After the transformation of money as the main medium of exchange from barter trade, people have tried to come up with a rational means of exchanging value. In reference to Lee, for the purpose of making goods and services proportionate, Aristotle a Greek Philosopher introduced four criteria that can be used to determine what is referred to as good money. He suggested that good money should be durable, divisible, portable, and possess intrinsic value. Initially, gold was the preferred mode of exchange because it met all the four criteria mentioned above.
Due to increased demand and growing economies, many governments were forced to adopt a medium of exchange that was accessible and one in which they could regulate and control. This turn of events led to the emergence of Fiat currency. Fiat money has been adopted all over the world and comes with its own share of problems.
To combat and fix these problems, crypto currency has been on the rise for the last one decade which is aimed at exploiting disruptive technology referred to as blockchain to its advantage.
According to cointelegraph.com cryptocurrency is defined as virtual or digital currency that has been made in such a way that it functions as a medium of exchange, and make counterfeiting difficult. The role of Information Technology in crypto currency is crucial because the currency uses Cryptography to enhance security by verifying transactions alongside other functions such as regulating the creation of new units of these cryptocurrencies. Cryptocurrencies can also be referred to as entries which are limited in a database that cannot be altered unless some specific conditions are met.
Blockchain particularly works in reference to the structure of the data which permits the presence of decentralized digital ledgers that limits transaction by a single organization. Right now, the two most widely accepted cryptocurrencies are Ether which powers Ethereum Blockchain and Bitcoins.
Currency can basically be defined as entries in a database that are limited in that, the entries can only be changed when specific conditioned are arrived at. Take, for example, the money in a bank account. The entries comprise a database, which is altered when the conditions are met that alters what the account holder owns, in coins and notes. In reference to the cryptocurrency mechanism, a cryptocurrency takes for example Bitcoin is made up of the peer network. All peers in the network have access to the entire history of all transactions and are therefore aware of every account’s balance. A file in the ledger is is created whenever a transaction takes place, as in the following example, “Tiana gives (x) Bitcoins to Antonio”. The file is then signed by Tiana’s private key. There is nothing special about this, it is just a fundamental public key cryptography. When signing is complete, the transaction is transmitted to the network, from one peer to others. Again, this is basically just a point-to-point technology.
Everyone in the network is almost aware of the transaction immediately after it is initiated, but confirmation is made after a specific time. The most important concept in cryptocurrency is confirmation. It is imperative that cryptocurrencies are fundamentally about confirmation. If the transaction is unconfirmed it means it is still pending and forging can take place. Confirmed transactions are set on stone. These means that after confirmation, the transaction cannot be reversed or forged and becomes a part of the unalterable record of historical transactions. From the above statement, the Black geeks mean that this transaction is now partly a blockchain. In a cryptocurrency network, the main function of miners is only to make confirmation about the transaction. Confirmation of cryptocurrency involves taking the transaction and verifying if they are legit after which they are broadcasted to the network. When miners confirm these transactions, every node ensures that it is added to their database and thus becomes a link of the blockchain. After completion of this job, miners are awarded a cryptocurrency token. To indemnify the system against forged transactions the inventor of cryptocurrency Satoshi directed that every miner is supposed to do some investments in order for their computers to qualify for this feat .
There are a plethora of benefits to using cryptocurrencies. Digital currencies are not only good for business owners or business but also for the buyers. One benefit of bitcoins is that if a person had purchased it and then its price shot, they bought it using dollars or pennies and definitely it pays off in the long run. Highlighted below are the advantages of using cryptocurrency. Fast and easy to make payments- payments are quick and easy using cryptocurrency, transactions are made in a matter of seconds. What makes it quick is the fact that people are not required to enter many details such as debit/credit cards details. The most important thing is having the address wallet of the person they wish to make their payments to. Based on the crypto the amount is credited to the receiver in a matter of seconds or minutes. The low fee in transactions and the ease of transfers makes it a convenient mode of exchange. Ease of access- Its availability to the public makes it a desirable choice because barely everyone can use it. Because of the decentralized consensus, investors around the globe can get access to cryptocurrency. In an event that a person is willing to contribute towards a global project, he can do so using the online transfer of funds.
Secure- due to use of “NSA created cryptography” all the transaction you make is secure. This means that It is nearly impossible to make payments if one is not the owner of the wallet unless it gets hacked of which there are many ways to indemnify himself (the owner) against such vices. Pseudonymous- This implies that a person can remain anonymous simply because neither their accounts nor their transactions are linked with their real-world identity. People won’t be able to know their identity from the blockchain but can obtain information from it. Transactions are irreversible- once a transaction has been confirmed there is no one who can reverse it. The author means that not even the person, their miner, Central Bank Manager, or even their president can alter the transaction. If the money is sent, it is sent.
These features indemnify the user against fraud and there is no filing of chargeback. To a greater extent, it has got some benefits. Enhances International Trade- When it comes to cryptocurrency transactions become limitless. A person can send money to a receiver who is in another part of the hemisphere without struggling. Transactions made by people in different countries have become easier simply because they are not controlled by any central bank. This alleviates hindrances because the value is not affected by interest rates. Despite the advantages highlighted above cryptocurrency has its own share of problems just like any other system of exchange. The drawbacks of cryptocurrencies are highlighted below.
Inadequate knowledge- Due to lack of knowledge and complexity of this mode of exchange, many people become vulnerable to hackers. This complex technology calls for a sober mind before ones think of investing. It is Difficult to understand- This trend is new and comes thus makes it difficult to understand. Due to inadequate knowledge about the system many people end up losing their money after investing because of lack of adequate information about the market. Payments are irreversible- if by bad luck a person makes a mistake and sends money to a wrong receiver, their money is lost and cannot be recovered. The best they can do is to persuade the receiver to send back the money of which if they decline the money is forever lost.
According to Jacob Tuwiner, “Cybercrime is generating at least $1.5 trillion dollars in revenue every year via illicit online markets, IP theft, crimeware, and ransomware. In some cases, cybercrime revenues exceed those of some legitimate companies,”. The name of Bitcoin and other cryptocurrency have become popular recently and have earned recognition of both government and mainstream media. When viewed from a different perspective, cryptocurrency has become an avenue where cybercriminal lauder dirty money. Bitcoins ATMs are used as vital tools by cybercriminals in converting laundered money in signals that are harder to trace. It is believed that cryptocurrency if used in the future, is going to promote cybercriminal rather instead of minimizing it. In spite of all these, everyone should appreciate the positive initiative of ccrypto currencythat is, to decentralize control and make the traditional economy revolutionized.