Cryptocurrency refers to money that is digitally generated and stored with a secure encryption method called cryptography, whereby units of currency are created, and funds transfers are monitored without a central authority or government involved. This digital currency is created on a technology called Blockchain. The word cryptocurrency is derived from a union of two words which are Cryptography and Currency. The invention of cryptocurrency has revolutionized our financial system in the last decade with money that can be owned, distributed, transferred and exchanged without traditional middlemen like banks. Cryptography is a unique way of protecting information in codes to be deciphered only by the people whom the message was intended for, while currency refers to a medium that can be used to store or exchange value between parties who agree to the use of it.
Many often ask if cryptocurrency is real money because unlike fiat currency, it does not identify with any government neither is it backed by solid metal or a reliable reserve. To understand cryptocurrency, it is important to study the history of money from barter to banknotes and how it has evolved as an improvement often engineered based on the needs of people. Money in itself has no value but is quantified by the value placed in it. It derives its value by virtue of its functions: as a medium of exchange, a unit of measurement, and a storehouse for wealth often used as an instrument of power by the government who regulate its distribution and use. To know if cryptocurrency is money, it has to be evaluated based on the properties of money and function as a store of value. The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability which can all be found in cryptocurrency.
Every medium of exchange from the beginning of civilization had its unique problem premised on durability, liquidity, and control which often necessitated new ways of value storage. According to Wikipedia, “Paper money was introduced in Song dynasty China during the 11th century. The development of the banknote began in the seventh century, with local issues of paper currency.” in approximately 770 BC to solve the problem of portability. In present-day economy, every government issue its own fiat money as legal tender and maintains great control over its supply, creating financial policies that empower them to manage economic variables such as credit supply, liquidity, interest rates, and money velocity, inflation, unemployment etc.
HISTORY OF CRYPTOCURRENCY
The first mention of decentralized cryptocurrency was in a white paper published in 2008 by Satoshi Nakamoto who successfully created an ecosystem of digital money called Bitcoin (BTC) intended to be a peer-to-peer (P2P) network of transactions between parties that do not require a middleman to consummate. This came at the tail end of the global financial crisis that plunged the world into a depression that was possible because of a vulnerability in the financial system that affected the masses. The great recession opened the eyes of many to the faults of government financial policies as the US government bailed out banks who had contributed largely to the crisis by creating a bubble of wealth for the citizens. Because the traditional financial system had just gone through a crisis that hit the masses hard simply because their finances were entrusted in the hands of banks, and the government who couldn’t protect them when the financial bubble burst. People realized there was too much control by the government over their earned money which could be frozen or restricted from use due to jurisdiction financial policies; thus a solution was created to empower the masses to be in charge of their own money and finances.
Satoshi Nakamoto, an unknown individual or group of people, announced the arrival of the first cryptocurrency proffered as a solution to solve the problem of traditional money. Satoshi referred to Bitcoin as “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” This digital currency was designed not to rely on any government institution or enterprises and made accessible all over the world without restriction. Because there is no regulation, middle man or a third party, the protocol for cryptocurrency was established on a distributed network of computers called a blockchain to ensure transactions are completed securely, and every transaction is accounted for without counterfeiting or double-spending. Blockchain is a ledger system of record keeping.
Before Bitcoin became the first established cryptocurrency, there were some attempts to create currency on a ledger system for cash payments. In 1983, the American cryptographer David Chaum conceived an anonymous cryptographic electronic money called ecash. Later, in 1995, he implemented it through Digicash, an early form of cryptographic electronic payments which required user software to withdraw notes from a bank and designate specific encrypted keys before it can be sent to a recipient. This allowed the digital currency to be untraceable by the issuing bank, the government, or any third party. These, and many more attempts, like B-Money and Bit Gold, were never successfully developed but are similar to the technology behind Bitcoin. In November 2008, Satoshi Nakamoto released a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System to make deliberate use of cryptography. It was noted that Satoshi had no fondness for the financial institution and wanted to eliminate intermediaries’ access to personal transactional data. The first mining of Bitcoin was recorded in 2009, which began a new generation of the financial ecosystem.
