Monday, 12 June 2017

Cryptocurrency - Five Things You Must Know!

Thanks you for stopping by.
Cryptocurrency  has been a trending topic recently: Bitcoin, BTC, Swisscoin, Giracoin, Ethereum an many more.

The questions are:
  • What does the future hold for cryptocurrencies?
  • Should you put your money on it?
  • How secure is the investment?
You will get answers to these question and more on this post but I would make a details explanation of the underlying technology in a different post.

Sorry for the typo there: Facts not Fact!!

Money as Transactions, How Cryptocurrency Works
To get a clear understanding of the technology, you need to view money in terms of transactions.
What this means is that if Mr xyz has $10 million dollars, it does not mean that $10 million dollars of physical notes are kept somewhere for him!

 It means that there are series of transactions and records held by the bank that proved that figure. And you are sure you have this money as long as these records are not compromised.

Banks store this records using Database Technology which ensures security and consistency of the records. The records are kept on series of related tables and this records are stored in the bank's computers.
The records held by the banks are referred to as centralized, which means that it is controlled  and managed by a central body or organization

Now cryptocurrency is exactly the same: series of transactions and records stored securely!

So what is the difference?
First, Cryptocurrency employs a different technology called BlockChain(I would discuss this later) which is related with databases but is actually more secure than conventional databases used by banks.
Second, cryptocurrency records are decentralized,  which means it is not managed by just a single bank. 

This is shown below:

Let's now look at the 5 facts about Cryptocurrency.

1. Has Been Around Since 1990
The idea of digital currency/cryptocurrency was introduced by a researcher named in David Chacum in 1983 but its actual use was in 1990 when a company called DigiCash was founded.

2. All Modern Banks Use Cryptocurrency.
This should not come as a surprise. Records kept by the banks are encrypted for security reasons and can be used for financial transactions and therefore can be viewed as cryptocurrency. If you want to buy a car, you don't need to collect the physical cash, you use your credit/debit card, the banks simply modify the records for you and for the car dealer and you have the car. So using cryptocurrency simply means modifying the records/transactions. So here we clearly see that cryptocurrency is used every other day.

3. Cryptocurrency is the Future of Transactions
Many years ago, you could not easily talk to someone in another continent, but now you can do that with excellent ease in real time at the comfort of your living room. Mobile Technology have made that possible. Same with monetary transactions, right now its not very easy to transfer money across continents, but in fews years to come, you will be able to do that in seconds with cryptocurrency. That is  simply how technology work, creates an easy way to do things.

4. Financial Institutions  Tries to Suppress Its Popularity
There is an expression that says: "You can't fight the technology". This is actually not very correct, the fact "You can't win the technology". No matter how hard you fight, new technology would replace  old ones. This is very clear because, the technology would change things,  unfortunately to the detriment of persons who have failed keep pace with growth in technology.

The questions is, 'why would people fight a trend they know they cannot win?'. Maybe they cannot stand the effect this trend would have on them. Imagine what would happen to the big banks when everyone can make transactions easily in a decentralized way without interference from the bank. Imagine the millions of bank employees that would be put out of the job, and so on. My advice is: start now to see ways to move along with the changing trend while  the time is still there.

5. To Succeed, You Need to be Well-Informed
One thing i see especially in developing countries is that people get involved so easily anytime a particular scheme promises to yield much returns. At the end of the day, they don't get what they expect and end up disappointed. Same applies here, you need to get all the necessary information before you can delve into this area but be sure that the cryptocurrency technology is moving at a very fast  pace and the waves would sweep across the financial horizon, wrecking much damage and leaving behind the naive and gullible permanently altering our perception of wealth.
I perceive that this would happen sooner than we expect.

I'm sure you may have many questions here, I already expect it. I'm working on a comprehensive explanation of the technology behind cryptocurrency as well as its security.

To understand more on how the technology work you can view this article i wrote recently: Blockchain Technology Explained

Do leave your questions and concerns in the comment box, I would collate them and it would enable me know what areas you would need clarification.