The Allure of Cryptocurrency
“The same people who thought Bitcoin at $100 was expensive, now think it is fairly valued at $30,000” – J.R. Rim
To trace the exact origins of cryptocurrency to 2009 would be a far cry from the truth. If we look closer, much before Bitcoin came into being, the ideas were floated as early as 1980 in Netherlands and USA. Among the earliest known cryptocurrencies viz. B-money, Hash Cash, Flooz and Bit Gold, and a noteworthy mention would be Digicash created by David Choum that would have certainly laid the foundations to erstwhile cryptocurrency
It all started with a white paper ‘Bitcoin – A peer to peer electronic cash system’, published in the year 2009 under the pseudonym “Satoshi Nakamoto”. In the same year, the first block of Bitcoin was mined jet setting the blockchain technology. This first mined block was called the Genesis block.
Increase in demand
Among the first to arrive on the scene, Bitcoin set the trend for the growing interest in cryptocurrency. Traded for the first time in 2010, it set the tone for rivals to enter the market as early as 2011. Namecoin and Litecoin were the early followers. There was a crash in bitcoin price in the year 2011, which took two years to recover. The scams and thefts of Mt Gox, the largest Bitcoin exchange in 2014 wiped out the assets worth millions. In 2016, Ethereum arrived on the scene and came close to pulling the plug on Bitcoin. With thousands of cryptocurrencies vying for a spotlight, today Bitcoin has managed to defy conventions to remain as the sought-after currency trading currently at $40,000.
Though bitcoin emerged in the scene in 2009 with mining, the first time it was valued was with the first transaction in the year 2010 when a person bought 2 pizza’s swapping 10000 bitcoins which would have surely made them millionaires if they had held out. In the year 2011, rival currencies emerged. All rival cryptocurrencies are called Altcoins
Bitcoin runs on blockchain technology, which is fondly called the triple entry bookkeeping system. A transaction effectively has three parties, the sender, the receiver and a third party who must confirm each transaction. Any details of the transactions can be obtained from its digital record.
The real-world impact of virtual money
It is being touted that with the rapid increase in usage of cryptocurrencies, the current banking system would become a thing of the past. The advocates laud their low cost per transaction, speed and increased anonymity. But the flip side talks about hacking, theft and unexpected rate fluctuations added to the energy consumption required for mining. Some investors are increasingly curious to add it to their investment portfolio and yet several others consider these currencies as a potential hedge against risk.
To sum it up, cryptocurrencies increase the financial inclusion of individuals and companies. Their transparency in tracking helps reduce corruption but then again it all depends on the mass adoption of these currencies.
“Bitcoin will do to banks what email did to the postal Industry” – Rick Falvinge
Authors – Benila Jacob, Anthony Preetham