Getting started
what even is crypto?
You have probably heard about Cryptocurrency and how people made millions from it and also how people lost their life savings, but what is Cryptocurrency? Cryptocurrency is a digital currency not controlled by any central entity like banks, governments, etc.. Instead, its value is based on supply and demand and how much people are willing to pay for it; there is a limited number of each currency, and depending on how many people sell or buy, the price either goes up or down. Unlike the US dollar, which is controlled by the US government and can print as much money as it likes, making the value of the dollar go down, cryptocurrencies have a fixed amount of ‘tokens,’ which means inflation does not affect Cryptocurrency that much, making it a future proof asset that will not lose its value over time.
Also, Cryptocurrency uses a technology called cryptography, and this is the foundation of cryptocurrencies; cryptography allows transactions made by cryptocurrencies to be anonymous, which means that no one can where you are spending your money, and it also makes it really secure which not even supercomputers can hack into the blockchain itself, and it makes transactions trustless, which mean that the people involved in the transaction does not need to anything about the other person to complete the transactions.
Different types of crypto
There are currently over 10000 cryptocurrencies in the market (Howarth), which is a lot, and the reason for that is anyone with basic knowledge of cryptocurrency, and a computer can make their own cryptocurrency, which has its pros and cons. The pros are that anyone passionate about cryptocurrency and wants to make a crypto with an actual use case can make one without any issues. The cons are that criminals can make cryptocurrency to steal people’s money, and nothing can be done about it, as all of the transactions are anonymous and cannot be tracked back to the criminals.
As stated above, there are a lot of cryptocurrencies in the market, but I will talk about the main ones, their use cases, and why they are different from each other. There are five leading cryptocurrencies, which are Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and Ripple (XRP).
Bitcoin (BTC): Bitcoin marked the beginning of a new era of cryptocurrencies and blockchain, which led to the creation of thousands of other cryptocurrencies with other use cases as it was the first crypto to be ever made; it was made by an anonymous person called Satoshi Nakamoto, this person made this crypto, and shortly after disappeared, no one knows who he is till this day. Bitcoin is decentralized, meaning it is not controlled by any central entity. Instead, it operates on a decentralized network of computers. Bitcoin can be used for a range of purposes, including purchasing stuff online and transferring money to other people; what makes this crypto different from the USD is that the transactions are anonymous, meaning that no one can track or see what you are doing with your money. There is a limited supply of 21 million bitcoins in the market, and no more can be made, making it a great way to fight inflation.
Ethereum (ETH): Ethereum is the second largest cryptocurrency after Bitcoin, with a market cap of 225 billion dollars. Ethereum is like an upgraded version of Bitcoin with more features; it was made by Vitalik Buterin in 2015. The most notable difference between Ethereum and Bitcoin is that Ethereum is running on an Ethereum Virtual Machine (EVM), which is a powerful computer engine where developers can build decentralized applications (dApps) like finance apps to gaming apps, unlike Bitcoin, which is only use case is to buy goods and transfer money. Ethereum also introduced a new concept that many cryptocurrencies implemented: Non-Fungible Tokens (NFT). NFTs are online images with a specific value in the market (Clark); for example, if I am an artist and want to sell my digital paintings, I could make an NFT for each of my paintings and sell them online. The buyer, when they buy the image, will have a certificate of ownership that is generated from the blockchain confirming that he owns this piece of art.
Tether (USDT): Tether is fundamentally different from Bitcoin and Ethereum; it is a type of cryptocurrency known as a ‘Stablecoin,’ which means that it is pegged and backed up by the US dollar. Traders and investors mainly use it to move funds quickly or just to store their money in a place where they know their value won’t increase or decrease; it is the US dollar of cryptocurrency,
technology behind crypto
Each cryptocurrency has its own technology that makes it different from others. Still, the bases and foundations of all cryptocurrencies are nearly the same: they are all built on a blockchain and use cryptography. I will explain these two concepts as they are the leading technologies that are being utilized in cryptocurrencies.
Blockchain: A blockchain is a database distributed or shared amongst nodes (node is just another word for computers) of a computer network (Hayes), and these nodes store information electronically. What makes it decentralized is that unlike, for example, SQL, which is a database that nearly every company uses to store their data and has a central point of control, blockchain databases are managed by collective nodes of computers where no one owns or can control the information stored in there. Furthermore, when a transaction is made, it cannot be altered or deleted in any way, and that makes for a trustless environment where there are no security risks of changing records for someone’s personal needs.
