In the 1990s, attempts were made to create a form of digital money, but they all failed. In 2008, though, a man named Satoshi Nakamoto created the first successful digital cash system, one that was decentralized and therefore relied upon no bank or other organization to oversee and manage it. He called his form of digital currency the “Bitcoin,” and this was the first type of cryptocurrency made.
So, what took so long?
Well, here’s what had previously stymied other people who tried to create digital cash systems: how to prevent double-spending of the same digital-dollars. In a typical banking system, that protection is built in as a central server manages accounts, transactions, and current balances. But, in early attempts at creating a cryptocurrency system, someone could theoretically send the same dollar to multiple people.
In Nakamoto’s solution, though, they couldn’t, because everyone involved in the decentralized network has access to the same master list of transactions made and current account balances.
Cryptocurrency has no physical form. It is entirely digital. It has value because people agree upon a value; it doesn’t, then, have intrinsic value like gold or other precious metals do.
On one hand, how this works is quite complex (you can find a good overview of this at BlockGeeks.com ), while still being simple and accessible enough for people to participate in.
You can test your knowledge of cryptocurrency at our crypto test:
More About Cryptocurrency
Each type of cryptocurrency is an exchange unit of currency. It is electronically created and stored in what’s called the “blockchain.” This is the record of transactions made, records stored on computers linked together in a peer-to-peer network.
Encryption techniques are used as the units are created and to verify specific fund transfers; and, once a transaction is verified, the new transaction block is added to the blockchain ledger in a way that can’t be altered or removed.
So, how does a transaction get confirmed? There are people who are deemed as “miners,” and it’s their role to review transactions and confirm them as legitimate ones. After that takes place, it becomes part of the permanent blockchain.
In return, miners are provided with cryptocurrency tokens as their payments for the jobs they just completed.
Types of Cryptocurrency
Since Nakamoto made his breakthrough Bitcoin system, dozens of other forms of cryptocurrency have been created:
• Bitcoin Cash
Many companies anticipate that blockchain technology will ultimately change the foundation of our economy. So, who knows!
Additional Facts About Cryptocurrency
Once a transaction takes place, it cannot be reversed, not even by a miner. Once money is sent, there is no way to get it back, even if you discover that you sent it to a scammer. The accounts are not attached to someone’s real name, either.
Instead, you’re assigned a wallet ID; and, although you may be able to trace what transactions are taking place through someone else’s ID, you may never be able to know another person’s real identity.
Transactions are lightning-fast, even if sent across the world, and are confirmed by miners in just a couple of minutes. Transactions are also extremely secure, with BlockGeeks.com calling a Bitcoin address “more secure than Fort Knox.” You can download relevant software for free, and it’s available to everyone, with “no gatekeeper.”
Investing in Cryptocurrency
Interested in crypto trading? There are many ways to get started investing, one of which is with SoFi Invest®. SoFi offers a platform where you can trade Bitcoin, Ethereum, and Litecoin, and you don’t even need to set up a crypto wallet.
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Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.