Cryptocurrency

Every now so often comes up a new fad , a trend , which seemingly comes out of nowhere , and the word of the times seems to be cryptocurrency. Every person who wants to trade has at the very least considered buying or getting themselves involved in this world . But what are they ?

To be specific , cryptocurrencies are not items to be exchanged such as gold or shares , but rather refer to a method of payment . nerdwallet.com puts it quite eloquently : they can be imagined as casino tokens offered by a company to specifically buy their items or services . In order to obtain the chips you need to pay in real fiat money . But what really allures the people and fascinates is the security of the payment method .

Based on a technology known as blockchain , the transactions are stored in something known as ‘nodes’ or certain powerful computers. The transaction is then attempted to be verified / confirmed using algorithms and the one who does it first is the recipient of the token . This is known as ‘mining’ . Once confirmed , the stored data cannot be altered as it is part of a decentralised ledger , which is then verified by a majority as ‘proof of work’ .

Since this is decentralised and cannot be altered , it is essentially stored in the database forever , making it one of the most secure (if not the most) methods to transact .

So why does not everyone do it ? There are a couple of problems . Firstly , The speed by which transactions happen is painfully slow . It averages around 7 per second , while Visa has claims of transacting over 20000 per second. Second is the pure electricity and maintenance budget to run the powerful computers constantly . Third is the anonymity and risk of fraudulent scams as a result of the said anonymity .

To trace back , since each token is so rare when compared to printable paper money , these are sold for high values . They are a commodity not unlike gold , but are also volatile in prices. Due to their special uses and uncommon origin , they are priced for houses a day and may cost a door the next . It is a bet with high stakes , where to come out on top you have to find a person willing to buy the currency off you at a much higher price than you paid for it .

Should you invest in it ? That is at your discretion . As time passes the prices keep bouncing , and these are subject to market risk . But if someone were to tell me in fifteen years time my groceries will be bought using cryptocurrencies , it may not be a tall claim at all .