Cryptocurrency is considered one of the most fascinating technological innovations and advancements of the 21st century. So, when did cryptocurrency first emerge and how did it become popular in modern society?

As explained in The Guardian, the emergence of cryptocurrency predates back to the year of 1983 where an American cryptographer named David Chaum introduced the idea of a specific form of cryptographic electronic money in a conference paper that he published. It was followed by the development of a proto-cryptocurrency called Digicash in 1995. Despite being the first to introduce the idea, it was not until October 2008 that the popularity of cryptocurrency began to skyrocket in the digital world and ultimately become a worldwide phenomenon. The primary impetus was a paper by an anonymous programmer under the name Satoshi Nakamoto entitled Bitcoin: A Peer-to-Peer Electronic Cash System that does not require trust in any kind of third party in late 2008.

Crypto gave rise to its official launch in 2009 which makes it a popularly used worldwide payment system that allows people to transfer money across borders the absence of intervention from banks or government entities. Bitcoin was the only cryptocurrency in the market as of 2010, but as the year progressed, new virtual currency entered the market enabling people to have more options for investment opportunities and given the ability to compare each currency and eventually picking the ones that offer more stability. Bitcoin itself has gone through a period of volatility since its inception and it is believed that its rise was not until 2017 when the value peaked significantly.

So, why is it popular?

According to the World Financial Review, there are a number of factors that made cryptocurrencies popular. The first reason is because of the low fees associated when using it. Online payment options usually incur large fees in their transaction process, on the other hand cryptocurrencies charge significantly lower and assure more safety. Not to mention, virtual currency is easy to buy which means it is highly accessible.

The second reason why crypto is so popular is due the fact that it is not in any way related to governments all around the world. This helps assure people that cryptocurrencies will remain stable regardless of the economic disturbances that may occur in some countries around the world.

The third underlying reason as to why decentralized currency that we know as crypto is deemed popular is because of its potential for profit. When someone invests or buys a specific type of cryptocurrency at its lowest price, the possibility of profiting is high when the price of the cryptocurrency rises.

The other reason is because of its accessibility and availability in many online companies, making it easier for people to make payment without the hassle of inserting their credit card details.

The last reason is because cryptocurrency is easy to get as the process is decidedly simple and customer-friendly. It is no wonder that virtual currency is believed to have the ability and capacity to dominate the monetary market in the future. This is backed by the evidence that cryptocurrency has also started to adopt major technological innovations such as the blockchain. This inevitably will affect the world in so many ways and help the revolution of many conventional sectors, converting it into a more digital, accessible system which promotes transparency in its process.

What is Cryptocurrency?

Cryptocurrency or crypto-currency or also known as crypto is a virtual currency which exists digitally as a medium of transaction which uses cryptography to allow the process as well as to secure its transactions. Cryptocurrencies are not governed by and do not rely on any central issuing or regulating monetary authority such as banks or government and therefore fall under the category of decentralized currency.

A cryptocurrency functions through a decentralized system to undergo and record transactions as well as to issue new units, making it less likely for counterfeiting or any other unwanted form of actions that might hinder the process of digital money transactions done on the internet to occur. There are many types of cryptocurrencies, some of the prominent ones include: Bitcoin, Ethereum, Litecoin, Ripple, BNB, Solana and many more. Bitcoin and other leading types of cryptocurrencies may dominate the current market, however there are thousands of other types of cryptocurrency that exist and gradually have become more attractive for people to invest in.

What is Blockchain?

Blockchain is a type of digital, shared, immutable ledger or collection of financial accounts which accommodates the process of recording transactions as well as tracking assets in a business network. It is essentially a system that stores a list of digital data records comprising many blocks of data that are organized in a chronological order and linked as well as secured by cryptographic proofs.

This unquestionably makes it difficult and impossible for the data to be altered, hacked, tampered with or cheated in the system. Blockchain is sometimes referred to as distributed ledger technology (DLT) and it has become popular in the modern digital society especially for business purposes because of its capacity of being unalterable and transparent through the use of decentralization and cryptographic hashing.

