Cryptocurrency
Digital currency is also called cryptocurrency, virtual currency, electronic currency, or even electronic money, as well as cryptocurrency.
These assets are money and a type of currency, but they do not exist in physical or physical forms, but rather they are virtual and exist in the virtual world or the Internet space.
Cryptocurrency and digital goals
- These currencies appeared, and their number is increasing day by day with the release of more of them with different names. Bitcoin is the most famous, but it is not the only one.
- Almost all of these currencies were established and exist for a clear goal, which is to use them in electronic payment on the Internet and commercial transactions, as well as to transfer money and transfer it quickly from any country to another without borders, obstacles, and time limits for daily and instant transfer.
- With these currencies, the process of transferring billions of dollars has become very easy and takes place in minutes with high privacy as the parties to the transaction are not disclosed, and this is not actually possible, as central banks usually set limits for the financial liquidity that will leave the country and work to raise the incoming liquidity.
- Cryptocurrencies came not only to quickly transfer money without recognizing geography, time differences, national currencies, the structure of the economy, and sovereign borders, but also to be used to buy goods and products, sell them, and receive returns and profits in the form of digital currencies that can be exchanged into dollars and cash.
- These currencies also have exchanges for trading, which are electronic trading platforms distributed around the world that allow those looking for profitable investments to buy quantities of them and sell them when their value increases. The difference between the purchase and sale price is profit, and, of course, the loss is possible when selling during sudden crises and selling times.
The history of digital and cryptocurrency
The history of this sector is long and not born yesterday or a few years ago as most people think. Like in any field, sector, or product, there is a series of failure events followed by success and a real launch.
Of course, those who are familiar with the history of digital and virtual currencies are those who believe that they will remain here and will not die, as promoted by some who have taken hostile positions for many reasons, the most important of which is a lack of knowledge in the field and ignorance.
Back in 1977, the RSA algorithm appeared, which was invented by the trio of Leonard Adleman, Adi Shamir, and Ronald Rivest at the Massachusetts Institute of Technology, which was announced at the time and its invention paper was published.
The benefit of this algorithm that formed the first core of these coins is that it allows the receipt of revenue and money through it.
Many years later, in 1993, mathematician David Chum invented ecash, what is said to be the first electronic cryptocurrency that relied on encryption.
Then David Chum worked to raise funds to fund his idea, and of course, he succeeded in establishing the company DigiCash that manages this central digital currency, and he worked on contracting with merchants and companies to accept his currency and use it in electronic dealing, but because of the delay in e-commerce and not growing much at that time, he failed. The project was unable to persuade companies and traders to use its currency.
In 1996, E-gold was launched, which is the first site to exchange and trade gold, which requires opening an account on it and using it to buy and sell gold. Unfortunately, the site was closed after suspicions that it was used in money laundering. Although the number of subscribers reached more than 3.5 million, it closed in the end.
In the same period, specifically during 1997, Adam Buck invented a system to reduce spam email called Hashcash, which was also integrated into the algorithm and cryptocurrency code with its development, of course.
One year later, a computer science graduate, Wei Dai, was able to create a scheme of electronic currency that he shared via his mailing list, which formed the first core of the digital currencies currently in existence.
Two years later, exactly in 1999, the first electronic bank was launched, and we are talking about PayPal, which helps in transferring money over the Internet, and it has strengthened its success and people's demand for it by emphasizing the need to launch digital and electronic currencies used to transfer money.
In 2003, the Tor browser appeared, which provided browsing sites with anonymity as well as browsing blocked sites and prohibited access to them through regular browsers; this constituted indirect support for encrypted currencies, encryption, and the privacy of financial transfers and commercial deals.
A year later, programmer Hal Finney was able to detect the "RPOW" protocol, which specializes in resisting hijacking attacks from services and reusing services after being attacked and disrupted for a short period without human intervention, another support for the emergence of digital and encrypted currencies.
In October of 2008, in light of the global financial crisis, an anonymous person named Satoshi Nakamoto published a paper in which he talks about ways to transfer money without the control of governments and financial authorities.
In the same year, the blockchain was created by an unknown person, who is also said to be a pseudonym for a group of people who worked on this technology, which attracted the attention of banks and financial institutions, and there is an openness to it in many sectors, including medicine, smart contracts, trade, and teaching, which is a record of transactions in Bitcoin virtual currency.
In 2009, and exactly during April, the person behind Bitcoin managed to mine 50 units of it, and a few days later, the first currency deal was made between Nakamoto and Hal Finney.
According to the trading of the MTGOX exchange, the price of Bitcoin reached $1 in 2011, meaning that it was equal in value, after which the value of this currency continued to increase.
