A Newbie’s Guide To Cryptocurrency- Much Ado About Cryptocurrency (A Continuation)
By Sophia Onyeabor-Zema
In the previous episode, I shared about the evolution of money and how it relates to cryptocurrency. I got introduced to Bitcoin as the first-ever cryptocurrency. This week, I learned what makes Bitcoin such a viable currency and I’d love to share what I discovered with you. Learn with me, let's go!
Bitcoin as Viable Currency
How do I know that Bitcoin has value just like real money? Good question! I'll ask you mine. What gives the Euro(€) value over a Pound(£)? Why does Pound(£) have more value than a Dollar($)? What gives these currencies value in the international market? People and government policies (monetary and fiscal). Our demand for these currencies makes them valuable. In the same way, bitcoin has value because of its users. With over 4 million users who actively use Bitcoin cryptocurrency wallet and its market capitalization at $763.44 billion. Market capitalization refers to how much a company is worth as determined by the stock market. This means that there is an established demand for Bitcoin.
Even though the earliest use of Bitcoin was for illegal activities on the dark web, that is because objectionable characters leveraged on the pseudonymous nature of the currency ahead of dependable people. Nevertheless, lots of legal transactions are now being carried out using bitcoins. Most online vendors and even physical stores now accept Bitcoin or any other cryptocurrency as payment.
Another characteristic of bitcoin that gives it value is decentralization. If you have read the article that Satoshi Nakamoto first published there, it states that Bitcoin is "A purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution". The purpose of bitcoin was to cut out the third party and institution and foster transactions that are not based on trust or the lack of it but cryptographic proof. Cryptocurrency got its name from here.
Cryptocurrency and Cryptography
Cryptocurrency is a combination of two words; “cryptography” and “currency”. Thus, Cryptocurrency is a digital currency supported by cryptography. The basic principle of cryptography is to conceal information and hide its true content so that only people with permission can access it.
A basic concept of cryptography is scrambling the word GET OUT to FGupVu where the secret to solving this is only known to you and me. It means that I must have shared this secret key with you prior or told you face to face. In this digital age, I can't share the secret key with you in person if you're in another location. Therefore a need for an encryption algorithm like Public Key cryptography.
I would love to explain the concept of cryptography in Bitcoin, so join me next week!
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