“Announcing the first release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double-spending. It’s completely decentralized with no server or central authority”. – Satoshi Nakamoto, 09 January 2009, announcing Bitcoin on SourceForge.
The initial users of Bitcoin were only a handful of cryptocurrency enthusiasts, mainly programmers that were rewarded for building the Bitcoin ecosystem with their computational skills. Laszlo Hanyecz on 22 May 2010, who exchanged two pizzas in Jacksonville, Florida, for 10,000 BTC and from then on Bitcoin began to gain popularity across the globe, Hanyecz is known as the first person to use bitcoin in a commercial transaction. Over the last decade, numerous cryptocurrencies have been created, and the ecosystem has expanded astronomically. Currently, there are over 5000 different cryptocurrencies in the world.
PROPERTIES OF CRYPTOCURRENCY
- Decentralization: Decentralization is the process of distributing power away from a central authority, and sharing to parties involved in a transactional ecosystem. The need for decentralization often arises to eliminate the vulnerability of a concentrated form of power that can be easily attacked or manipulated. Cryptocurrency ecosystem thrives on decentralized ownership of value. Every data recorded is distributed across multiple computer nodes across the network, which means that no single entity owns the database. Unlike in a central record-keeping system, it is very difficult to crumble a decentralized network because an attack on one node does not affect the network nor shut down operations. It is rather difficult to take over or hack a decentralized network.
The Importance of Decentralisation in a Blockchain Network
- It ensures that data is shared real-time with all parties in the network; data is tamper-proof because it is duplicated across all nodes (computers) in the network.
- It resists government censorship—the platform accessibility cuts across global territorial restrictions. Anyone can join a blockchain network from across the world, and it offers a fairer system which is consensus-driven.
- It secures data unlike central institutions that store data in locations that are usually privately-owned, inaccessible to the public, and can be susceptible to fraudulent attacks that cripple networks.
- Trustlessness: Cryptocurrency runs on an ecosystem that does not require trust in the parties involved or a middleman. The fabric of the ecosystem is created on a mechanism that ensures everyone on the network can reach an agreement of what the truth is through mathematical functions. Traditional funds transfer between parties often requires a measure of trust which was represented by middlemen — banks and other financial entities while a cryptocurrency simply shares that trust to all parties in the network. For a currency to be considered as crypto, it can be sent directly between parties without a bank or middleman, allowing the user control overuse and transactional data. Although it is believed that a cryptocurrency doesn’t totally eliminate trust, rather it has redefined trust to have no identity, thereby being ascribed a trustlessproperty.
- Immutability: Every cryptocurrency created or transferred on a blockchain network maintains a record that cannot be changed or undone — this is the characteristic of a distributed ledger technology. Once a transaction data is added to the network, it is near impossible for it to be altered or deleted. A financial institution can manipulate data in their care because it is hidden and centrally controlled. Cryptocurrency is created on an open-source network whereby all transactions that have ever been consummated is transparent and can be verified by everyone on the network. Therefore, it is difficult to manipulate or erase data.
- Anonymity: Every cryptocurrency user can be represented by a virtual identity to keep personal information hidden. Therefore, it doesn’t forfeit privacy for transparency.
- Virtual: All cryptocurrencies exist only electronically and requires a measure of internet connectivity to use, although they can be stored offline to ensure a heightened form of security. Attempt to use it will always require a device that can connect to the internet.
HOW IS CRYPTOCURRENCY CREATED ON THE BLOCKCHAIN?
A cryptocurrency is generated as a reward when computational power is used to execute a process on a blockchain network. Bitcoin, the first cryptocurrency was created through a method called mining, whereby a network of peers work out complex mathematical puzzles using extremely powerful computers to verify if transactions are valid on the network. If the transactions are confirmed to be valid, the miners record the information on a public block and add it to the network of pre-existing blocks. Once this is done, miners are rewarded with newly created digital currencies, and this method is called Proof of Work — one of the most popular consensus mechanisms. Every node has a record of the complete history of all transactions on the blockchain network and the accurate information of every account. As new blocks are created and verified, the information is added to all nodes on the network.
