What Is Cryptocurrency? Here’s Everything You Need to Know

by Josh Biggs in Blockchain on 25th February 2020

To fully understand what cryptocurrency is, you first need to understand how money works.

Money is a legal tender that must have some characteristics: It must be used by a large enough number of people, it must be accepted as a form of payment, and it must be trusted. To truly understand the whole point of paper money (Afterall it is only paper) you’d have to dive into the history of money.

The main gist is that paper money and non-precious coins were made as representative money, used to represent precious metals like gold. This means that you could go to the government and exchange your worthless paper money for gold which had real value. Unfortunately, this system was replaced by fiat money. Fiat money gets its value from government decree. It is valuable because the government says so (which isn’t exactly the best way to measure value).

The world has long gone digital and so has most of our money. Unfortunately, banks and central agencies have major control over this digital money and they act as middlemen who process financial transactions between parties. When you have a middleman whose primary goal is to make profits, things become more expensive than they should be, and these transactions sometimes run slow. Also, when you put the power to control the finances of millions of people in the hands of a few, there’s bound to be some abuse and inequality. And this is where cryptocurrency comes in.

A cryptocurrency is a form of digital currency that is not controlled by any financial institution or government agency. To ensure the security of this currency, it is cryptographically encrypted, making it so that a transaction between any two parties cannot be intercepted or interfered with by a third party.

When you pay for a product with your credit card, the payment is a transaction between you and the merchant. That transaction goes through the bank or credit card company that can intercept or even block it (but usually they just process it). With cryptocurrency, the transaction would be between only you and the merchant, and a third party wouldn’t have access to it even if they wanted to. This is the power of cryptography.

Cryptocurrencies are usually built with a network called a peer-to-peer network. And these networks are built on a decentralized public ledger called a blockchain which prevents duplicate transactions. It was first introduced to the US in 2008 with the creation of Bitcoin (BTC).

Because of its authenticity and level of security, cryptocurrencies like BTC have become valuable, with BTC reaching an all-time high of $17000. It is currently worth about $10000. The great thing about cryptocurrencies like BTC is that you don’t have to be a computer guru to invest in them. Regular people have invested and made millions off this technology. To get in on investing, you’ll need a crypto-wallet.

Several companies offer them, one of them is Crypto Vantage, a company that provides the facilities that enable you to buy and store cryptocurrency. They also have a guide that walks you through the world of cryptocurrency.

Its Effect on Business

If you are a business owner or entrepreneur, you’d want to know how crypto can make you money. Businesses rely on money and cash flow, and anything that causes significant changes to finance also causes significant changes to businesses.

Take the franchise business for example. A franchisee looking to get into the business would go to a franchisor for the right to use the franchisor’s name. The franchisee, after getting approved, would need to source for financing from banks who sometimes give steep interest rates and unfavorable terms.

With cryptocurrency, the franchisee could circumvent the banks and seek funds directly from the general public—this is called crowdfunding. The use of crypto simplifies the entire process as the franchisee would not need to go through a bank to either obtain a loan or receive funds. Meanwhile, you can visit the UPS store for advice on how to start a franchise.

If you are a tech-savvy entrepreneur, you could implement a crypto payment system at your franchise. It’s as easy as downloading a plugin or setting up an API. This would greatly reduce transaction fees, make transactions faster, and because of the irreversibility of transactions, customers won’t be able to carry out chargebacks.

The world of real estate could also be disrupted. Imagine if the middlemen were cut out and homeowners and buyers could liaise directly via the peer-to-peer network and buy and sell homes easily with crypto. The possibilities are endless.

Categories: Blockchain