There are almost no differences in usage between coins and tokens, an ordinary user won’t tell a difference between them, but for some people, it’s important to know whether they invest into a coin or a token, so let’s find out what’s up with those coins and tokens.
History of Cryptocurrency
Let’s go on a brief journey through history first. Don’t worry, we’ll be quick.
- 1983. David Chaum, a cryptographer from the US, creates anonymous cryptographic electronic money – ecash. In the year 1995, this idea got implemented through Digicash – an early form of cryptographic e-payments that required special software to be used to withdraw notes from the bank, create specific encrypted keys for the transaction and sending the note to the recipient. Thanks to this system, users’ transactions couldn’t be traced by the banks, the government or anyone else.
- From the year 1996, some descriptions of cryptocurrencies were published. That might not be very interesting to you, so let’s skip this step for now.
- We’ve eventually come to the year 2009. This year had changed everything dramatically. That’s the year when Satoshi Nakamoto created Bitcoin. After that, the “rise” of cryptocurrencies began. More and more attention was drawn to the field and investments got bigger and more people were involved.
- Since 2009, releases of widely known cryptocurrencies have been happening. The most important date is August 6, 2014, when the UK announced that its Treasury had been told to do a study on cryptocurrencies, what role they can play in the economics of the UK and whether regulation should be considered.
What is Crypto?
Every time you talk about a phenomenon, first you need to get sure that you are talking about this particular thing, not something else that sounds quite similar. So, let’s begin with the definition of cryptocurrency.
According to the Merriam-Webster dictionary, a cryptocurrency is any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions.
From this definition, we get that cryptocurrencies are much like the money on your PayPal account, but they’re not issued by a bank or a government, have no central storage and are encrypted from the very beginning.
Principles of Cryptocurrency
There’s a famous cryptocurrency researcher, Jan Lansky – he has named six conditions that a system should meet to be called a cryptocurrency:
- The system does not require a central authority, its state is maintained through distributed consensus.
- It keeps an overview of cryptocurrency units and their ownership.
- The system defines whether new cryptocurrency units should and can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
- Ownership of cryptocurrency units can be proved exclusively cryptographically.
- The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units.
- If two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them.
Technology behind it
Cryptocurrencies are based on blockchain technology. It’s based on a chain of operations inside the system. Each new operation adds a new block to the line of operation blocks inside the system, and you can’t cut a block or a bunch of them out, as the information on the operation blocks is stored and synchronized simultaneously on every device that uses a taken blockchain. This makes providing false information to the system impossible.
However, blockchain technology is like a fetus: it’s just the beginning, and you can teach it anything in the future. The blockchain can be “taught” some stuff as well. For example, you can make your blockchain more secure and anonymous with brand new encryption and decentralized technologies, make its transactions much faster or create new ways of earning your coins… Pretty much anything is possible here. That’s why cryptocurrencies are becoming more and more popular.
Why are there so many crypto coins and tokens?
Well, that’s simple. The main reasons are the following:
- New ideas basically lead to the birth of new cryptocurrency. Newcomers always have a fresh look and approach
- It’s usable in any economic sphere. Big markets, where you can buy stuff with bitcoin, loyalty programs, cashback…
- It’s profitable. Any cryptocurrency can become one of the coins on the market top, which leads to the fact that many of them get at least some followers and investors.
Cryptocurrency space resembles traditional finance at some point. Crypto coins have their exchange rates, getting affected by everything that influences the currency itself or the sphere of its use.
The top cryptos for today are:
- Bitcoin [BTC] (Market cap – $131,539,498,091 price – around $8.4K per unit)
- Ethereum [ETH] (Market cap – $16,462,104,803 price – around $161 per unit)
- Ripple [XRP] (Market cap – $10,096,459,864 price – around $0.23 per unit)
- Tether [USDT] (Market cap – $4,163,301,274 price – around $1 per unit)
- Bitcoin Cash [BCH] (Market cap – $3,871,896,973 price – around $214 per unit)
We’ve talked about cryptocurrencies from the very beginning. We hope that you found this topic interesting. Surely, the cryptocurrency sphere has many branches that we’ll unfold in further articles. Since the latest news about the laws concerning cryptocurrencies, crypto has the potential to become a worldwide method of payment just like PayPal and can even beat traditional payment methods due to its safety. So, let’s stay in touch to be up-to-date!
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