The ingenuity behind cryptocurrency rests on the foundation of blockchain — a distributed ledger technology that records transactions uniquely by ensuring data stored cannot be altered or lost. The blockchain technology is a ledger that does not have a central location of data storage. Rather, transactional data is shared across all parties in the network. These parties are represented by computers nodes that store evidence of each transaction on the blockchain. Simply put, everyone on the blockchain network is a guard keeping the evidence that transactions have been consummated at a particular time with a specific signature.
For Example: If Dave sends $10 to Steve in a community, every member of the community will get a notification that $10 was sent and that it has been received by Steve. If Steve later claims to have received $5 and tries to alter his own record, every member of the community will disprove that claim because they all have evidence that Dave transferred $10 to Steve.
The process of storing data on the blockchain involves cryptography which is necessary to encrypt information stored, thereby protecting basic information of the transaction like personal data of parties involved. On the blockchain, transactional data is bundled together inside a block, and once it is verified as valid, it is added to the end of the ledger to form a chain. Each block of data contains a unique signature together with reference to the previous block. This is what makes cryptocurrency platform very secure by ensuring that anyone who tries to cheat the system needs to get more computational power than all the miners in the network which is near impossible and extremely expensive to run.
HOW DOES IT WORK?
Cryptocurrency is validated on the blockchain by using cryptographical functions to conduct financial transactions. A transaction can simply be referred to as a file that contains the detail of an exchange stored in a block with a fail-proof mechanism. Satoshi defined an electronic coin as a chain of digital signatures. Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and also adding these to the end of the coin.
Every block on a chain contains three things:
a) Data which includes the basic details of the transaction. This data varies with different blockchain and Bitcoin stores the amount and addresses of users, including the Hash of a previous block.
b) Digital signature called Hash and
HASH: is simply a signature that identifies a block in the chain. In cryptography, the Hash is a mathematical function that converts an input value into another compressed numerical value. Hashing is simply a process of making information that is readable and understandable to be converted to an identity that is not understandable. Hash function protects data. It is a cryptographical way of keeping data private in large numbers usually written as hexadecimal. The input to the hash function is of arbitrary length, but the output is always of fixed length.
Cryptocurrency transactions are taken through an input on the blockchain network and run through a hash function. What makes a hash function unique is that it has a defined set of outputs no matter the length of the input, and it can never be reversible. Once an output is generated, it cannot return it to input or be used to determine its input. Also, any new addition to data input creates a new output such that no two inputs can have the same output, therefore, when a block is created, and the Hash calculated it is irreversible, if any information is added to the block, the Hash will automatically change. The connectivity of blocks in a blockchain relies on the storage of a previous hash on a new block as every block on the network contains the Hash of the previous block except the first block called Genesis block.
If there is a change in block 1 (Genesis block), the Hash will automatically change, and Block 2 will no longer contain a valid record of previous Hash. This means that all other blocks on the chain linked to block 2 will also be rendered invalid because they all contain a wrong hash of previous blocks. This is how the blockchain ensures immutability by making it obvious when data has been tampered with.
A hash can be compared to a fingerprint, an identity that is unique and cannot be duplicated. Bitcoin uses the SHA-256 hash algorithm to generate verifiably random numbers in a way that requires a predictable amount of computation.
A Hash may look like: 000000000000000000b7d5s2wt5d66e5s2a2v6tt1b5v6tt5ed5c6xg2b2cxs
TIMESTAMP: Timestamping is the process of securely keeping track of the creation and modification of time on a document. It allows parties involved in an ecosystem to know that a document in question existed at a particular date and time. Every block added to the blockchain network has a time and date by design to validate and authenticate chaining processes. This is one of the features that eliminate double spending on the network. Digital money is susceptible to double-spending, whereby a user attempts to cheat the system by transferring the same value more than once.
According to the Bitcoin whitepaper “We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.”
Cryptocurrency runs on a network of peers that require a consensus to determine the rules of processing. To create a consensus, once a block is generated. It is sent to all nodes on the network for verification. This takes about 10 minutes on the Bitcoin network as this information is confirmed authentic by all nodes, it is then added to the last chain in the ledger, and a consensus has been reached. There are several types of consensus mechanism used to arrive at the truth on a blockchain network.
