It is fair to say that few could have predicted the massive increase in the popularity of cryptocurrencies during the course of the past half-decade. That said, Bitcoin still remains the most well-known and used. It is perhaps unfortunate that many online articles dedicated to explaining the growing popularity of cryptocurrencies contain inaccuracies, extreme author bias and thinly masked market manipulation statements. All of these deflect from the true benefits of new digital currencies.
What Are Cryptocurrencies?
The word cryptocurrency is used to describe all virtual currencies that are based on a highly-secure, cryptographic framework. The way in which the source code for cryptocurrencies is written means there are always a finite number of coins in circulation. The total number of coins created is known as the roof limit. This number is always in the public domain. You might find it helpful to compare cryptocurrencies to precious metals. For example, there is a finite amount of gold in the ground and once it has all been mined, no more can be produced. Similarly, once all of the coins of a particular cryptocurrency have been “mined”, no more can be created.
The mining process takes up a large amount of energy and data centres who host cryptocurrency mining must ensure a power cut does not affect the energy continuous supply. Lots of data centres turn to UPS Battery Shop for the uninterruptable source of energy in case of power cuts.
Another thing to note is that cryptocurrencies have no intrinsic value. They are not backed by physical assets or government-owned central banks. The first crypto invented was Bitcoin, and all other cryptocurrencies are based on the source behind it. Bitcoins are stored in a virtual wallet on an owner’s PC. This virtual wallet is automatically synced with the decentralised transaction log. You can think of the decentralised network used for cryptocurrency transactions as almost identical to peer-to-peer seeding and sharing used for torrent files. Consequently, as you might imagine, it is almost impossible for government agencies to take down a cryptocurrency, as there is no centralised data facility.
Cryptocurrency Key Facts
- The roof limit is fixed and the value is in the public domain.
- Transaction times for digital currencies are near real-time.
- Cryptocurrencies have bulletproof security. If you have time, you should learn more about public blockchains to understand just how secure they are. The only thing bitcoin owners have to worry about is theft that can occur if a hacker manages to access a person’s computer and obtain all the private keys in their virtual wallet.
- To remove the risk of bitcoin theft you can write down private keys from your virtual wallet on a piece of paper. Then you don’t have to worry about anyone stealing your coins in the unfortunate event that your laptop or computer is stolen or hacked into.
As of today, there are over 900 different cryptocurrencies. Unfortunately, however, only a small number of retailers accept such currencies when it comes time to pay for your goods or services. The three cryptocurrencies that are most widely accepted are Bitcoin, Litecoin and Peercoin. This is most likely because of the fact that the value of those coins is more stable due to the fact there are a few coins left to be mined for those particular cryptocurrencies.
Any changes to the value of Bitcoin almost always trickle down to less popular cryptos. Bitcoin launched in 2009 and at the time, each unit was valued at less than 10 cents. In December of 2017, Bitcoin hit an all-time record high of nearly £20,000. As you can imagine, a lot of people made a lot of money by holding their coins and speculating on future prices instead of using their Bitcoins as everyday currency. The value of Bitcoin is wholly dependent on the faith people have in it. As previously mentioned, cryptocurrencies have no intrinsic value and they are not backed by state governments or tangible items. Their value lies in their functionality.
The newness and unprecedented rapid rise in the popularity of cryptocurrencies have resulted in legislative measures lagging behind. Consequently, many people have capitalised on the lagging applicable legislation. Some of the things cryptocurrencies are used for include online gambling, money laundering, international money transfers, purchasing drugs online, arbitrage and exchange trading. There is little sign of the popularity of cryptocurrencies waning anytime soon, as there is a huge demand for instantaneous, anonymous, secure, decentralised international currencies.