16 Aug 2018
Cryptocurrency. The classifications, past, present and future
by Jonathan Phillip
What is a cryptocurrency?
A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. It’s sometimes referred to as digital or virtual currency. But unlike fiat currencies cryptocurrencies are decentralized, the decentralization of cryptocurrencies works using through distributed ledger technology, typically a blockchain though other types of crypto-ledgers exists like Tangle or has hgraph, – that’s something we’re going to discuss in a later article-, this public ledger serves as public financial transaction database.
History of cryptocurrencies
After the 2008 financial crisis, a person or group of people under the pseudonym Satoshi Nakamoto which used SHA-256, a cryptographic hash function, as it’s proof of work scheme. And Bitcoin is considered as a 1st-generation cryptocurrency and over 4,000 other types of cryptocurrencies have been created since then and some using different ledger technologies and hash functions. For example in October 2011, Litecoin was release and it was the first cryptocurrency not to use the SHA-256 function instead it used script as its hash function. Another notable cryptocurrency, Peercoin was the first hybrid cryptocurrency which used proof of work/proof of stake. Ethereum is also another prominent cryptocurrency proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer, went live on the 30th of July 2015. Ethereum is also considered a 2nd-generation cryptocurrency, because Ethereum is not just a cryptocurrency but also a platform for creating blockchain applications usually referred to as DApps (decentralized applications), and also adds other features like smart contracts, and has a wide scope of uses for many industries to build on. IOTA was the first cryptocurrency not based on a blockchain, instead uses crypto ledger called Tangle and it’s the 3rd-generation cryptocurrency. Tangle technology solves many problems associated with its older cousin blockchain.
Uses of cryptocurrency
- Low-cost money transfers
One of the well known benefits of using cryptocurrencies in financial transactions is the low transaction fees and rapid transactions times. For example, recently a $99 million litecoin (LTC) transaction took only two and a half minutes and cost the sender $0.40 in transaction fees. Another set of people that also benefit from using cryptocurrency to make transactions are diasporas sending money to family in developing countries, using traditional systems of sending money usually involves very high transaction fees and longer transaction times, using cryptocurrency people can eliminate these intermediaries, cut down cost of sending money and save time in the process, not to mention that using cryptocurrency is way safer than traditional money transfers.
The emergence of digital token-based fundraising that provides startups with the opportunity to raise capital by selling a newly created digital token to early backers of the project in exchange for established cryptocurrencies such as bitcoin (BTC) or ether (ETH). The price of the newly issued token then acts as a proxy linked to the success or failure of said startup once it starts to trade in the secondary market. It can also be used to raise funds for regular startups like tech hardware companies or service based startups. Usually, a startup would have a few options to get their company off the ground: Through experienced venture capitalists, or through crowdsourcing tools like Kickstarter or GoFundMe. But, with the trend of cryptocurrency spiking, startups can get creative and raise money using this new form of payment and there are quite a few platforms that are making it easier for startups to fundraise using cryptocurrencies, for example, Dropcheck, Dispatch, Ambisafe, to name a few.
Additionally, cryptocurrency can be used to used to avoid corruption in fundraising organization like charity organizations. Due to its ability to keep companies accountable blockchain can eliminate many problems occurring in companies or charity organization.
- Payment for media content
Social media and blogging platform, Steemit, enables publishers to receive financial rewards in the form of cryptocurrency for posting content and for curating on the network by upvoting high-quality content. Another media platform that enables content creators to get paid using cryptocurrency is Youtube’s new alternative Dtube.
These media platforms empowers its users by rewarding them for contributing to the platform as opposed to taking the users data and selling it to third parties and other big data companies like Facebook, Instagram or Twitter does. Due to these reasons, sites like Dtube and Steemit are becoming more popular with content creators.
The travel industry is one the fastest and the most profitable industries yearly, and with the rise in popularity of cryptocurrencies, it is now possible to travel the world using the only cryptocurrency.
Established travel agencies such as CheapAir and Destina accept cryptocurrency as a payment method to book flights, car rentals and accommodation using bitcoin (BTC) or Ether (ETH) on sites like CryptoCribs.
And the growth of the bitcoin ATM markets also means travelers are now able to convert their cryptocurrency into local currency in most major cities around the world, for example in Dubai’s shopping mall, even some high-end luxury stores now accept cryptocurrency as a method of payment.
The most popular use of cryptocurrency is for investment purposes or wealth creation. Most people buy cryptocurrency as an alternative means for more wealth creation to invest in other parts of their lives like college tuition for kids, buying real estate, e.t.c.
How to buy cryptocurrency
So you’ve decided to invest in cryptocurrency, but you don’t know where and how to start. There are thousands of options out there and each of them comes with pros and cons, and many only have a specific function that doesn’t meet all your needs and leads people have a lot of applications to do different things with your cryptocurrency. Well, I don’t think it should be that complicated and overwhelming but in my time of testing different platforms and apps, there are only a few I could recommend my favorite being Cryptanite wallet.
But, what’s a wallet? You might ask. A crypto-wallet as the name implies is where you keep or store cryptocurrency that you buy. There are over 4000 cryptocurrencies in the market and depending on the cryptocurrency you wish to invest in, you would need to find a wallet that can store that particular currency, for example, if you wish to buy bitcoin you will a wallet that supports bitcoin storage, if you want to buy Ethers you will need a wallet that supports storage for Ether. But some applications let you store different kinds of cryptocurrency creating what is called a BASKET (A diverse portfolio of currencies) and you can store many types of cryptocurrencies in it. Some wallet also let you buy and sell cryptocurrencies within the app itself.
Now, more about wallets and what types of wallets are available in the market. Like a bank account when it comes to choosing a wallet you look out for the ones with the best safety record and ease-of-use and these most important factors when choosing a crypto-wallet because if your cryptocurrency gets stolen you can never get it back.
There are 3 major types of wallets to choose from:
- Online wallet: These are quickest to setup but are the least secure
- Software wallet: These come in a form an app and are much safer than online wallets
- Hardware wallet: These are portable device that you plug into a computer something like a USB flash drive and it’s the safest option of the three.
Now Cryptanite, what’s so great about it you might ask, well just about everything.
Cryptanite Wallet is an app that allows you to store different types of cryptocurrencies. The application allows you to buy and sell cryptocurrencies and create diverse baskets that allow you to have multiple cryptocurrencies in one account. You can choose up to five coins to have in each diverse portfolio basket you choose. And it doesn’t just end there, this wallet lets you use the application to buy products from the different merchant that accept cryptocurrency as a form of payment and them platform has mines cryptocurrency letting users buy the virgin coin.
The future for cryptocurrency is exciting and every now and then, there’s a new company pouring loads of cash into the underlying technology behind these currencies and more markets opening up to cryptocurrency, ordinary people taking advantage of its already proven ability to create wealth beyond some of our wildest dreams, and even countries using it as a means to escape total economic collapse when plagued with crisis or sanctions ,the sky might just be the starting point for this thing some might call NEW MONEY.