Ever since evolution, humans has
been involved in changing the way of how economy works. Change in economy
occurs continuously over a period of time and the involvement of human in it.
For million years on earth, mode of payments has been evolved from bartering
essential food items like wheat and meat to gold and several other precious
metals. Trade played an important role in the history of payments and how it
worked.
Until Iron Age and to an extended
period of time, bartering was the major way to exchange goods and services for
people because it gave them the sophistication to get what they wanted. For
example, someone who has amass of horses can exchange it to buy milk or labors
and vice versa. But that sort of bartering didn’t go well since it did not
provide the equivalent value of the traded items.
Thus ancient civilizations like
Greek, Persia, Indus, Maya and various others used beads and shells as coins
and then Gold and Silver as the payment mode for trading purposes. These
precious metals were much easier for calculating the value of the goods and also
portable to carry around during sea voyage. There were other materials like
leather and diamonds were used as payment modes for a while in few regions of
the world.
For many years, Gold was the main
mode of payment, until Paper money was introduced and printed. Modern
governments started printing paper money based on their trading value and
exchange. Thus economics and commerce took a center stage to understand these
processes and educate the stakeholders of it.
These paper money were printed by
the governments and the value has been regulated by central banks. The value of
these currencies are mostly depended upon the regulators, trading and exchange.
Thus the control of this currencies are mostly centralized and can be
manipulated according to the convenience of these regulators. Thus economy and
trading can be saturated. Inflation is a result of these and the society at
large and the traders had to suffer due to that.
A cryptocurrency (or crypto
currency) is a digital asset designed to work as a medium of exchange that uses
cryptography to secure its transactions, to control the creation of additional
units, and to verify the transfer of assets. Few people know, but
cryptocurrencies emerged as a side product of another invention. Satoshi
Nakamoto, the unknown inventor of Bitcoin, the first and still most important
cryptocurrency, never intended to invent a currency. In his announcement of Bitcoin in late 2008,
Satoshi said he developed “A Peer-to-Peer Electronic Cash System.“ His goal was
to invent something; many people failed to create before digital cash.
The single most important part of
Satoshi‘s invention was that he found a way to build a decentralized digital
cash system. In the nineties, there have been many attempts to create digital
money, but they all failed. “After more than a decade of failed Trusted Third
Party based system, they see it as a lost cause. I hope they can make the
distinction, that this is the first time I know of that we’re trying a
non-trust based system.” – Satoshi Nakamoto in an E-Mail to Dustin Trammell.
After seeing all the centralized
attempts fail, Satoshi tried to build a digital cash system without a central
entity. Like a Peer-to-Peer network for file sharing. This decision became the
birth of cryptocurrency. They are the missing piece Satoshi found to realize
digital cash. The reason why is a bit technical and complex, but if you get it,
you‘ll know more about cryptocurrencies than most people do. So, let‘s try to
make it as easy as possible:
To realize digital cash you need
a payment network with accounts, balances, and transaction. That‘s easy to
understand. One major problem every payment network has to solve is to prevent
the so-called double spending: to prevent that one entity spends the same
amount twice. Usually, this is done by a central server who keeps record about
the balances.
In a decentralized network, you
don‘t have this server. So you need every single entity of the network to do this
job. Every peer in the network needs to have a list with all transactions to
check if future transactions are valid or an attempt to double spend.
If the peers of the network
disagree about only one single, minor balance, everything is broken. They need
an absolute consensus. Usually, you take, again, a central authority to declare
the correct state of balances. But how can you achieve consensus without a
central authority?
Nobody did know until Satoshi
emerged out of nowhere. In fact, nobody believed it was even possible.
Satoshi proved it was. His major
innovation was to achieve consensus without a central authority.
Cryptocurrencies are a part of this solution – the part that made the solution
thrilling, fascinating and helped it to roll over the world.
Economy fluctuation pretend
existing even today with major impact on all the markets with raise and fall in
selling cost. This phenomenon affects the market in dissimilar manner since
most trading assets are bought through debt.
Despite continuous economic fluctuation
Cryptocurrency can create a contemporary platform in the market. It gives an
option to bypass middleman and connect traders and investors with a real time
experience with significant instant transactions
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