Cryptocurrency. Everything you wanted to know, but were lazy to google.

Report

Aziza Doniyorova

Alumni member

Management Development Institute of Singapore in Tashkent

 

  Recently, it has been announced that the President of Uzbekistan Shavkat Mirziyoev signed the document of e-currencies usage legalization. Particular attention will be given to the development of using contactless payment technologies, such as PayPal, Alipay, Visa and Mastercard. With certain inherent advantages and some smart new policies, our country tries to attract investors and integrate into the global virtual currency ecosphere. 

So, what is cryptocurrency and how does it work?

  Cryptocurrency is a digital, decentralized currency, the separate units of which are called “coins’. The virtual currrency is having a bit of a moment right now, everyone must have probably seen the headlines trended worldwide like “Bitcoin millioner at 18”, “Where can I buy bitcoin?”, “Who is Satoshi Nakamoto?”. But despite the fact that cryptocurrency reached its boom relatively recently, the digital currency for exclusively electronic use was created in the distant 1990 by a computer scientist David Chaum. He launched a company called DigiCash and in 1994 it put forth the first electronic transaction over the Internet. The transactions of the company were unique and innovative in that they were anonymous due to the cryptographic protocols developed by Chaum. Unfortunately, the company went bankrupt in 1998, the idea was ahead of its time and did not find its buyer, just like its followers Flooz and Benz.

  The situation has changed in 2008, the next one who joined the game was someone named Satoshi Nakamoto, who published a protocol and working principle of the new cryptocurrency “Bitcoin”. None of the investigation services has not established the true identity of mysterious Satoshi Nakamoto, it is still unknown whether it is a man, woman or the whole group of developers. Although, Satoshi Nakamoto vanished in 2011, the mystery is still trending, because the Bitcoin's creator may be worth $6 billion. Yes, you heard that right – six billion dollars. The bitcoin created by Satoshi Nakamoto is not owned by any country, group or a person. It is owned only by users of this virtual currency. The principle is: the new bitcoins have to be mined (issued), the miners get some bitcoins, those later can be sold to other people through specific market places or even mobile apps, called “cryptocurrency exchanges”, which operate almost like the ususal stock trade. The issued or bought coins are stored in “digital wallets”, which can be online and offline. Online ones are more common and easier to use, but offline ones are safe, because hackers cannot steal digital assets that are not connected to the internet. The wallets are kept in the cloud or a server and used to buy/sell the virtual currency and transfer it from one account to another as a form of a payment or transaction. When the coins are stored in the wallet, the user is free to start making purchases. Currently, more than 3000 businesses, including “Lamborghini”, “Microsoft”, fast food restaurant “Subway”, “KFC Canada” and etc accept bitcoin payment. Let's pretend that one fine day you will decide to buy Lamborghini Hurracane valued $200,000 and the current bitcoin price is $10,000. You will send 20 BTC to Lamborghini company for the car. And there is no bank or credit card involved in this transaction. Since the creation of Bitcoin (BTC), many other cryptocurrencies have been evaluated: Litecoin (LTC), Ethereum (ETH), Ripple (XRP) and etc, which are not that expensive and well-known as bitcoin, but also demonstrate the growth rate. Even Pavel Durov, the founder Telegram is now developing the idea to mint his own cryptocurrency. Some kind of cryptofever is happening. Referring to the distinction of cryptocurrency, it is all about the absence of internal or external administrator. Put simply, banks, tax, judiciary and any of the government authorities have no influence over any of the emission or transactions running in this payment system. Thus, nobody is able to cancel, block or forcibly make a transaction without the private password of the owner of the coins and any operation demands the agreement of every participant.

  But each “coin” has two sides, right? And crypto coins are not the exception. First of all, virtual currency has no tangible value that can be hidden in vault and be used in difficult times. Second of all, the fluctuation of the currency is crazy, even though the value is going higher, does not mean it will not go down soon. Last, but not the least, no one is safe from the hacker attacks.

 

  Now let's see what famous enterpreneurs think about this whole new trend:

Bill Gates, the co-founder of Microsoft.

“Bitcoin is exciting because it shows how cheap it can be. Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient.”

Warren Buffett, business magnate, CEO of Berkshire Hathaway.

“I can say almost with certainty that cryptocurrency will come to a bad ending.”

Eric Schmidt, former Executive Chairman of Google.

“Bitcoin is a remarkable cryptographic achievement… The aility to create something which is not duplicable in the digital world has enormous value…Lot’s of people will build businesses on top of that.”

 

But regardless of the opinions and labels this innovation is admitted to be revolutionary. But still, it remains an open question as to whether it will replace centralized money controlled by the government with decentralized money controlled by the market. Only time will tell,  because the new currency has already shown its unpredictability.

 

Interesting facts about cryptocurrency:

1. Have you tried pizza for $50 million? Well, apparently one of bitcoin developers have. On May 2010, Laszlo Hanyecz bought 2 pizzas for 10,000 BTC. Currently, 10,000 BTC = 100,075,023 USD. Pizza guy hit the jackpot, there should be a movie.

2. In Algeria, Bolivia, Ecuador, Bangladesh, Nepal, Cambodia, bitcoin is officially illegal.

3. 21 million is the maximum number of bitcoin that can ever exist. Yeah, everything has its limit.

4. Kodak announced about issuing its own cryptocurrency and the stock price of the company jumps 60 percent. Nice move, Kodak.

5. Elon Musk was suspected of  being bitcoin creator under the pseudonym Satoshi Nakamoto. But in a tweet of November 28th, 2017, Musk denied the claim.