Cryptography: Cryptography is used in cryptocurrencies as a way to secure transactions by encrypting them using a Hash function (‘What is cryptography’), which takes in the data that you would like to send, scrambles the data, and adds more characters to it so anyone who is not supposed to see the data will see a bunch of letters that do not make any sense. Now, to access the data, the person would need the key; the only person with this key is the sender and receiver, no one else. That way, you would ensure that your data is protected against anyone who tries to get your data.
history of crypto, how everything started
The first Cryptocurrency that was ever made was Bitcoin. It was introduced in 2008 and created by a person called Satoshi Nakamoto; he stayed online for a while until he disappeared. By then, no one knew who he was and where he went; we only know that in his digital wallet, he has over 1 million Bitcoins, which is currently valued at nearly 37 billion dollars, but the wallet has not been accessed in over ten years.
At that time, one Bitcoin has valued around 0.0009 dollars, and people at that time were really speculative about the legitimacy of Bitcoin; people didn’t start buying or caring about Bitcoin until the price of Bitcoin went to a few dollars, at that time people got interested in Bitcoin to make ‘Big Money’ and so people began investing in it, then big companies also started investing in it until recently a whole country began investing in it, it became huge, and people became millionaires from it.
Now, after Bitcoin began to gain popularity, new cryptocurrencies were made; they were primarily copies of Bitcoin but with different names, like LiteCoin (LTC). It basically is Bitcoin with a different name, and so on. People began to make new cryptocurrencies, and they are known as Altcoin (alternate coins). This name is given to any cryptocurrency that is not Bitcoin, as people view Bitcoin as the leading Cryptocurrency, and the rest are just alternatives to it.
I would like to end this section with a story of how Bitcoin could change lives. In 2010, a person from Florida called Lazlo Hanyecz bought Bitcoin for a couple of months until he got 10000 Bitcoins. He realized at that time there was no actual use case for these Bitcoins so he asked if someone was willing to buy him two large pizzas in exchange for 10000 bitcoins, sure enough someone did take the 10000 bitcoins and bought him two large pizzas. At that time, 10000 bitcoins were only worth a couple of dollars. Now, these 10000 bitcoins are worth nearly 350 million dollars, so it was called the most expensive pizza ever. (Cryptotag)
use cases of crypto
Over the years, the use cases of cryptocurrency have been increasing gradually, with people accepting the idea of cryptocurrency. The most notable use case of cryptocurrency is payment; people can use cryptocurrency to pay for goods in online stores and transfer money between people. Another use case is trading; people trade cryptocurrencies to make money, and they choose cryptocurrencies over stocks because the amount of money a person can make in cryptocurrencies could change their lives for the better or worse, depending on whether they lost money or not. Also, micropayment became a possibility because of cryptocurrency because it significantly reduces the fees that need to be paid compared to traditional micropayment, making it useful for content creators, online platforms, and in-app purchases.
In the next couple of years, we will see more and more use cases that real-world applications will utilize; we need more time for people to accept the idea of cryptocurrency and digital money.
Sources
Howarth, Josh. “How Many Cryptocurrencies Are There in 2021?” Exploding Topics, 14 Mar. 2023, explodingtopics.com/blog/number-of-cryptocurrencies.
Clark, Mitchell. “NFTs, Explained.” The Verge, 6 June 2022, www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq.
Hayes, Adam. “Blockchain Facts: What Is It, How It Works, and How It Can Be Used.” Investopedia, 23 Apr. 2023, www.investopedia.com/terms/b/blockchain.asp.
“What Is Cryptography?” Money, money.com/what-is-cryptography/#:~:text=Cryptography%20allows%20cryptocurrency%20transactions%20to.
“Guest Post by CRYPTOTAG: The Most Expensive Pizza Ever: The Story of Laszlo Hanyecz and His 10,000 Bitcoin Purchase | CoinMarketCap.” Coinmarketcap.com, coinmarketcap.com/community/articles/646b19964649107c217c1ab9/. Accessed 14 Nov. 2023.