based on blockchain technology, which is a distributed ledger enforced by a disparate network of computers. They are also not issued by any central authority, making them immune to government manipulation or interference.
These virtual currencies are considered alternative, because they exist outside the bounds of state monetary policy. Most simply put, cryptocurrencies are a digital means of exchange created and used by private individuals or groups. They use cryptographic protocols, which are extremely complex code systems that encrypt the transfer of sensitive data, securing their units of exchange.
Just like gold, cryptocurrency is mined. However, it is done digitally. The so called miners serve as record-keepers for these communities as well as indirect judges of the value of the currency. Mining requires vast amounts of computing power and highly technical methods. Since most cryptocurrencies have a finite supply, which is a key guarantor of value, miners receive fewer new units per new chainblock as time goes on.
Just like there isn’t an endless amount of gold in a given mine, there is only so much of each cryptocurrency. This makes this currency more similar to precious metals than fiat currencies. Fiat currencies are government issued, and they aren’t backed by actual commodities. This allows banks to create new money as needed and makes their supply unlimited.
____@ECHO22______
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