Are you familiar with cryptocurrency? The most well-known of them is Bitcoin, and many people predict a bright future for this decentralized type of currency.
Google Dictionary says:
(Cryptocurrency is) a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
The creator of Bitcoin, Satoshi Nakamoto, said in 2009 when annoucing it:
“Announcing the first release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double-spending. It’s completely decentralized with no server or central authority.”
In the 1990s there had been many attempts to create digital cash, but they all failed. Cryptographers deciphering mathematical puzzles mine, or create, the tokens. There is no other way to create bitcoin, and the world supply of tokens will be maxed out around 2140. How they are born is a bit technical and not important to know starting out. You can mine them (solve cryptography puzzles), buy them, or receive them as gifts. That is all. All coin activity is tracked in the blockchain, which is a detailed public record of who has what coins and how they got them and more. There are a few features of Bitcoin that made it successful:
Creation of Coins and Transactions Are Irreversible
Once a token has been mined (created by cryptographers called miners through some heavy math), it exists. There is no going back. And every transaction that has ever happened remains. There are no reversals or cancelations of events in the blockchain.
Bitcoin is Anonymous, Kinda
Actually token owners use pseudonyms. So although your money is securely tied to you, it’s actually tied to your secret identity! You have a private key and no one can spend your bitcoin without it.
It’s Fast and World Wide
Bitcoin is not issued by any government or bank. No government can garnish, tax, or regulate it, which keeps bureaucracy down. If you have the internet, you can spend bitcoin fairly quickly, usually within minutes. No exchange rates, from anywhere.
Security is Fierce
You don’t need security forces, software or services to keep your token safe. It is inherently secure because of the serious improbability of anyone guessing or deciphering what they would need to know to access your tokens. A meteor is more likely to hit you than you are to have your tokens accessed by anyone trying to guess your key or pretending to be you with information about you or your coins. But you must protect your key, because someone is much more likely to acquire your information than figure it out.
No Barriers to Entry
You don’t need anyone’s permission to own or mine tokens. No one can tell you no, it’s free to use the software to purchase bitcoin. You’ll want to keep your tokens in a “wallet” and many of those are free too.
Once you have a Bitcoin wallet, you use a traditional payment method such as credit card, bank transfer (ACH), or debit card to buy Bitcoins on a Bitcoin exchange (example: Coinbase). Now you’ve transferred the tokens to your wallet. For information to help you understand cryptocurrency wallets, see our post Choosing a Safe Cryptocurrency Wallet.
The largest thing stopping your from owning Bitcoin is probably having doubts about what and how real it is!