1. Proof of Work (PoW) simply allows a lot of miners to use their computational power to attempt to solve complex mathematical puzzles to verify a transaction. The first miner to arrive at a solution which adds a new block to the chain will be rewarded with a fee in digital currency. This is the most popular consensus mechanism of a distributed ledger because Bitcoin (BTC), the first cryptocurrency uses this mechanism. It is, however, an expensive method of arriving at a consensus because it requires powerful computers which consume a lot of electricity, and it requires technical know-how to set up these hardware equipment.
Another setback for the Proof of Work mechanism is scalability issues. As the blockchain network becomes larger, it requires more computational ability that may not be met and could slow the network down.
2. Proof of Stake (PoS) however allows the transaction to be verified or validated by the people who stake their pre-existing cryptocurrency to be qualified enough for a validation process. Network participants are allowed to validate transactions based on the amount of cryptocurrency staked. The greater the stake, the higher the likelihood of being chosen as the next block validator. The staked cryptocurrencies are therefore used as collateral to ensure rules are adhered to, and they can be forfeited if the validator (or forger) does not conform to the consensus rules on the network. On the Proof of Stake algorithm, validators are paid transaction fees. One of the most popular cryptocurrencies to use the Proof of Stake mechanism is Ethereum (ETH), which started initially on the proof of work algorithm.
The proof of stake also solves the problem of scalability discovered in the Proof of Work algorithm by a method called Sharding — which is to store some transactional data on archive nodes to reduce the load on the main network. Other networks that run on Proof of Stake mechanism are Nxt, Dash, etc.
3. Delegated Proof of Stake (DPoS) is similar to Proof of Stake because it also uses the process of staking cryptocurrency to validate nodes. However, it uses a more democratic system that is said to be fair because it allows participants to elect delegates that are allowed to validate nodes on the network. Examples of Crypto ecosystems that run on DPoS are Tezos, EOS, TRON, Lisk, Elastos, Ark, Rise, Credits, etc.
COMMON USES OF CRYPTOCURRENCY
- Payment system: The first cryptocurrency was created primarily to be a peer to peer electronic cash payment. Today, cryptocurrencies are considered as a valid form of value exchange for business transactions across the globe. Since the first Bitcoin transaction was consummated in exchange for pizzas, there has been a huge growth in the adoption of cryptocurrency as a valid means of payment. The adoption was launched majorly in the tech-savvy ecosystem where enthusiasts used digital coins to pay for goods and services, and in the last decade, numerous merchants have incorporated gateways for cryptocurrencies to be accepted as a form of payment online. Therefore, cryptocurrency can be purchased or sold in exchange for fiat or other cryptocurrencies.
- Store of wealth: Just like gold, crypto coins can be used to store wealth away from government reach. The technology is independent of governmental influence; therefore, it offers a censorship-resistant way of storing value.
- Money transfer: One of the main purposes of cryptocurrency is to reduce transactional fees and eliminate geographical limitations on money transfer. Hence, it is used to transfer huge amounts of money with very low fees compared to what traditional banks would charge. This is one of the most endearing features of cryptocurrency as a huge amount can be transferred within a few minutes to anyone across the globe while paying a ridiculously low transaction fee.
- Asset for investment: The popularity for cryptocurrency grew exponentially over the years which in turn increased the value attached to each currency, such that a $10 worth of Bitcoin in 2010 would equate USD 34 million ten years later. Cryptocurrency, as a form of exchange, is an asset that can be traded like in a traditional stock exchange. The crypto market is well-favoured because it is very volatile and offers a high rate of return. Also, as more solutions are being created on the blockchain network, there is an increase in the acceptance of cryptocurrencies.
FIVE MOST POPULAR CRYPTOCURRENCIES
- BITCOIN (BTC): Out of over 5000 cryptocurrencies available today, Bitcoin remains the most popular and the most valued currency at a price above USD 11,000 with a market cap of USD 221.59 Billion recorded in September 2020. Bitcoin is referred to as the father of cryptocurrency because it revolutionized digital money and set a precedence for other decentralized platforms in the last decade. The Bitcoin blockchain is only used to power the Bitcoin, and numerous solutions have been crafted after the architecture of this blockchain. In the second quarter of 2020, there were 18.42 million Bitcoins in the world accessed through exchanges and stored in various wallets across the globe. About 85% of Bitcoin has already been mined as there are only 21 million Bitcoins that can be mined in total. About 1800 Bitcoins are mined daily because it takes about 10 minutes for a block to be verified and added to the chain.