How does it work?

Blockchain technology which was invented initially by Satoshi Nakamoto and used in the process of recording and storing transactions for cryptocurrencies such as Bitcoin works by storing transaction data in blocks and linking it together to form a chain. As mentioned in Binance.com, , on a blockchain transaction happens within a peer-to-peer network of globally distributed computers called nodes. Each node keeps a copy of the blockchain and supports the functioning and the security of the network.

Types of Cryptocurrencies

There are nine types of cryptocurrencies: utility tokens, security tokens, payment tokens, exchange tokens and non-fungible tokens, decentralized finance tokens, stable coins, asset-backed tokens and privacy coins.

Utility tokens are digital units representing a value on the blockchain. Examples of utility tokens include; Funfair, Basic Attention Token, Brickblock, Timicoin, Sirin Labs Token and Golem.

Security tokens are used for securitized tokenization of properties, bnds, stocks, real-estates, property and real-world currencies. For example Sia Funds, Blockchain Capital and Science Blockchain.

Payment tokens are the most popular ones as it is used for paying good and services inside and outside their own platform with the examples of Bitcoin, Ethereum and Monero.

Exchange tokens are crypto marketplaces for buying and selling and swapping tokens for example Binance Coin or BNB token, Gemini USD, FTX Coin for FTX Exchange, OKB for Okex exchange, KuCoin Token, Uni token, Huobi exchange and Crypto.com.

As for non-fungible tokens (NFT), it is a digital certificate of ownership a non-replaceable item, a one-of-kind asset on the blockchain.

Decentralized finance token of DeFi is a financial application built on the blockchain or distributed ledger which allows money control directly to the user yielding the freedom to transact on a global scale with peer to peer methods and access to global markets. For example DeFi are Stellar, Polygon, IOTA, Tron and Cardano.

Stable coins are essentially tokens of a stable value in nature that their value is somewhat predictable and will almost likely remain the same all the time. They include Tether, USD fiat, Gemi Dollar, USD coin and Paxos.

As for asset-backed tokens, they are a category of cryptocurrencies whose underlying value is backed by a real-world often tangible assets such as money, stocks, bonds, real estate and gold.

Lastly, privacy tokens are used for privacy applications because their code encourages better privacy that Bitcoin and mainstream crypto. They include Zcash, Dash, Horizen, Beam and Verge.

In the crypto industry, there is a key distinction that differentiates coins and tokens. Crypto coins are the primary asset of a blockchain such as Bitcoin and Ethereum. Whereas crypto tokens are mainly created by platforms and applications specifically built on top an existing blockchain. Crypto coins are used for governance and transactional fees, making them the infrastructure and the backbone of the blockchain. Tokens mainly represent a myriad of real-world cases such as gaming, NFTs and other form of fees.

Where can you purchase something with cryptocurrency?

For the most commonly-used cryptocurrency such as Bitcoin, it has become a lot easier to purchase or make transaction everywhere. Online stores such as Overstock, Home Depot, Newegg, Shopify and Microsoft have accepted Bitcoin as its method of payment. Bitcoin type of payment has also deemed accepted for service providers such as AT&T, Twitch, Dish Network, ExpressVPN, NordVPN, ProtonMail, Vultr, WordPress, Reddit, Namecheap, Bloomberg and Chicago Sun Times. Bitcoins can also be used to pay for video games purchases such as for Xbox, Humble Bundle and Big Fish Game.

For education, Bitcoins can be used to pay for university fees such as for Curtin University in Australia, The King’s College in New York City and European School of Management and Technology in Germany. For Restaurants, Bitcoins can be used for purchases at Subway and Burger King.

Some suggests that cryptocurrencies have been integrated with Visa with the latest update confirming that Visa has decidedly partnered up with 50 cryptocurrency firms to allow customers to convert and spend digital currencies such as Bitcoin. It was seen as a profitable movement as it further integrates digital currencies with its global payments network and an important infrastructure to support blockchain-based payment.

