The words currently making the headlines these days are cryptocurrency, Bitcoins, blockchains and FinTech. Amidst all the commotion, newsletters and general media attention, a huge part of the population has no idea what it all means. Even bankers, developers, tech savvy folks and other individuals in the financial sector have basic notion about cryptocurrency. Let us understand what cryptocurrency stands for and all of its overwhelming possibilities!
What Exactly Is Cryptocurrency?
In layman’s terms, cryptocurrency is commonly defined as digital currency that uses a public key cryptography system, setting it apart from the regular currencies. Needless to say, it is highly secure and non-forgeable. The reason for the growing popularity of cryptocurrencies is because the transactions are entirely safe, anonymous and utterly decentralized.
Cryptocurrency: The Highest Selling Point
The major reason for cryptocurrencies to take the financial world by storm is the use of the blockchain technology. As defined by Don & Alex Tapscott, authors of Blockchain Revolution (2016), “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
The blockchain is a robust technique which makes it possible to eliminate the middlemen for transactions involving cryptocurrencies.
Its main feature is that of decentralization which is achieved by using a global network of computers that uses the blockchain to manage the entire database containing the cryptocurrencies transactions. Therefore, the use of a central authority to manage the database is rendered needless.
Bitcoin & The Advent of Cryptocurrency
One word that has become synonymous with that of cryptocurrency is the Bitcoin. Some say that cryptocurrency emerged as a side product of the Bitcoin invention while others deem Bitcoin to be the first decentralized cryptocurrency.
The brains behind this invention is an individual with an alias or a group named, Satoshi Nakamoto. Bitcoin was originally designed as a peer-to-peer electronic cash system in 2008.
The most riveting part of Satoshi’s invention was that he developed a digital cash system that was completely decentralized! Bitcoin enables decentralized transactions without any credit card or central bank interventions. Today, the Bitcoin is the most popular of all the cryptocurrencies and is soon estimated to be worth $2000.
This invention marked the advent of cryptocurrency.
Who is a Miner?
Since there is no central authority to delegate tasks to individuals, anybody can be a miner. Every miner needs to invest some work of their computers to qualify for this task. They have to calculate the product of a cryptographic function called ‘hash’ that connects the new block with its predecessor. Bitcoin allows users to transfer currency via the Internet and every time a transaction takes place, it needs to be verified and validated between the members of the global network. Primarily, a miner has the sole job of confirming the transactions in a cryptocurrency network. Once a transaction is confirmed, it is irreversible. A miner takes transactions, certifies them as legit and spreads them in the network.
Will Cryptocurrency be the New Norm After 2017?
A new reality is arriving with the acceptance of Bitcoin and other alternative forms of Bitcoin, termed as altcoins, such as Ethereum, Ripple, Litecoin, and so on.
Japan is heralding the cause of cryptocurrency by legitimizing the digital currency, Bitcoin as a legal form of payment, this past April. Now Japan’s leading air carrier service, Peach Aviation, offering low cost air travel, will be the first to accept Bitcoin for airline ticket purchase.
Another nod for the use of Bitcoin is the acceptance of the digital currency in the education industry in India, what with my alma mater, GITAM University in the state of Andhra Pradesh, hosting classes about FinTech as part of its MBA curriculum and certificate courses on Cryptocurrency, soon to start this June.
Several colleges in the US have even begun to accept payment in the form of Bitcoins.
In Asia, and primarily in India, a powerful market for Bitcoin remittance has emerged. According to the World Bank’s annual report, in India, which happens to be the biggest market for remittance at over $70 billion, the highest transaction rate is as low as $200. Once the blockchain is adopted, as much as $7 billion can be saved by the remitters.
These advances make the concept of cryptocurrency seem promising, and although it may be too soon to tell, one thing is clear. Cryptocurrency is here to stay.
Cryptocurrency is digital gold, and in the words of Paco Ahlgren, Financial Analyst at Wi-Fi Alliance, “This may be the purest form of democracy and I, for one, am thrilled to be there to watch it unfold.”