Bitcoin can be divided into smaller denominations such as other currencies like US dollars or pounds. The smallest unit of Bitcoin is called Satoshi. 1 Satoshi byte is worth 0.00000001 Bitcoin, and it is named after the mysterious inventor. This enables microtransactions that traditional electronic money cannot do.
- ETHEREUM (ETH): Ethereum is the second most popular cryptocurrency network. It was launched in 2015 by Vitalik Buterin as an improvement to Bitcoin architecture but now is seen as a rival coin. Unlike Bitcoin, which is primarily a coin, Ethereum is a network that offers more as a smart contract platform which allows developers to build decentralized apps (Dapps) on its blockchain. Ether (ETH) is the native digital coin on the Ethereum network, and the platform uses the Proof of Stake consensus to validate transactions. Vitalik first conceptualized Ethereum in 2013 with the idea of developing an open-source blockchain platform different from Bitcoin (BTC), thus pioneering smart contracts.
On the Ethereum blockchain, a smart contract behaves like a self-operating computer program that automatically executes when specific conditions are met. Ethereum blockchain allows smart contracts’ code to be run exactly as programmed without any possibility of downtime, censorship, and fraud or third-party interference. Ethereum transactions are called gas, and they are responsible for powering operations on the entire network, meaning a validator has to spend gas (Ether) in order to make changes to the blockchain.
ETH is known as the most popular Altcoin, and it is priced at USD 480 with a market cap of USD 54.048 Billion as of September 2020. As the Ethereum network grew massively, Ether; the fuel needed to power, it has also increased in volume and value. It is arguably more sustainable in demand because it powers smart contracts that used to create risk-free transactions.
- TETHER (USDT): Based on the market cap as at September 2020, USDT ranks 3rd in the most valued coin reaching a market cap of $13.45 Billion USD. Tether is known as a stable coin because it is a cryptocurrency pegged to fiat with a value meant to mirror the value of the US dollar. Tether (USDT) is issued on the Omni, TRON, and ETH blockchains, and it is favoured for use on transactions that require stability like the use of Tether for decentralized finance (DeFi). An example of such is the decentralized loan application which is premised on a coin that has stability.
- RIPPLE (XRP): Ripple is the currency that runs on a digital payment platform called RippleNet, which is on top of a distributed ledger database called XRP Ledger. XRP was created by Ripple to be a speedy, less costly and more scalable alternative to both other digital assets and existing monetary payment platforms. It is ranked as the 4th most valued coin at $ 0.23 USD and a market cap of USD 13 Billion. Rather than use blockchain mining, Ripple uses a consensus mechanism through a group of servers to confirm transactions. Ripple can be owned by purchase on crypto exchanges; it cannot be mined.
- BITCOIN CASH (BCH) is similar to Bitcoin because it was created as a hard fork out of the Bitcoin blockchain. It aims to become sound global money with fast payments, micro fees, privacy, and high transaction capacity (big blocks). As at September 2020, BCH was priced at $289 USD with a market cap of USD 5.3 Billion. Bitcoin Cash is favoured with people who transact in digital currencies because it has lower transfer fees, and it is faster to process. Bitcoin Cash can handle significantly more transactions per second, solving the issues of payment delays and high fees experienced by some users on the Bitcoin BTC network. The process of generating new blocks on BCH is also called mining like in the Bitcoin blockchain.
STORAGE OF CRYPTOCURRENCY
Digital currencies are primarily generated as a reward for solving complex mathematical problems and are stored in an electronic location which is known as wallets. Some wallets can be created free on some online platforms while some require payments. A wallet stores information through cryptography with the creation of public and private keys.