Examples of Cryptocurrency

How many cryptocurrencies are currently out there? According to coinmarketcap.com, there are 1583 cryptocurrencies listed. Even though there are so many of them, there are twelve that are considered the most popular and leading in the cryptocurrency industry. They are Bitcoin (BTC), Ethereum (ETH), Tether (USDT), USD Coin (USDC), Binance Coin (BNB), Binance USD (BUSD), XRP, Cardano (ADA), Solana (SOL), Dogecoin (DOGE), Polkadot (DOT) and Shiba Inu (SHIB).

Now, let’s talk about the main ones in the following section.

Bitcoin

Bitcoin is the most well-known cryptocurrency or virtual currency which operates free from any central control or any bank or government invigilator. It promotes the full usage of peer-to-peer software and cryptography. Bitcoin that was originally created by its mysterious creator under the pseudonym Satoshi Nakamoto was debuted in 2009 and has undergone various period of volatility and did not break into popular consciousness until later in the year 2017. The digital currency was initially intended for people to send money over the internet by providing an alternative payment system that operates without the need of centralized control from authority. Bitcoin became the first and a precursor to the emergence of other types of cryptocurrency.

Ethereum

Ethereum or Ether was launched in 2015 and considered as the second-largest digital currency after Bitcoin. On the Ethereum network, the decentralized cryptocurrency allow for smart contracts and decentralized applications to be developed and run in the absence of any downtime, possibility of fraud, control or any particular intervention from a third party. The primary goal. behind Ethereum was to a create a decentralized suite of financial products that anyone in the world can and may freely access, despite differing background such as nationality, ethnicity or even faith. Ethereum is a blockchain with compelling aspects that make it possible for those without state infrastructure and state identifications to gain access to bank accounts, loans, insurance and other variety of other financial products. The smart contract aspect if Ethereum is the primary impetus to its skyrocketing popularity. Ethereum utilizes a proof of work blockchain which means that it encourages miners to compete in solving complex puzzles to validate and verify their transaction.

BNB

The third largest crypto exchanges in the world is Binance Coin (BNB) issued by Binance. Binance coin blockchain is also the platform on which Binance’s decentralized exchange operates. The virtual currency originally founded by Changpeng Zhao and was created as a token to pay for discounted trades until now it becomes the most widely used exchanges in the world based on trading volumes. The ability to be used for payments as well as purchasing other types of goods and services added to the already existing compelling aspect that Binance Coin possesses.

Solana

Solana is a blockchain platform founded in 2017 designed to support the functionality of decentralized applications. Its official launch was not until March 2020, making it a newer cryptocurrency to its leading crypto predecessors and the ninth-largest cryptocurrency by the market cap. Its main capability is the speed of completing transaction for a web-scale platform. It was deemed as an ‘Ethereum killer’ as it performs transaction faster per second more than that of Ethereum’s speed. Moreover, it costs lower fees for the transaction process. Similar to Ethereum, Solana uses smart contracts that are beneficial for running cutting-edge applications such as decentralized finance (DeFi) and non-fungible tokens or NFTs. Unlike Ethereum which utilizes proof of work, Solana uses proof of stake which is considered less harmful because it is not as energy-intensive as the proof of work method used by Ethereum.

Proof of work involves a competition between miners to solve cryptographic algorithms puzzle or equations in order to validate transaction and allow people to earn blockchain rewards. On the other hand, proof of stake method assures that the transaction is reliable by randomly choosing the validators and compensating them in return with crypto.

How to buy cryptocurrency?

The first step that you should do when buying cryptocurrency is to find and selectively pick a broker or crypto exchange. A cryptocurrency exchange is a platform where trading occurs between buyers and sellers. Once you decide on a type of cryptocurrency exchange, you can continue by signing up to open up an account. Verifying your identity is an essential process that you ought to follow and the kind of identifications they need may vary depending on the cryptocurrency platform and the amount you plan to buy. Identification helps prevent fraud by allowing you to meet the federal regulatory requirements standards. The platform may ask you to submit a copy of your passport or driver’s license, accompanied by an upload of your selfie to prove your appearance matches the information you submit. You will only be able to buy or sell crypto when the verification process has reached its completion phase.

