To understand cryptocurrency, one first needs to understand currency in general, its origins in terms of how it has been created to denote value and its role in facilitating business transactions.
Let’s start at the beginning. Many years ago, around 5,000 years ago, to be exact, there was no money. Back then, economics worked on the principle of barter, e.g., one person gives another some grain in exchange for a goat. Moving through the Bronze Age, people started to use ‘currencies’ to better organize trade by way of standardizing the value of something, usually in the form of precious metals, with ‘coins’ coming in in the late bronze to the early iron age.
In the 7th century AD, the Chinese started using paper notes to represent precious metals, making complex business transactions even easier. In the 20th century, computers and the internet gave rise to digital banking. Banks could store currency digitally through data spreadsheets, i.e., bank accounts, revolutionizing international trade.
Cryptocurrency & Autonomy Over Money
The only two problems with traditional digital banking are 1) that it is highly centralized by regulatory authorities, which can impede trade through bureaucracy, and 2), like any online system, it can, like physical currency, be stolen, lost, laundered, or subject to other forms of criminal activity through cyber-attacks or hacking. Cryptocurrencies are a new means of changing both of these realities. In computer science, a cryptocurrency is a form of entirely digital currency that is entirely decentralized from any particular governing authority, giving its owner complete autonomy over transactions.
All of the digital data that constitutes it is stored in an online database called a ledger to protect and secure it. This ledger is then placed contextually within a blockchain. Each transaction is connected to all prior transactions by timestamps represented by a unique ID code called a Hash, combined with the Hash of the previous block. For a transaction to be approved within a blockchain, its Hash has to coincide with that of the previous block, and so and on so forth all the way up the chain. Therefore, if someone illegally tampers with a block in any way, this automatically invalidates all proceeding blocks, making any further transactions impossible.
Advantages of Traditional Digital Banking
Cryptocurrencies are often considered secure by design; in addition to the blockchain system, digital ledgers are managed in a peer-to-peer (P2P) network, where all affiliated nodes (potentially numbering in the millions) automatically adhere to a unanimous algorithm protocol that continually validates or invalidates all new transactions to safeguard against tampering, making it virtually impossible to do. This allows exchange platforms to facilitate transactions all over the world both effortlessly and securely at the same time, and you can check out OKX at https://www.okx.com/markets/prices/dogecoin-doge for more.
In Conclusion
Cryptocurrencies are often seen as the next stage in the history of economics, bringing power to the user and making the bank and its role in transactions effectively obsolete. It does this by combining the two hallmarks of development in this regard, by reducing the difficulty of complex business transactions by removing the bureaucracy of a centralized authority while maintaining security via blockchain technology.