Every cryptocurrency user has a location (wallet) with a private key and a public address that are both mathematically derived from each other. A wallet is an alphanumeric identifier that is generated based on the public and private keys, and it signifies a location on the blockchain to which coins can be sent to. The public address is like an account number which is safe to share with the public to receive cryptocurrency into the wallet, while the private key is like a private PIN that is not meant to be shared. It is important to note that if a private key is compromised to a third party, cryptocurrencies in a wallet can be stolen. Also, once a private key is lost or forgotten, the cryptocurrency it guards is lost irredeemably.
Wallets can be categorized into Cold and Hot storage systems based on their access to the internet. Because wallets enable access to the location where private keys are stored, it can be hacked if rendered vulnerable. Cold wallets use a physical medium to store keys offline, making them resistant to online hacking attempts and are considered safer than Hot wallets which are connected to the internet.
TYPES OF WALLET
- HARDWARE WALLET: These are hardware devices built specifically for handling private keys and public addresses of cryptocurrencies as a stored file. They are considered as cold storage and more secure. It is usually a USB -like device with a screen and side buttons to navigate through the interface of the wallet. Usually, it can be connected to a mobile device or a personal computer. A hardware wallet can be purchased from reputable companies and are considered quite safe because it stores cryptocurrency away from the internet access limiting the risk of hacking. Popular hardware wallets have been improved to allow storage of more than 22 different cryptocurrencies.
- PAPER WALLET: These are also a very secure way of crypto storage because it keeps private keys away from online. A paper wallet is simply a document that contains a cryptocurrency public address and a private key. Paper wallets can be printed in the form of QR – codes or direct replica of address. The QR code makes it easy to be scanned when in use. It is very easy to create a wallet address online to be stored in the form of paper. However, ensure that the printing is done privately where no one else can see, and the paper document is stored in a secure location. It is also considered as cold storage.
- SOFTWARE WALLET: There are several ways to create a wallet online which can be on mobile applications or web platforms. A lot of cryptocurrency exchange platforms offer such services where a user automatically gets a wallet created upon signing up.Mobile wallets: are designed specifically as smartphone applications that can be installed on mobile devices for ease of use. These wallets are essential for people who use cryptocurrency to make payment frequently in stores both online and offline and can accept more cryptocurrencies than the hardware wallets. Mobile wallets are convenient and easy to use, which has made them popular. However, they are vulnerable to malicious attacks on the device because the information on the wallet is stored in an online server usually provided by the producers of the wallet. It is advisable to secure mobile wallets with passwords and 2 -factor authentication. Some companies that produce these wallets claim to secure the coins stored in some offline cold storage. But they are still vulnerable to malicious attacks and can be subjected to possible regulations whereby the company is expected by law to disclose details of registered user data.
Web Wallets are more vulnerable because it is basically online and can be accessed through URLs on different internet browsers. These are the least secure types of a wallet as the private keys are stored online.
OWNING A CRYPTOCURRENCY
Anyone can purchase cryptocurrency from anywhere across the globe. Although some countries have made the ownership and distribution of crypto illegal, if the internet is not restricted from use, almost all cryptocurrencies are available on exchange platforms to be exchanged for fiat currency. Some cryptocurrencies are not paired with fiat currency; therefore, they can only be bought using another crypto. Bitcoin is the most used currency for the purchase of other currencies.
Steps to Obtain Cryptocurrency
1. Get a wallet that is compliant with the cryptocurrency needed to be purchased. Most of the wallets available can accept different cryptocurrencies, and they generate individual addresses, and private keys for every currency supported. Cryptocurrency remains digital; therefore, it is necessary to create a wallet online because there is no store that issues physical minted cryptocurrency. However, storage of wallet address and private key may be done offline to ensure better security.
2. Find a trusted exchange platform — there are over 500 popular cryptocurrency exchange platforms where coins can be purchased with fiat currency. It is important to consider the authenticity of a platform before depositing money to purchase crypto. Over the years, a lot of unsuspecting crypto enthusiasts have lost huge amounts to fraudulent platforms online.
Exchange platforms can be either decentralized or centralized. Decentralized platforms are more secure against malicious attacks than popular centralized platforms. Several trusted, popular crypto exchanges have been successfully hacked whereby many thousands of coins were lost. In recent times, most of the online exchanges run a dual storage system of both cold and hot wallets.
