Cryptocurrencies are digital currencies that are not controlled by any government or central bank. They are created, exchanged and used electronically. Cryptocurrencies can be exchanged for real-world currencies, but can also be used to buy goods and services.
Cryptocurrencies have been compared to Ponzi schemes and even compared to “bubble” terminology itself. With such a volatile nature, the value of cryptocurrencies has been highly unstable (as with any commodity), creating a lot of controversy among the crypto community. This lack of trust in the currency is what had brought it down to a fraction of its original value at its peak in 2017.
7 Things You Didn’t Know About Crypocurrencies: A blog summarizing cryptocurrencies such as Ripple, Ethereum, Bitcoin, etc.
The development of cryptocurrencies is well publicized, but the underlying technology has many more fans than you might suspect. For example, I’ve seen some things written about Ethereum that are so off-base that I wonder if the writers even understand what Ethereum does.
I’ve seen other things written about crytpocurrencies that are far too technical for the average reader. So here are seven things you didn’t know about cryptocurrencies that might help make sense of it all.
Something is a cryptocurrency if it’s decentralized, uses cryptography as a means of verifying transactions and as a way of issuing assets, and creates its own money supply.”
Though the term was first used in an academic setting, by the late 1990s it had evolved into the colloquial “crypto-currency,” “alternative currency,” or “digital currency.”
In that original sense, all digital currencies are cryptocurrencies; it’s just that some are better known than others. Bitcoin was the first successful one, but there are now hundreds of them.
Cryptocurrencies can be used to make payments online, to hold value outside of banks, to gamble on virtual sports or other activities, or to buy real-world goods. Only a small number of them will have use outside the black market, but that doesn’t mean they won’t become big: Bitcoin will likely continue to grow as long as people aren’t sure they can do so without getting caught.
Ripple is the first cryptocurrency that can act as a payment system between different banks, replacing expensive and time-consuming correspondent banking systems.
Ethereum is the first Turing-complete smart contracting platform that runs on a blockchain, allowing developers to create decentralized applications.
Bitcoin is the first example of a cryptocurrency, invented in 2009 to enable financial transactions without third parties. Litecoin, Dogecoin and other altcoins have since been created.
Combining these ingredients with technologies such as TOR, i2P and VPNs has led to an emergence of private cryptocurrencies that can be used for anonymous payments.
Ripple is a company that issues an XRP token. It is similar to Bitcoin in that it is a digital currency. However, unlike Bitcoin, Ripple does not use peer-to-peer technology for bitcoin mining and instead uses an enterprise-grade distributed ledger technology (DLT) for settlement. The xCurrent product uses XRP as the bridge currency.
XRP is a cryptocurrency which has been described as a “banker’s coin,” and has been compared with Bitcoin in terms of volatility. It isn’t possible to mine XRP like one could with bitcoins, but banks can buy it on exchanges.
Ripple is not the only company using blockchain technology in banking and financial services. In 2016 Bank of America, UBS, Credit Suisse, J.P Morgan Chase, MUFG and others announced they were using blockchain technology to settle cross-border payments using various cryptocurrencies, including bitcoin.\
Cryptocurrencies are a bit like the Internet in the early 1990s. The difference is that it has taken us about 20 years to get to where we are now. The Internet became ubiquitous over time, not all at once. Cryptocurrencies haven’t yet reached that point, and they may never.
Cryptocurrencies are a new way of making money, because they allow people to make money without trusting anyone else to hold their money for them. But the analogy works better when you think of cryptocurrencies as a form of money-as-a-service. Whatever else you can say about Bitcoin or Ethereum, for example, there’s no danger of them going bust and losing your money.
This is important. One reason why financial crises always seem so terrifying is because they take place when trust evaporates overnight. It isn’t just that people lose their savings; it’s that they lose their trust in the system. There can be no more confidence in institutions than there is in yourself; we look to institutions to tell us how much money we have, how we can spend it, what we can do with it without breaking any laws, and so on, and if those institutions fail then we become less confident in everything around us: how much money other people have, whether
One of the problems with cryptocurrency is that it’s all too easy to get caught up in the hype and forget what the currency actually does. So let’s recap: cryptocurrencies are useful for moving money around, but not for storing it. They are useful for buying things, but not for investing in companies or creating new companies or making money from trading. And they’re useful for sending messages, but not for email or instant messaging or video conferencing.
They don’t do anything you can’t already do with a credit card, a bank account, or cash. They’re just easier to move around, and some people have made piles of money by doing so. But those people are the exception; most people have lost their money this way.