After that, new digital currencies began appearing, competing with the original currency and based on the blockchain, with the advent of each of them having a customized, developed, and modified blockchain technology in its favor. Among these names, we find Ripple XRP, which was founded in 2012, followed by Litecoin and Ethereum, the latter founded in 2015, until the number of cryptocurrencies reached 1590 now.
On the other hand, there are dozens of trading platforms that provide buying and selling digital currencies, as well as services for converting dollars or cash into digital currencies, and it has turned into a popular trade.
At the beginning of this year, the market value of digital currencies exceeded 700 billion US dollars, and it is said that after the current rationing crisis is over, its value is expected to be estimated at several trillion dollars, and in the future, it may exceed the value of global stock exchanges.
Unlike fiat and coins, digital currencies are intangible!
This means that any intangible currency that the individual cannot feel is an electronic currency, and this means that the money on credit cards and the money that is sent and received through electronic banks is considered an electronic currency system, but if it is touched and felt, it becomes an ordinary currency, as it's known.
It is called "cryptocurrency" in English and is divided into two sections. The second section is the currency, while the first section is the word "Crypto," which is an abbreviation of the word "cryptography."
A person can obtain bitcoins, for example, in a process called bitcoin mining.
How do digital currencies work?
Digital currencies, specifically Bitcoin, are decentralized currencies, meaning that no government or institution can control the production of more of them.
But how are digital currencies controlled?
Cryptocurrencies are controlled by a technology called Blockchain.
And the blockchain as defined in the book (Blockchain Revolution) by the writer Don Tapscott and his brother as a non-manipulable electronic ledger of economic transactions that can be programmed to record not only financial transactions but everything that has value.
That is, every economic or financial transaction that occurs on the system is recorded and encrypted in a block, which is then linked to other blocks to form the blockchain.
The digital currency system, or the Bitcoin system, which is a decentralized system for sending and receiving money, is characterized by several things:
It is ultra-high-speed as the money you want is transferred in less than a second, compared to the method of traditional banks that takes days.
Bitcoin money transfers are almost free or cost a negligible amount.
Protection and transparency, as every economic or financial process, is saved in a block and distributed to millions of computers around the world, which makes the process of hacking practically impossible. The financial process takes place in front of the whole world, which makes attempts to manipulate it impossible.
Decentralized, meaning not affiliated with any central bank,
The biggest digital currencies
In 2009, the first cryptocurrency appeared to us from Satoshi Nakamoto, and this currency is called "Bitcoin."
Bitcoin is the most popular currency in the world of electronic currencies, which all investors are advised to trade against other currencies, and it is also the highest in terms of market value.
In 2011, Charlie Lee, a former engineer at Google, invented a currency called LTC, which appeared as an alternative to Bitcoin, but it could not budge Bitcoin from its place, and there is no other currency that could do this, although it is very close to Bitcoin.
In 2013, one of the most famous digital currencies appeared to us, Ripple, which ranks third in the world of digital currencies in terms of liquidity. The Ripple currency differs from Bitcoin in that the second wants to replace the traditional banking system, while the first does not want to cancel it. Do you want to support him?
To understand Ripple more simply, the Chief Analyst for Ripple, David Schwartz, explained this:
Today's payment systems are what e-mail was in the early 1980s. Each provider has built its own system for its customers because if people use different systems, they can easily interact with each other. Therefore, the ripple network is designed to connect different payment systems with each other.
In December 2014, Evan Duffield produced Dash, a digital currency that is a more secret version of Bitcoin, while in April 2014, the digital currency Monroe was produced by her team, and in the same year, the Chinese government launched the digital currency Neo to boost the Chinese economy.
In 2015, Russian programmer Vitalik Buterin invented the second most famous and best digital currency ever, the Ethereum currency. At the same time, Ethereum is both a virtual or digital currency and a decentralized platform. As an example, a digital currency's status and what it is as a decentralized platform are very important and dangerous!
The implementation of Ethereum threatens the function of the government’s work, as this system allows the creation of smart contracts in a way that simulates traditional contracts and makes sure that all terms of the contract have been fulfilled, and ensures that no condition of the contract is breached, which is exactly the role of the authorities in real life.
The risks and drawbacks of digital currencies
- In the absence of a supervisory authority to refer to in cases of fraud and fraud, the user is absolutely responsible for his digital funds.
- The absence of personal data for users of the currency made it a means for suspicious transactions such as the arms and drug trade.
- The state cannot charge taxes on business operations conducted through digital currencies.
- It is assumed that taxes are one of the most important sources of income for every country, from which health and education services are provided to citizens.
- Hence, digital currencies can harm the economies of countries in the long run.
- The fluctuation in the price of digital currencies causes concern for many and makes them closer to the speculative market than an alternative currency.
- It is not completely reliable at the moment.
- There are billions of people around the world who are not good at using the Internet and dealing with technology.
- On the other hand, many have the ability to use digital currencies but feel suspicious of them.