The next move is to deposit cash to invest. In order to do so you must be assured that you have funds in your account. You will deposit your money into the crypto account by linking it to your bank account followed by authorization of a wire transfer from your debit or credit card. After that, you can place your cryptocurrency order. There are many cryptocurrencies to choose from and the most popularly used ones are Bitcoin and Ethereum.

As for others, you may need to learn more about it to prevent yourself from losing money in the future due to price swings.

The last important step in buying cryptocurrency is to select a storage method. Since cryptocurrency exchanges are not backed by protections from a centralized authority, they may be prone and at risk from acts of theft and hacking. You may even lose your investment if you forget the codes to access your account.

Therefore, you have at least three options to follow through to assure your investment security:

The first one is to leave the crypto on the exchange which means you are storing it in a crypto wallet attached to the exchange.

The second one is to store it in hot wallets that are online-based and run on internet-connected devices such as tablets, computers or cellphones. However, cybersecurity risk is often associated with this type of storage.

The third one is keeping it in cold wallets that are not connected to the internet such as a USB drive or a hard drive. This is arguably the safest method that you can use to protect your investment from any form of cybersecurity as well as allowing you to access it even when you forget the codes to your account.

What are the advantages and disadvantages of cryptocurrencies?

Cryptocurrencies come with both advantages and disadvantages. There are a number of factors that could be considered as advantages when using crypto.

Advantages of cryptocurrency

The first advantage is that the transaction process is generally quick, easy, straightforward, private and at a fairly low cost. The fairly low cost is due to the fact that the blockchain cuts out any form of intermediaries such as banks and online marketplaces that usually incur large fees. You can send or receive a variety of cryptocurrencies using a simple smartphone app or a computer through hardware wallet or exchange wallet.

The second advantage is that it is well-secured. In spite of the possibility of a scam that might occur when you are investing in cryptocurrency, it is less likely to experience such an occurrence if you are using decentralized currency that is based on cryptography and blockchain security for payments and transactions.

The decentralized currency means that transactions can be done without the need for central authorization.

The third advantage is that cryptocurrency sees no regard for national borders. You can send coins to someone in a different country without the hindrance of long duration, large fees, regulation and sanction that might be imposed in a particular country due to possible tensions with other specific countries.

Disadvantages of cryptocurrency

Cryptocurrencies are not immune to flaws either. There are several disadvantages that you ought to remain cautious. The first disadvantage is associated with cybersecurity issues. Cryptocurrency exchanges, especially in terms of investment, can be considered risky as it is vulnerable to scams, theft and hackers. This is primarily caused by the fact that it is not regulated by the Financial Conduct Authority (FCA) and thus there is not assured protection.

The second disadvantage is the volatility of cryptocurrencies value. It changes quickly and often significantly, making those who invest so much in it prone to losing a lot of money at the very end if the outcome does not look promising.

So why is it so popular in today's day and age?

Cryptocurrency’s popularity has been spiking in recent years. The decentralized currency, which is a form of digital money, is viewed as the future of money which arguably will replace traditional centralized currency such as the U.S dollar that is controlled by governments. Other factors such as low fees of transactions process, its potential for yielding profit through investment, accessibility and availability in many online companies and the decidedly simple and customer-friendly process also contributed heavily to its skyrocketing popularity in the digital and financial spectrum.

On the other hand, influential people such as Elon Musk and Bill Gates have begun to endorse the system, claiming it a plausible alternative for when loans are difficult to seek. This was seen as applicable especially during the pandemic. What was formerly viewed as an alternative investment solely in the domain of speculators, cryptocurrency is now being openly discussed as a viable option for a portion of any investor’s portfolio, including their retirement plans. So, this ultimately helps balance out the investment portfolio.