The complex, interesting world cryptocurrency began with the invention of bitcoin in 2009. Today, the creator of bitcoin is still largely unknown. Many other virtual currencies have emerged on the market since this innovation occurred nearly a decade ago. Today, the market capitalization of all of the cryptocurrencies combined is estimated to be around $370 million, though ups and downs in the market continue to occur.
Virtual currencies are fascinating to many because they are revolutionizing monetary transactions across the globe and have the potential to change the way that our society is run. This is largely due to the fact that cryptocurrencies are irreversible and permissionless. These two key factors make many view the cryptocurrency system as an attack on the traditional control that banks have over their citizens’. This excites some while terrifying others.
All currency is made up of limited entries in a database that no one can change without meeting specific rules. Both traditional currency and cryptocurrency could not exist without a verified database for accounts, transactions, and balances. Bitcoin and other cryptocurrencies are unique from the traditional financial system because they exist in a decentralized system in which one entity is not the regulator. Instead, bitcoin employs a peer-to-peer verification system.
In order to be sustainable, all cryptocurrency networks rely on the consensus of their users. If this does not happen, the system will break down immediately. This breakdown will occur at the first moment that the nodes of the network start to disagree about any single balance or issue. Many rules have been built to keep this system breakdown from happening. The fundamental difference between cryptocurrency and all other currencies is that there’s no central authority that governs it.
Bitcoin and other cryptocurrencies are important because they are revolutionizing monetary transactions across the globe. Many believe that the cryptocurrency system is an attack on the traditional control that banks and governments have over their citizens’ finances due to the fact that virtual currency is permissionless and irreversible.
Cryptocurrency is an open system with no gatekeeper that anyone can participate in, making it profoundly different from the traditional currency system as we know it. In the future, cryptocurrency will likely continue to grow in importance for both businesses and individuals around the globe, though its value continues to fluctuate rapidly.
Though digital currency continues to grow in popularity, many people still don’t really get it. To understand where cryptocurrency is likely headed, it’s helpful to have a baseline knowledge of the ins and outs of this unique financial system. Fundera made an interesting infographic that helps break down the complexities of the cryptocurrency system. Read on for the most important information about bitcoin and other cryptocurrencies.