a crypto world
Author: Ivo Knorr
February 23, 2021
We hear terms like ‘Bitcoin’ and ‘Cryptocurrency’ more and more every day. But what do they actually mean and how will they be integrated into our lives in the future?
Let’s first talk about what cryptocurrency actually is. A cryptocurrency is a medium of exchange, much like a dollar or euro, except a cryptocurrency only exists digitally. There is no way to get it in physical form. Because of the way this virtual currency is stored and secured, it’s nearly impossible to counterfeit, making it more secure than regular currencies. Cryptocurrencies are a decentralized currency, meaning that they are not issued by any government or authority. This also means that the government has no interference with these types of currencies. Another advantage of crypto is that they are very easily transferable with little transaction fees between two parties by the use of keys, similar to a bank address, each key is bound to a specific wallet.
The first and still most famous crypto currency is bitcoin. It was created in 2008 and the first transaction was made in 2009. The first major users of bitcoin were online black markets. They chose to exclusively use bitcoin as a payment method because of its anonymous and secure way of transferring money. In 2011, the price of a bitcoin was $0.30. In 2014, the price was $770. After a new software was introduced for bitcoin in 2017, its popularity greatly increased. Bitcoin reached a price of more than $19,000 at the end of 2017, before going down again. As of writing this article, the bitcoin price is over $52,000 dollars per bitcoin.
Since bitcoin, many other new cryptocurrencies have been introduced. Some of them were meant as a joke while others were meant as a serious alternative to a regular currency. Because of the fluctuating prices of all cryptocurrencies, trading in crypto is attractive for investors, much like trading in stocks.
Buying crypto is one way of obtaining them, but there is another way called mining. The ‘mining’ of cryptocurrencies is when a powerful computer completes a complex computational problem which could never be solved by hand. There are 2 results to this crypto mining. First, when a computer solves such a puzzle, they produce new crypto. Secondly, solving these puzzles also verifies crypto transactions, making the crypto network more secure and trustworthy. Mining is not just something you can do with your own laptop at home, since it requires extremely powerful computers.
Over the years, cryptocurrencies have become more and more mainstream. Many banks and governments already have divisions researching crypto, more and more stores, both digital and physical stores are accepting crypto. Big companies like Tesla are investing millions if not billions of dollars into crypto.
Another great example of the real world adaptation of cryptocurrencies is that recently, the city of Miami has announced that it is exploring options to give Miami residents a part or their whole salary in the form of bitcoin instead of dollars. The proposal also includes ideas of letting Miami residents pay their taxes with bitcoin. This is a very interesting proposal, but it also brings its problems. One of them being that the price in dollars of a bitcoin is fluctuating all the time. If you receive 1000 dollars in bitcoin salary in one month, it might only be worth 500 dollars the next month, making receiving bitcoin as a salary not very secure. There is also the fact that although more and more stores are accepting bitcoin, the large majority of stores do not accept bitcoin yet, meaning that a receiver of bitcoin as salary would still first have to convert their bitcoin into dollars in order to spend their salary.
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