Published on October 19th, 2020
Over the past few years, the cryptocurrency asset class, led by Bitcoin, has gained an extreme amount of popularity and press.
These trends have made investing in cryptocurrency for beginners much more accessible than in previous years, as an abundant wealth of information in the form of blogs, market reports, and other resources exists in many corners of the world-wide-web.
The evolution of cryptocurrency and the many uses of blockchain have contributed to the positive change in both institutional and individual investors’ attitudes.
What exactly is cryptocurrency, and how does it work? Let’s take a look at how Bitcoin, the first cryptocurrency, functions, as most cryptocurrencies operate in a similar way that Bitcoin does.
In 2009, Satoshi Nakamoto, who may or may not be an actual person, conjured up Bitcoin, a purely digital currency free from the reigns of any central bank or government. Not only is it a currency, but it also features a record for each transaction, known as a digital ledger.
What is a digital ledger, and how does it work? Take the following example of one person purchasing any goods or services using Bitcoin.
To execute procurement, the purchaser opens a Bitcoin wallet APP on his or her smartphone to enter the amount to buy that good, then sends a public code of the wallet to the seller. It is here that the Bitcoin network creates Bitcoin, using the underlying blockchain technology.
When the transaction happens, the Bitcoin network generates a “hash,” a code, but it is unseen to the entire network. To verify this transaction, thousands of users, called “miners,” generate algorithms to decipher the code.
After a mere matter of minutes, one miner finds the code, a feat which earns that miner one Bitcoin, deposited in his or her wallet. Thus, Bitcoin is not conjured out of thin air but a result of work.
Cryptocurrency, led by Bitcoin, has gained the faith of regular people and major investment firms. While it now has a market cap of almost $200 billion, Bitcoin is not just an investment instrument.
First, the rise of cashless payment APPS has enabled Bitcoin to circulate more in the economy. As a result, major companies have begun to accept Bitcoin as payment for their products or services. Some of these companies include Microsoft, The Play Station Network, Express VPN, and Goldman Sachs.
The present situation with Bitcoin, cryptocurrency, and their circulation is much different than before. Cryptocurrency is changing from a sole investment into a circulating currency. This point is made more palpable because the list of firms that accept Bitcoin and other cryptocurrencies gets longer every quarter.
As society relies more on cashless payments, a more significant number of firms will accept cryptocurrency. The effects of Covid-19 and a subsequent push for more remote work is speeding up this cashless-shift. As a result, many people are not willing to handle cash, as it may be a vector for the deadly disease.
Moreover, with more employees being based at home for work, people will undoubtedly use new cashless apps to purchase food, groceries, and other necessities. Ultimately, this new technology will ameliorate crypto’s rise.