Perception of Cryptocurrency

What is Cryptocurrency and how does it work?

Cryptocurrency is a common subject that most individuals have heard about or acknowledged sometime in the past few years. When thinking about cryptocurrency, it would not be a surprise if it was associated with Bitcoin and Ethereum. Cryptocurrency is any form of digital currency defined by encryption algorithms. However, what exactly is its purpose, and how exactly does it play a role in today’s society?

Cryptocurrency is used as a form of currency of varying monetary value across different markets that are used to make secure encrypted transactions. Cryptocurrency is purchased with crypto exchanges that allow trade in existing cryptocurrencies depending on crypto pairing. An example would be using USD coins to purchase Ethereum. Cryptocurrency requires access to an encrypted cryptocurrency wallet that links the individual to their cryptocurrency. However, because cryptocurrency is part of blockchain technology, there is no defined value in the form of currency used in everyday lives present day. Nevertheless, this form of decentralized medium of exchange can be used to buy products or as an investment, similar to stocks. It is important to realize that because cryptocurrency is similar to stocks, it comes with risks in decreasing the immeasurable value of a certain cryptocurrency.

Cryptocurrency in Different Countries

Cryptocurrency is used as a standardized form of monetary value to monitor exchange throughout different parts of the world. This is much needed considering how monetary value is different depending on the type of currency used in parts of the world. For example, USD means different values of currency from a location like Japan. The list below compares the difference in value in different countries. There is no monetary value that is the same. In addition, the conversion between different currencies varies and is always constantly changing. 

**All values have taken on 8/2/22 and may be subjected to change.**

Not all countries are open to the idea of cryptocurrencies since it is an unopened territory that may provide more opportunities of terrorism. As a result, many countries place many warning and enacted laws to maintain cryptocurrency, while other countries ban it completely. There are also many countries accepting of cryptocurrency and are heavily involved with cryptocurrency trade including the United States. The top 10 countries interested in cryptocurrency in order from greatest to least include: Ukraine, Russia, United States, Kenya, South Africa, United Kingdom, India, Nigeria, Australia, Singapore. 

However, the list of top 10 countries with highest rate of crypto ownership, starting from greatest to least, may differ, as shown below. 

**Data collected from brokerchooser.com on 8/2/22 and may be subject to change.**

Either way, cryptocurrency still holds value and allows its participants to use it to purchase everyday items as well. Although cryptocurrency is not vastly adapted in many departments or used for large purchases, it is possible to buy almost anything including technology and anything on e-commerce websites, luxury goods from brand companies, cars, and insurance. There is also an influx of cryptocurrency scams that may make purchases risky unless the safety of the websites is ensured. 

The History of Cryptocurrency

The idea for cryptocurrency began way before the existing cryptocurrency presented itself. There were many attempts such as Bit Gold. The idea of cryptocurrency came from David Chaum, an American cryptographer, 1983 who proposed the idea of accessing electronic cash. To do so, he developed a “blinding formula” that would encrypt the data being transferred. The first official cryptocurrency was created by his company, DigiCash in 1990, dedicated to developing eCash. It may not have been successful, but it led to the spark of the creation that would grow in the years to follow.

Another important product in the history of cryptocurrency that should be noted is the design of Bit Gold by Nick Szabo in 1998. BitGold started the idea of using blockchain technology to avoid relying too much on an individual authorizing centralized currency. Its focus was on allowing users to solve cryptographic puzzles to receive a form of reward. While the product wasn’t complete, it was created with concepts that were used to inspire the creation of Bitcoins.

The first cryptocurrency open to the public was bitcoin, introduced in 2009 when the Bitcoin software was published and accessible to the public. The purpose of this bitcoin product, suggested in “Bitcoin - A Peer to Peer Electronic Cash System” by Satoshi Nakamoto, is to establish a form of electronic payment using safe transactions recorded onto blockchains. With this, Satoshi Nakamoto also mined the first block called “Genesis Block” with the central processing unit of the computer, mining the first 50 bitcoins. Nakamoto’s introduction to the idea of bitcoin for the rest of the world was the start of the growing limits of cryptography. However, the idea of trading bitcoins didn’t begin until 2010 after someone began using bitcoins as a form of trade. It was only possible to mine for bitcoins since there was no value established to trade for bitcoins. 

