Just a few short years ago, cryptocurrency was a digital quirk. Little more than a talking point amongst the cyber-security enthusiasts and theorists. As 2012 came to an end, one bitcoin was worth around $13.50. One bitcoin as of writing is worth $19,590.12 according to the Blockchain Exchange. This explosion in popularity has led to fluctuating markets, but as bitcoin begins to settle, a clear picture of what the future holds can be seen.
Key Terms in Cryptocurrency
Cryptocurrency and digital currency as a whole is abundant with jargon and technical terms that may seem disorientating to those just beginning to adopt this new form of finance. However, it can widely be broken down into five parts:
- Cryptocoins and altcoins
- Decentralised
- Non-fungible tokens (NFTs)
- Wallets
- Blockchains and exchanges.
What Are Crypto Coins and Altcoins?
Cryptocoins are currencies that use decentralised, encrypted computer networks to verify purchases rather than a central bank. The most well known cryptocoin is Bitcoin but there are multiple competitors with their own unique selling points. For example, Ethereum (ETH) has been adopted by finance giants such as VISA to verify cryptocurrency based transactions.
Why Are People Switching to Cryptocoin?
There are a number of benefits that explain why the rapid and sudden adoption of cryptocoin has occurred. Cheaper and faster transactions are the biggest benefits of cryptocurrencies. The anonymous nature of cryptocurrencies ensures that payment companies such as VISA and Mastercard, which have the most dominant market shares, are unable to dictate what individuals and other companies can spend their money on. This also comes with the added bonus of preventing a single point of failure from causing the system to collapse.
What Does ‘Decentralised’ Mean?
A term that you will often see being thrown around when researching Cryptocurrency is ‘Decentralised’. In brief, decentralised systems are ones that do not have a single core running the program. For example, a decentralised company may have remote workers and multiple offices, rather than just one head office.
What Are the Benefits to Decentralised Software and Currencies?
Decentralised currencies are immune to many of the issues that traditional forms of currency are susceptible to. Banks are typically unable to move money or verify purchases without the help of a third party such as VISA, MasterCard or American Express, because of this, you are limited to what these private companies deem as acceptable services or products. As well as this, should these payment companies fall victim to a cyber attack, or a data breach, you may lose access to your finances.
With decentralised currencies, this risk is mitigated. As well as this, cryptocurrency was designed in such a way that should a hostile party attempt to breach its security, they would need more computing power than the defending parties, something which is highly unlikely to occur.
Non-Fungible Tokens (NFTs)
At the start of 2022 a new aspect of Web 3.0 came into the public spotlight: non-fungible tokens or NTfs. An NFT is a unique record associated with an asset stored on the blockchain. The token itself is proof of ownership of the asset. A good illustration of how this technology works is through the metaphor of a concert ticket. Having the ticket proves that you own the right to enter the concert, and is a record of which seat you ‘own’. Whilst the ticket can be copied, the authentic original is able to be easily discerned through tests, meaning that only you are able to access your concert seat or asset.
Aren’t NFTs just Art Pieces?
The recently popular Bored Ape Yacht Club uses NFTs to enable customers to buy their own unique, virtual art piece. However, NFT technology can be used for any form of digital product, acting as a proof of ownership certificate, as opposed to a form of investment.
Wallets
A wallet in the context of Cryptocurrency is a piece of software or in some cases hardware that allows you to store your private keys which grant access to your bitcoin. It is critical to note wallets do not keep your bitcoin, rather they keep the keys you need to access them safe.
Some wallets also include access to one of the main crypto currency exchanges, allowing you to keep an eye on your cryptocurrency’s current value.
Blockchains and Exchanges
The blockchain is a public record of all transactions made using a cryptocoin. It is the decentralised group of computer networks that verify all transactions. An exchange is similar to a traditional stock market in that it allows the buying and selling of assets, in this instance, crypto coins.
Preparing for the Future
The internet is rapidly evolving and it can be easy to feel overwhelmed. Maximist specialises in preparing companies and individuals to make the shift to web 3.0. If you would like to learn more about what Web 3.0 is and how to get involved, contact Maximist on 0800 059 0116 or by using our contact form.
