In the modern world digital currencies have become a fascinating concept that spreads viral day by day. Due to the massive growth and innovation of new concepts, this phenomenon of virtual money is popularizing vigorously in a global rate.
The first ever crypto currency came into being is Bitcoin, in the late 2008. Apart from Bitcoin there are many other crypto currencies used in the world such as Ethereum, Ripple, Litecoin, Monero, Dash, Augur etc. Bitcoin was invented as a byproduct of another invention. Satoshi Nakamoto is the founder of Bitcoin. He wanted to develop a “peer-to –peer Electronic Cash System” but he ended up innovating the cryptocurrency concept.
Most efforts to introduce digital currency were in vain over the past few decades. That failures occurred due to use of third party applications to manage the centralized organization of the systems. Out of these, cryptocurrency could become successful because it does not have a centralized authority but a decentralized network. Simply it can be described in accordance with a peer-to-peer file sharing system. In the concept of cryptocurrency is based on decentralized networks consisting of peers. A peer can be referred as a ‘node’. Every peer in the network has a record of transactions occurred in the network and available balance of each and every account.
When dealing with digital cash double spending is one major issue to be dealt with. Double spending means spending of same digital token for more than once. To solve this error generally a central server which is allocated and it is responsible for monitoring each and every transaction and to record details about the transaction processes. But in the concept of cryptocurrency, there is no such a central server. Each and every node in the network is responsible for recording transaction details. Here the term transaction refers to a file containing details of sender, receiver and amount of money utilized and it is signed by the private key of the sender. Then that message is shared from peer to peer within the network.
To become a transaction to be legal it should be confirmed. Therefore ‘confirmation’ is a critical aspect in the concept of cryptocurrency. Until a transaction is confirmed it is not legit and it can be misused, forged. Once the transaction is confirmed it is legitimate and permanent. Then it becomes a part of the blockchain. In simple blockchain means the record keeping technology used in crypto currencies such as Bitcoin. It is a system in which transactions made from cryptocurrencies are listed and recorded in peer computers within a network. Then once again let’s move on to where we were: confirmation.
The process of confirmation of transactions is done by ‘miners’. Mining means the process of verifying and adding various forms of cryptocurrency in to the digital ledger, blockchain. Only after the confirmation, the transaction details are broadcasted to the network and all the nodes store this details.
Cryptocurrencies have unique characteristics which makes them convenient to be used in digital marketing. We can divide them transactional properties and monetary properties. Let’s consider transactional properties first.
Irreversible: Once the transaction is done the process cannot be reversed by any means.
High speed: Once the transaction is finished, it is distributed all over the network and gets confirmed within few minutes.
Globally available: The physical locations of the involved parties does not matter and the transaction process occurs in the same speed despite of geographical locations.
Secure: A crypto currency address (e.g. A Bitcoin address) is very much secure. Strong cryptography, mathematical concepts and algorithms are used to secure crypto currency and practically it is not possible to break this security scheme. Only authorized user (owner) can send crypto currency but none other.
Pseudonymous: The crypto currency transactions, accounts are not related with real world identities.
No permission: We do not need to get permission from any authority to use cryptocurrency. Any individual who is interested can use it.
Those are transactional properties. Now we will consider monetary properties of cryptocurrency.
Currency generation is limited: The rate of generation of digital cash is limited. Algorithms are used to predict in advance the rate of currency generation and how it has to be done. Therefore even now, we can calculate the total amount of cryptocurrency in circulation for any given future date. Any currency generated by a malicious user regardless of accepted rules is discarded by the network and it is considered to be worthless.
No debt: The fiat money we have in our bank account is created through debt. They are governed by a centralized authority. But cryptocurrency is not considered as debt. Those are virtual and physical. They are real as gold or silver.
Not the transactional process but just the concept of cryptocurrency is revolutionary. Because it breaks the conventional monetary system based on central authorities such as banks to govern and manage it. Cryptocurrency is virtual so no one can touch them yet they break all the strong laid monetary policies. It is definite that cryptocurrencies would bring fascinating changes to the global economy in the near future. Therefore it is for sure that the cryptocurrency is the dawn of future economy.