What you must know first about Cryptocurrencies
Introducing you to Cryptocurrencies
Let’s first look Fiat Current:
What is fiat Currency?
A fiat currency in a simple term is the traditional money we use for day to day transactions. That is the Tsh, KES, USD, GBP, UGS etc.
They are called the fiat money. They are the approved legal tenders by the government of every nation.
The fiat money functions as a means of exchange, they have the usual features of money such as scarcity, medium of exchange, store of value,durability, portability, divisibility, uniformity, limited supply, and acceptability.
But the fiat money origin can be traced back to the Gold Smith, several decades ago. One of the weaknesses of fiat is that it is under the control and manipulation of the government. This what we called centralization
At this point, I want you to look at your Dollar, and tell me what you have been using it to do, and the limitations it has.
We move to the next revolution in the financial world. It is the Fintech revolution.
The waves of financial revolution are currently in two forms;
This is the beginning in the rise of financial technology, where payments and transactions are now digitized. But these digital technologies only innovate around fiat money, by digitizing them. This innovation helped to solve transactional payment, as payment became faster and more efficient.
The leaders in this revolution are Paypal (Peter Thiel, Elon Musk, Reid Hoffman etc), Interswitch, and recently we have Flutterwave, Paystack etc.
This industry began a financial disruption revolution. They started by helping to digitize most of the financial services such as transfer, loan, payments, name them.
The rise of cryptocurrency. What is a cryptocurrency?
Cryptocurrency is a digital currency that exists only in virtual form or online form. We have examples such as Bitcoin, Ethereum, Litecoin, Dodge, Ripple etc.
These digital currencies are built on a digital technology called Blockchain. Blockchain is a technology that makes digital record keeping systems to be public and makes transactions recorded on it difficult to erase.
Blockchain provides a record taking technology that makes it possible for everything happening on the network to be recorded as they are taking place, and once it is recorded it can’t be deleted.
So, this makes everything that goes on on the network to be traceable. Blockchain actually is the technology that helps to decentralize cryptocurrencies.
Cryptocurrencies help to solve one of the weaknesses of fiat money which is centralization, by decentralizing the control. This means, crypto is not controlled by central banks and any central authority or system.
It is maintained by computers connected to the network from different locations. They are control by what we called Nodes (Computer powerhouses)
This the conversion of money into digital coins. we have them as digital coins, that is why you see their symbols as coins.
Cryptocurrency in general may have two functions:
- As a measure of value: This makes crypto to act as money that can be used to pay for goods and services.
2. As a store of value: This makes crypto to act in the asset class. It is a form of investment that can grow. You saw how bitcoin (BTC) grew from below $10000 in 2020 to $56,000 as at 23rd 2021. The main feature of assets is that they grow in value.
Generally, blockchain makes cryptocurrency to have the following value and functions.
Every transaction that takes place is known by everyone
Nobody controls the network, it is controlled by nodes and transaction take a form of P2P
You have your money store in your personal banks (Wallet), this give control of your money or assets.
Before now, what do you think Cryptocurrencies are? Has your perception changed?