Ryan O'Grady

administrator

What are cryptocurrencies

Ryan O'Grady,January 1, 2018

 

Cryptocurrencies are a digital currency that is transacted across the web and was initially used as a medium of exchange. Nowadays the use of cryptocurrencies has evolved and they are being applied in different ways as discussed below.

The first cryptocurrency Bitcoin was created in 2009 by a group of programmers under the alias Satoshi Nakamoto. IT was described as a ‘peer-to-peer electronic cash system” which was completely decentralised meaning the codebase and data is stored across multiple devices across the web using the blockchain as the public ledger of transactions.

 

Cryptocurrencies are broken down into 4 core segments:

1. Store of Wealth

Bitcoin has been referred to as digital gold and due to its limited supply, decentralised nature and global appeal it is seen as the cryptocurrency with the greatest store wealth.

2. Transactions payments between parties

The original reason cryptocurrencies were designed was as a means of exchange between parties over the web. A decentralised payment system is meant to be more secure, faster and have less transaction costs than using traditional centralised banks. Example of these coins include Dash, Litecoin, BitcoinCash and Viacoin

3. Smart/Digital Contracts

The blockchain allows for more than transaction payments to be stored. Rather it allows for any digital or smart contract to be embedded in the blockchain and then distributed to all computers that are in the blockchain network. A digital contract on the blockchain is intended to digital facilitate, verify, or enforce the negotiation of performance of a contract. Smart contracts will allow the enforcement of a contract without the user of a third party and with limited manual intervention. There are many applications now being built on-top of the blockchain which use underlying cryptocurrencies as the platform, these platform cryptocurrencies include Ethereum, Condano, EOS and NEO.

4. Tokens

Are used as a currency or utility for web applications. These tokens are usually built ontop of one of the platform cryptocurrencies like Ethereum or NEO and can be traded on cryptocurrency exchanges. These tokens are also used to raised capital by companies where they sell tokens to investors in an Initial Coin Offering (ICO). The investors then keep the tokens hoping to price appreciates and/or use them for services within the web application they relate.

As the cryptocurrency space evolves so too will the use of cryptocurrencies and how they are entrenched into the technology we utilize on a daily basis.