In the previous lesson, we briefly looked at some of the concepts that will be covered in this module. The first step in this learning journey is where it all begins. Cryptocurrencies are the breath of the crypto space and will be a huge part of your experience. Keep reading!
What are Cryptocurrencies?
The name’s crypto, cryptocurrencies 😉
Cryptocurrencies are digital currency that is encrypted and decentralized. Unlike the currency we’re used to (like the US Dollar sitting in your wallet), there is no central authority or regulating body. This is because cryptocurrencies are built on blockchain technology and utilize the network of computers it runs on.
As such, users don’t need to rely on a bank or third party to verify and approve their transactions. By using a peer-to-peer system, people around the world are able to send and receive payments without a middleman. Users can store and access their cryptocurrencies in a digital wallet.
The name ‘cryptocurrency’ is based on the use of cryptography and encryption to verify transactions. Advanced coding is needed to store and transfer data between wallets and public ledgers ensuring a high level of security.
Bitcoin is probably the cryptocurrency that you hear about the most. It was founded back in 2009 and is steadily holding on to its status of popularity. However, there are thousands of coins and many more are in development.
How Cryptocurrencies are a Disruptive Technology
- Crypto is democratizing financial opportunities. Unlike traditional finance, anyone with a device and Internet connection is able to create a wallet and get started. Some of the challenges of traditional finance include:
- Lack of resources. Banks and ATMs might be scarce in some areas
- Need for government-issued documents. Unfortunately, there are people around the world who struggle to be recognized by their country of residency. Many banks refuse to allow a person to open a bank account without government-issued identification papers.
- Terms and conditions. Applying for a loan or credit card might require you to earn a certain income threshold and good credit scores.
- Higher security. By utilizing blockchain technology, cryptocurrencies also benefit from the high level of security that comes with it. Users that follow the proper protocol are less likely to be hacked or lose their funds.
- Crypto is peer-to-peer. When the middleman is cut out, there are less fees, less wasted time, and less effort involved.
- There is higher transparency. You might not know what goes on in the bank but you can easily take a look at the blockchains ledger to see all recorded transactions.
- There is better privacy. Users are anonymous so no one is able to see how many assets a specific person owns and identify them.
Cryptocurrencies are digital currencies that are built on blockchain technology. A currency will be distributed and run on its own blockchain. There are many benefits to users that provide a strong contrast to traditional finance as we know it. We will continue to see more coins and more disruptive technology emerge as the crypto space continues to grow.
- Learn more about the rise of Bitcoin and cryptocurrencies and how we’re seeing a disruptive innovation
- Fancy a video? Check out Cryptocurrency: The Future of Finance and Money and how the CEO of MicroStrategy believes Bitcoin is the most disruptive force of the decade
You should be able to answer all the questions below. If you are having trouble answering any of them, go back and review the lesson & the external content.
- How do you define cryptocurrency?
- How did cryptocurrency get its name?
- What blockchain does a cryptocurrency run on?
- How are cryptocurrencies disrupting the financial industry?
- What is the main benefit of a peer-to-peer system?