The idea of anonymity is limited on centralized exchange platforms because these exchanges have to comply with the anti-money laundering rules of host countries that require KYC (Know Your Customer) procedure for users. Therefore, user data may be compromised or controlled by the government.
3. Make your purchase — once a wallet is created, visit any trusted online exchange platform to use fiat currency to purchase crypto instantly. A lot of exchange platforms allow debit and credit cards to be used for payments to execute trades instantly. According to a foremost crypto tracking platform — CoinMarketCap, there are 18,998 different trading pairs available on 259 exchange platforms. Trading pairs refer to currencies that can be exchanged, e.g. USD/BTC or ETH/BCH etc.
Some other exchanges are like escrow service whereby the seller releases the cryptocurrency to the exchange on behalf of the buyer while both users agree on an external way of making payment. Once the seller confirms payment of funds, the escrow platform will release the crypto to the buyer.
4. Receive cryptocurrency as payment or gift by sending public address to the intended sender of the currency. Ensure that the wallet public address sent is correct because cryptocurrency may never be recovered if sent to a different address. It is better to always copy addresses directly online or scan QR code.
5. Use Bitcoin ATMs -There are Automated Teller Machines (ATMs) around the world that are specially installed for Bitcoin and other cryptocurrencies. Canada pioneered crypto ATM in 2013, and there are about 9,557 locations in the world, as of August 2020, according to the crypto ATM tracking website Coinatmradar. Bitcoin ATMs are getting popular because transactions can be made easily without an online footprint, especially for currencies stored in cold wallets.
6. Mining — this is one of the oldest ways of obtaining cryptocurrency where mathematical puzzles are solved to validate a transaction on a blockchain to earn a fee usually paid in the currency of that network. It requires substantial computational power to join a network and may be quite expensive to set up.
FUTURE OF CRYPTOCURRENCIES
There is undoubtedly immense potential in Bitcoin and Altcoins for the growth of the financial system. However, there are still several myths surrounding the creation and use of cryptocurrency owing largely to the fact that it is not clearly understood and an enormous amount of cash has been lost to crypto scams, creating a substantial measure of fear in the masses. Many believe Bitcoin is a pyramid scheme and several governments are confused about how to react to its existence. Some governments have tried to regulate cryptocurrency and blockchain technology in an attempt to protect the interest of investors and to eliminate its use for criminal related activities which may include cross border money laundering, human trafficking and terrorism etc.
Across the globe, regulations have varied between jurisdictions with many issued warnings to steer the public away from cryptocurrency. The ICO (Initial Coin Offering) boom of 2017 where thousands of citizens lost their funds to the crowdfunding of unrealizable cryptocurrency projects also contributed to the concern of financial agencies that necessitated more attempts to regulate ICOs and other blockchain-related activities. Many blockchain projects are now mandated to be registered with regulatory bodies in charge of securities and assets while centralized crypto exchange platforms are mandated to get licensed in some countries. Various governments around the world hold widely divergent views on cryptocurrencies, and there is some optimism in some agencies who have welcomed the possibilities inherent in the blockchain technology using it to create enterprise solutions that are futuristic for public projects. Cryptocurrency is legally accepted as a form of payment in some countries for transactions on private and public domains, e.g. The Isle of Man and Mexico permit the use of cryptocurrencies as a means of payment along with their national currency.
After a decade of exponential growth, cryptocurrency looks promising as a form of investment and storage of value for the next decade. Crypto evangelists believe it will eventually replace fiat currency in the near future; it is doubtful this would happen soon if it ever will. There is much need for blockchain technology to be utilized in industries that require a high level of transparency, like the food and health industry. Such projects should be encouraged by the government for transparency and accountability.
It is evident that more attempts will be made to regulate cryptocurrency in the future, especially as the world goes more digital. The literacy level is increasing across the world, and more people are relying on e-commerce, especially since the 2020 pandemic brought the world physical market to a standstill briefly. These regulations may stifle the fundamental freedom intended by the first blockchain, but it will also bring a level of stability to the volatile market of cryptocurrency.