Monetary revolution: Why were cryptocurrencies invented?

The internet has been continually serving as a bridge to many changes in the world. It has been used to fill lapses in the system by providing faster transactions, data transfer and other perks that make life easier. One of the most notable changes that it has brought to the table is cryptocurrencies, a novel idea that solves the problems left unfulfilled by fiat currencies.

Considering how cryptocurrencies have been taking the world by storm these past few years, banking sectors believe that it will be the future of financial exchange. But why is there a need for another currency outside of the standard fiat and why was crypto invented in the first place? Find out all you need to know about cryptocurrencies and how they came to be here at BTC Post!

How it all started: A peek in the history of cryptocurrency

In 2008, the first cryptocurrency called Bitcoin was introduced to the world, but the concept behind it started earlier than that. Bitcoin uses a practice of secure communication called cryptography. This process allows them to convert ordinary texts to unintelligible codes, which ensures safe transactions.

Cryptography began in 1983 when the American cryptographer David Chaum developed a cryptographic system called eCash. However, the application for it didn’t come until six years later when David established his company called DigiCash that processes anonymous transactions through cryptographic protocols. This unique algorithm became the basis of web-based encryption used by cryptocurrencies today.

The term cryptocurrency didn’t come into view until 1998 when a software engineer named Wei Dai developed b-money, decentralized currency that uses a cryptographic system to secure transactions. This invention put forward the idea of complex anonymity in cryptocurrency transactions.

Following these inventions, a couple of virtual currencies were developed but none of them took off until Satoshi Nakamoto outlined the first established cryptocurrency called Bitcoin in 2008 and launched it in 2009. At that time, Bitcoin didn’t have value since it hadn’t been traded. It was only until 2010 that it gained value when an investor traded their 10,000 BTC to two pizzas.

The idea of decentralized transactions and encrypted currencies captured the attention of other developers and the first competitor of Bitcoin was born. Altcoins are a digital currency that continues to improve on the original Bitcoin design by offering faster transactions. Many other cryptocurrencies followed after that which included Namecoin and Litecoin. Today, there are more than 1,000 cryptocurrencies in circulation and more are currently being developed to fit user needs.

Solving problems one crypto at a time

Cryptocurrency was created to solve problems in the current monetary system such as slow transactions. Take a look at some of the reasons that led to the creation of cryptocurrencies below:

To prevent another great recession

The first cryptocurrency was released after the great recession of 2008 when banks used people’s money to offer risky loans and investments that didn’t meet the expected returns. As a result, they ended up filing for bankruptcy, leaving their customers with nothing.

After this, many people lost their trust in the existing financial infrastructure and looked for a monetary system that doesn’t involve a third party so no one else can control their assets. Thus came Bitcoin, the world’s first cryptocurrency. The decentralized nature of Bitcoin prevents another recession since people are in control of their money, therefore the banks cannot lend it to others. With crypto, only you have the power over your assets.

To become independent from banking systems

Cryptocurrency uses a decentralized system that removes the need for a third party when making financial transactions. This allows you to be free from national monetary policies that can affect the value of your money.

Additionally, you won’t have to pay a lot of transaction fees for the services and, unlike banks, crypto can process transactions wherever you are in the world without taking a long time. This is possible since your transaction doesn’t have to go through bank policy reviews and cross-checking from the banks. In addition to this, it is not subject to geographical exchange rates, removing the tariff and unfavourable changes in the monetary value.

To prevent the devaluation of currencies

Cryptocurrencies are exempted from the devaluation of currencies that governments subject them to. While fiat is controlled by central banks, there is no one controlling cryptocurrencies.

The national bank has jurisdiction over how many currencies will be printed to plummet the price of fiat, while cryptocurrencies have a hard cap that controls the number of supplies. Since no new coins are produced after the supply runs out, the price of crypto surges giving the investors an opportunity to profit from the crypto market.

To remove government interference

Most cryptocurrencies like Bitcoin don’t have a central authority. It functions separately from the standard government-issued currency which exempts it from the government’s regulation on purchases and sales.

As a cryptocurrency user, you are allowed to purchase, sell and store your crypto however you want to. This means you can enjoy a flexible transaction using your preferred crypto. Meanwhile, fiat is under the jurisdiction of reserve banks that regulate the purchase, sale and storage of fiat currency.

The future of crypto: Where is it heading?

Cryptocurrencies have come a long way since the concept was first introduced. It met the people’s demand for a decentralized and open monetary system that shows the account owners everything that goes on with their digital assets. With the increasing popularity and improvement in cryptocurrency, one can’t help but wonder where it is headed next and what will come of its future.

As an investment

The crypto community is perhaps one of the few that benefited from the COVID-19 pandemic, all thanks to its decentralized feature that kept it from being touched by the resulting economic crisis.

According to Nischal Shetty, CEO of WazirX, the world’s economy is shaken due to the sudden emergence of the pandemic. To support the people, reserve banks are producing more money which led to inflation and since the stock market was shaken as well, investors are left with the decision to invest their money in deflationary assets like cryptocurrencies.

As a globally recognized currency

Financial experts like Iwa Salami, a senior lecturer in financial law and regulation at the University of East London, mentioned that the closer cryptocurrencies get to being mainstream, the more it attracts regulations set by the government or financial institutions.

However, it is also impossible for the government to regulate cryptocurrencies like Bitcoin since it has no governance structure as well as tax domicile. The idea of cryptocurrency replacing fiat is still far fetched but on its own as an online currency, it has a bright future ahead.