The invention of cryptocurrency showed that money could be smarter, cheaper and more efficient. In just over 10 years, cryptocurrency has reinvented finance for the digital age

But what is cryptocurrency and why is it so important? Let’s find out. 

What is cryptocurrency

A cryptocurrency is a digital currency that uses cryptography. Cryptography encrypts and decrypts information to make it more secure. Cryptography is safe because it requires enormous computing power to compromise it. Most of the time, this effort outweighs the potential benefits for hackers.

Because cryptocurrencies are digital, you cannot access them in the physical world. They are used online and stored in digital wallets

Cryptocurrency was created in 2009 by a pseudonymous individual called Satoshi Nakamoto. Nakamoto invented Bitcoin to create a currency fit for the digital age that was free from government interference. Bitcoin is still the largest cryptocurrency, but thousands have since been created. 

Bitcoin: Freedom money

Most currencies are created by governments and are controlled by central banks. These currencies are called fiat currencies. Cryptocurrencies are different because they do not need a central authority to function. Cryptocurrencies use blockchain technology instead.  

Blockchains are digital ledgers spread across a network of computers. Each computer connected to the network, known as a node, has independent authority. This means that no single computer can influence the whole network. Decentralized networks are safer than traditional centralized systems. If a bank’s central server is compromised, so is the whole network. But if one node on the blockchain is hacked, the rest of the system is still safe. 

Decentralized transactions using cryptocurrency are quicker and cheaper than those in traditional finance because blockchain is a peer-to-peer network (P2P). With P2P, users can interact directly, without banks as intermediaries. Because of this, users avoid processing time and fees. 

How is cryptocurrency different from other digital currencies? 

Previous digital currencies shared a problem. It wasn’t possible to tell if someone had used the same token to pay for something twice. But Bitcoin’s public data solved the issue. Here’s how:

A transaction is made between person A and person B. This transaction gets broadcast to the rest of the network. Every peer checks this new action against their full list of all other Bitcoin transactions. When every node on the network has checked the transaction, it gets approved. 

Benefits of cryptocurrency

  • Cryptocurrency is the first form of money that is free from government control.
  • Cryptocurrencies can be used anywhere in the world
  • Transactions that use cryptocurrency are quicker than traditional finance and usually cost less than international bank transfers. 
  • Cryptography and blockchain technology are safe
  • Cryptocurrency is full of opportunity to grow wealth while traditional finance is stagnating

Many digital currencies are created at random. Because of this, it is difficult for them to gain value. Bitcoin is different because only 21 million tokens can ever exist. Because the supply of available Bitcoin will decrease over time, demand increases and pushes up the price. Combined with its many use cases, this is why the price of Bitcoin is soaring to new highs.

We’re selective about the cryptocurrencies we add because we want to be at the forefront of technology while giving you the best opportunities to grow your wealth. That’s why you’ve got the option of starting your journey with Bitcoin and Ethereum, so you can explore both the world of cryptocurrency and its potential to energise your financial future on your own terms.