Cryptocoins, or cryptocurrency, have become very popular over the last 18 months. Unless you have been living under a rock, it is very likely you have heard people talk about cryptocoins.
Everywhere forums on the internet pop up talking about which cryptocoin is the best of them all. In the meantime banks, financial institutions, and governments are warning about the risks of the new phenomena, urging people to stay with their banks and keep using the old systems. Cryptocoins have been around since 2008, but it wasn’t until 2017 that a bigger audience got in contact with them. Let’s go back in time for a bit.
A short history of cryptocoins
In 2008, Satoshi Nakamoto introduced Bitcoin to the world. The first cryptocurrency was born. It was designed as a peer-to-peer electronic cash system. The idea was to send money from one person to another without having to go to a bank and pay high fees to get the transfer done. Now, 10 years later, we still don’t know how Satoshi Nakamoto really is. There has been a lot of speculation, and most suspicions go out to a few big names in the financial world that were already involved in other projects focused on digital cash technology.
On January 12th, 2009 the first Bitcoin transaction took place. Developer FInney received 10 BTC. The value of those 10 BTC was negligible, a simple Bitcoin was almost worth nothing. The first public transaction took place that same year when 2 pizza’s were paid for with 10.000 BTC.
It soon became apparent to many that these digital coins had quite a lot of potential. More and more people started mining for Bitcoin. This mining is done by having a computer solve difficult mathematical problems.
Around 2011, other cryptocoins started popping up. Bitcoin turned out to have a few flaws, these new coins tried to solve these issues. One of the most important new cryptocurrencies was Ethereum, which went live in 2015. With this, the second generation of cryptocoins took off. These currencies added extra features such as smart contracts. With these coins, users could add conditions to the transaction.
Nowadays there are loads of different cryptocoins out there, all with their own special features. Some focus on speed, others on anonymity, yet others are just weird or trying to be funny. Think about coins for dentists, the Mooncoin, Garlicoin, or the TrumpCoin and PutinCoin.
How do cryptocoins work?
Okay, so now you have an idea of what cryptocoins are, but how does all this work? Cryptocurrencies use blockchain technology. This is a technology where all transaction data is stored on a public block. All blocks are connected, hence the name blockchain. The blockchain is accessible and visible to anyone connected to the network. Once data is stored on a block, it cannot be altered. This makes the network a decentralized system. In other words, nobody is in control of the network. Transactions are being validated by all the computers connected to the network. If the majority agrees the transaction is valid, it can take place. The validation is done via mining. The transactions are verified and added to the blockchain. These miners also create new coins that are added to the system. Each cryptocurrency has a hard cap, or controlled supply. Bitcoin will ultimately have 21 million coins. At the moment, 17.2 of those have already been mined. The more coins are mined, the more difficult it gets to mine new ones. That is why you will need very powerful computers to make Bitcoin mining profitable nowadays.
If you want to learn more about blockchain technology, you should have a look at out Blockchain for dummies article.
What can I do with cryptocoins?
The future of cryptocurrency is looking bright. More and more places accept Bitcoin as legal tender. Right now, you could book a trip online and pay with Bitcoin on Expedia. Via eGifter, you can use this coin to get gift cards that you can use on Amazon or Home Depot, or more. Microsoft also accepts Bitcoin to add funds to your Microsoft account.
Every day, other coin developers publish news about new deals they have struck with all kinds of companies. Western Union announced it started testing Ripple in order to improve the efficiency and speed of their transactional system. And lots of other projects are in the pipeline.
It is very likely that in no more than a couple of years from now, you can make all kinds of payments with the cryptocurrency of your choice. It is a modern development that can’t be stopped. With more than 1900 different coins, it may be difficult to see the forest through the trees at the moment, but in the near future we will see some cryptocoins emerge as the most powerful and usable ones. It will depend on the needs of the market, which features turn out to be the most practical ones?
Do you own any cryptocurrency? If so, what is your favorite cryptocoin?