Bitcoin may have been the first cryptocurrency but it isn’t the only cryptocurrency. In 2011, altcoins, Namecoin and Litecoin, were generated as an improved, faster, and safer version of a Bitcoin. Since then, another cryptocurrency has popped up. However, one of the more familiar forms of cryptocurrency that rose in popularity would be Ethereum and ICOs in 2016. Ethereum uses Ether to supervise contracts and applications. This caused the need for Initial Coin Offerings (ICOs). ICOs are platforms used to purchase start-up values of cryptocurrencies before they enter the market. This is a way for companies looking to create new digital applications to raise money while investors gain access to the new coin. 

Cryptocurrency in the Present

The world is constantly changing, just like how there are always new units of cryptocurrency developed. Anyone can introduce new units of cryptocurrency through mining. Crypto mining is a verification process to confirm the legitimacy of transactions. The participant needs to access personal cryptocurrency as a requirement. The process of “mining” is completed with a hardware that would be responsible for solving complex computational math problems. Over the previous years, the rising popularity of cryptocurrency has made it difficult to do so. The computers would be responsible for competing with each other to solve the problem in order to claim blocks of bitcoins. This process allows the participants to gain bitcoins while assisting the system to verify Bitcoin legitimacy. As more people compete through the improvement of technology to outshine others, it requires more energy, electricity consumption, and cost to mine for cryptocurrency. 

 Crypto Mining Rig taken from hp.com 

There is evidence of a massive increase of 1000% appreciation in the value of regularly used cryptocurrencies such as bitcoin, resulting from the previous 5 years. Its value has been going through uptakes and down takes but it doesn't change the fact of the increase in its value. In 2017, Bitcoin reached a new high of $10,000 but its value has been escalating since then. According to forbes.com, as of June 2022, “Bitcoin trades for just over $31,000 per coin”. Newer types of cryptocurrency can take over with the price of bitcoins decreasing in the next few years as technology continues to advance. The list below lists the top 10 value based coins in the present.

**Data collected from finance.yahoo.com at 6:30 PM EST on 8/2/22.**

From my perspective: Nicole

Considering how cryptocurrency is considered “digital gold” according to forbes.com,  it wouldn’t be a surprise if cryptocurrency is adapted into everyday lives and used as a permanent form of monetary exchange. Just like how gold was once a form of currency, distributed, and later replaced due to limitations, it is possible that monetary transactions with paper money would slowly diminish as well. This wouldn’t come off as a surprise as more people are relying on digital payments through installments on their phones or credit cards, rather than cash. 

Using cryptocurrency in the future is a risk with both benefits and flaws. In 10 years, I strongly believe that there will be a future centralized around creating more potential for virtual exchange or purchases for more simplicity and secure transactions. It may come at a cost of risking privacy concerns, but the system may strengthen trustful bonds between parties during transactions and within systems of government as well. I do not believe it would be any different from the digital payments we make today. There may still be the possibility of cybercriminals interfering or stealing, but there should be equally as advanced technology to ensure protection of participants. The only change I envision would be more stability in the value of cryptocurrency as it becomes standardized in the futuristic form of life. 

Sources

https://www.oswego.edu/cts/basics-about-cryptocurrency 

https://www.forbes.com/advisor/investing/cryptocurrency/what-is-cryptocurrency/ 

https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency 

https://www.investopedia.com/tech/were-there-cryptocurrencies-bitcoin/ 

https://www.investopedia.com/tech/how-does-bitcoin-mining-work/ 

https://www.cryptovantage.com/guides/a-brief-history-of-cryptocurrency/ 

https://www.forbes.com/sites/bernardmarr/2017/12/06/a-short-history-of-bitcoin-and-crypto-currency-everyone-should-read/?sh=c29e5e43f279 

https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp 

https://www.nytimes.com/2022/06/08/nyregion/does-crypto-mining-have-a-future-in-new-york-and-what-is-crypto-mining.html. 

https://genesisblockhk.com/the-history-and-future-of-bitcoin-mining/ 

https://www.taxback.co.uk/how-to-trade-cryptocurrency-in-different-countries/ 

https://brokerchooser.com/education/crypto/crypto-countries