In the previous lesson, we discussed traditional finance and currency systems. We also saw how they work and their limitations. In this lesson, I’ll take you through what cryptocurrencies are, how they began, their evolution, and how they can address the challenges posed by traditional systems.
Simply put, cryptocurrencies are virtual money based on blockchain technology. They are like your traditional currency, such as Kenyan Shillings, South African, US Dollars, etc. However, they cannot be represented as real-world notes or coins. Instead, they are represented digitally over the internet.
We will learn more about blockchain technology in the next lesson.
Bitcoin was the first-ever cryptocurrency developed in 2009 by Satoshi Nakamoto. It was meant to be used just like physical money, as a payment currency for buying products or services. So, just like how you buy a pizza for money, you can use cryptocurrencies to purchase any product or service.
In fact, Bitcoin was used to buy pizza as well. This was in its initial years when a man bought two pizzas for 10,000 Bitcoins that were valued at approximately 41 USD. Currently, the value of 1 Bitcoin alone is about 46765 USD.
Cryptocurrencies since then have come a long way, and today, there are about 11689 cryptocurrencies out there.
There are different kinds of cryptocurrencies, and not all of them are used as money/cash but serve various purposes across industries such as finance, mortgage, fashion, healthcare, etc.
Cryptocurrencies and blockchain have gauged the shortcomings of traditional currency and finance systems and have found a way to solve them. Some of the advantages of using cryptocurrencies are as follows.
Advantages of Cryptocurrencies and Blockchain
- Cryptocurrencies give people more control over their money. This is because banks are not involved in the processes. How you handle your money, where and how you want to invest it, etc. are entirely up to you, so there is more autonomy.
- Usually, banks and traditional financial institutions have so many procedures and criteria that not everyone can access them. Since cryptocurrencies are available online, all you need is an internet connection and a mobile phone to buy and sell them, making them more accessible to people.
- Crypto transactions, i.e., sending and receiving cryptocurrencies, do not require banks and can happen peer-to-peer. This means you can directly send money to or receive money from people without any intervention from the banks. This is possible because the transaction occurs over the blockchain network, which we will learn more about in the next lesson.
Besides these, there are several other advantages that come with cryptocurrencies and blockchain technology. However, for us to understand them, we must first know and understand other concepts such as blockchain, crypto wallets, exchanges, etc.
So on to the next lesson, where I take you through how cryptocurrencies work.