Cryptocurrencies are something that is becoming more and more popular as a form of investment and is something that everyone who is serious about investing or works in the banking industry should know about and understand. Here’s a brief introduction to help you get to grips with the basics of cryptocurrency.
Where it began
The history of cryptocurrency goes back far beyond 2008 when the original concept for Bitcoin by Satoshi was announced. In fact, it goes all the way back to the 1990s. David Chaum created a system called Digicash, a digital currency option that ultimately was doomed to failure.
The idea behind Digicash was something that could not be denied, though, a currency that was decentralised and was not subject to governmental control. Between 1990 and Satoshi’s announcement about what would become Bitcoin, there were several other attempts at creating a secure decentralised digital currency, but it wasn’t until the idea of ‘A Peer-to-Peer Electronic Cash System’ using blockchain to secure, that it was successful.
But this was no accident, Satoshi Nakamoto actually sought to succeed where other digital currencies had failed. Many centralised their systems which proved to be ineffective. So instead, the idea that grew into Bitcoin was based on the same principle as file sharing. This proved to be the missing piece of the digital currency puzzle.
The New World Economy
After so many failed digital currencies, it would have been easy to understand if Bitcoin had failed, but with the launch of Bitcoin in 2019, the interest of many users was drawn to the digital currency, and after a few setbacks, it has become a success story.
Cryptocurrencies are essential digital gold. You can trade them, buy them and even mine them. Because they are outside of the control of governments and are decentralised, they are not only able to be used as an investment and payment for a wide range of goods, they are also a popular form of payment for black markets. But the value of cryptocurrencies is more in their rapidly increasing values. The values of cryptocurrencies have risen so dramatically that it is predicted that in a few years, general investors will be unable to afford to be a single Bitcoin.
However, there is a downside to Bitcoin and other cryptocurrencies, which comes in the form of the security keys that are used to control access to accounts. There are two types of keys – public and private, and the two should not be confused. Public keys are used to identify wallets and allow for funds to be transferred between wallets through exchanges. Private Keys give you ownership of your cryptocurrencies though and are need to authorise any transactions. If you want to move any digital currency out of your wallet, then you will need to use your private key. When private keys are stored on computers and hackers get hold of them, or you share them with other people – those people have access to your wallets. Equally, if you lose your private key and do not have a back up of your wallet, then you will have lost all of the cryptocurrency in that wallet.
Despite the pitfalls, if you take your time to research and understand the cryptocurrency market, you can make the digital currency investment work for you. Need help getting started with cryptocurrency investments? Contact us today to talk to our experts and see how we can help you make your money work for you.