History
Trust is the most crucial factor in any monetary transaction, and this is what the world and many coders were striving for since the advent of online payments. It was in 2008 when a whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published describing bitcoin and its mechanism. The whitepaper was published by Satoshi Nakamoto and the fun fact is that no one knows whether he is a man, a woman, or a group of persons. Satoshi Nakamoto did all their interactions over emails and on crypto forums.
On 12 January 2009, Satoshi Nakamoto made the first Bitcoin transaction by sending 10 BTC to a coder named Hal Finney. On 28 April 2011, after stepping down from the role of project lead, Satoshi Nakamoto disappeared. Bitcoin has come a long way since then.
An interesting story…
In 2010, when cryptocurrencies weren’t much introduced to the commercial world, a programmer named Laszlo Hanyecz spent 10,000 Bitcoins (worth $40 at that time) at a local pizza restaurant to buy himself two pizzas. He reached out to the Bitcointalk community and openly traded his Bitcoins to anyone who would buy him these pizzas. He is also the first person to use Bitcoin in a commercial transaction.
Can you imagine the cost of these pizzas if valued at the current rate of Bitcoins?
About $43 million.
These might be the costliest pizzas of all time!
The day when this transaction took place, that is 22 May, was named as the Bitcoin Pizza Day by the crypto fans marking the first commercial transaction using Bitcoins.
What is cryptocurrency?
A cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. It is based on blockchain technology and there is no central authority that manages and maintains the value of a cryptocurrency. As of end-December, there are more than 6,000 cryptocurrencies across the globe, however, the top 20 make up nearly 90% of the total market. The most popular ones include Bitcoin, Ethereum, Binance, Tether, Solana, and Cardano.
How does it work?
Before moving to the basic mechanism of crypto transactions, let’s think of how the traditional digital payments work:
Suppose you have to digitally pay Rs. 1,000 to a friend’s bank account. What would you do?
You will open the online banking application or use a digital payment platform such as Google Pay or Paytm. Now think of how the transaction will proceed – money will flow from your account to the bank and from there to your friend’s account. Now, for a successful transaction, the servers and systems of the payment platforms and the bank needs to work properly. Any technical glitch can lead to a failed transaction. Further, there are always risks of a security breach, hacking, and transfer limits on higher amounts.
With cryptocurrencies, all these risks and challenges are resolved as there would not be any intermediary for making the transaction. Once you are sure of a transaction, authentication of your identity and balance will take place and the money will be sent directly to your friend’s account in a matter of a few minutes. This is highly secure as there is no central point of failure.
Where can you use cryptocurrencies and how?
Though some of the leading retailers and service providers have started accepting cryptocurrencies, it is yet to gain mainstream acceptance. Some of the companies that accept cryptocurrency, mainly Bitcoin, include Microsoft, Tesla, PayPal, Starbucks.
To pay, you need to have a cryptocurrency wallet that interacts with the blockchain and allows you to send or receive cryptocurrencies. Here, it is important to note that, unlike conventional digital payments, cryptocurrencies take a longer time for completing the transaction. A Bitcoin on average takes about 10 minutes for completing the transaction. This time lag is the major drawback of cryptocurrencies.
The future of Cryptocurrencies
Cryptocurrencies are yet to gain acceptance from the government in many countries and people have divided opinions on them. The governments would surely like to regulate cryptos to ensure that transactions are not used for terror funding or for any illegal activities. However, anonymity in such transactions acts as a major constraint.
Considering the features of cryptocurrencies and their popularity, I personally believe, they are going to be a part of our lives maybe 10-15 years down the line. What’s your opinion?
