In its barest form, cryptocurrency is a digital medium of exchange, designed to be purchased, exchanged, and utilized for a variety of services. It is an intangible form of currency, having no physical attributes other than the computer network or smartphone it sits on, connected to thousands of computers globally.
Dating back to World War II, the need for secure communication and exchanges was essential. Thus, cryptography was born—the process of converting legible information into an enigmatic code, transferring messages securely to and from various, unknown sources. Cryptography has since evolved into a digital age, infiltrating computers and smartphones on a global scale.
Cryptocurrency operates similar to P2P networks like Napster and Limewire; but instead, throw in money. Like these file sharing programs, cryptocurrency is unregulated and user dominated. One of the reasons why it’s taking so much heat politically and even, legally.
How Does It Work And What Can You Do With It?
First, no transaction between users are the same. Each transaction contains a private key, held solely by the seller, and a public key, which is transmitted to the purchaser. The private key is the last step in authorizing a transaction being executed. If the holder loses the key, tough luck. Nobody else has it. Hence the intense security/uncrackable code.
Second, all transactions are recorded in public ledger, called a “blockchain.” Like a checkbook, cryptocurrency also has its own log of transactions by the amount and destination. However, the parties to the transaction(s), remain completely anonymous.
Third, it’s completely user-dominated. It’s decentralized, with no third party regulation or governance, at least right now. Unlike our country’s financial institutions, in the world of digital currency, there is a direct correlation between user activity and the return on “investment.” This is one of the main reasons this has been the subject of political and legal talk the past year.
Lastly, the potential for how this currency can be utilized is endless. For example, businesses are starting to accept payment for products and services in cryptocurrency, most commonly Bitcoin. Most recently, Mark Cuban, owner of the Dallas Mavericks, announced his team will be accepting payments in cryptocurrency as early as the 2018-2019 NBA season. From a consumer perspective, the ability to purchase goods and services could be much more convenient and efficient, e.g. a new and improved Paypal.