By Marc Darazi
Picture taken from: https://www.google.com
Over the past 10 years, the word “cryptocurrencies” has gained traction. The question that remains is: what exactly is a CRYPTOCURRENCY?
Cryptocurrency is a type of online payment that may be used to buy and sell products and services. Many businesses have created their own currencies, known as tokens, that can be exchanged for the goods or services that the business offers.
Moreover, consider them to be arcade tokens or casino chips. To use the good or service, you’ll need to convert actual money for cryptocurrency.
However, the origins of these virtual coins can be traced back to the American computer scientist and cryptographer, David Chaum. In 1983, he created the E-Cash cryptography system. Then, he invented another system, DigiCash, twelve years later, that used cryptography to keep commercial transactions private.
Nonetheless, it was in 1998 when the concept of “cryptocurrency” was first invented. Wei Dai, a computer engineer, began to consider inventing a new payment mechanism based on a cryptographic system and characterized by decentralization later that year.
The Bitcoin cryptocurrency was created in 2009 by Satoshi Nakamoto, a person whose identity is still unknown.
Now you will ask yourself several questions related to the intention of creating these virtual coins? What drove these people to create them?
The main goal was to develop a new method of payment that can be used globally, is decentralized, and is not backed by any financial institution. Also, there is a need to inform people about the existence of a different type of money that can be used and benefited from.
But the question now is how does this transaction work?
Blockchain is the technology that enables the cryptocurrency to function. Blockchain is a decentralized technology that handles and records transactions across numerous computers. The security of this technology is part of its attractiveness.
A database, or blockchain, is a sort of digital ledger. To comprehend blockchain, it is necessary to first understand the concept of a database. A database is a collection of data that is kept on a computer system in an electronic format and is usually organized in table format to make searching and filtering for specific information easier.
The way data is structured differs significantly between a traditional database and a blockchain. A blockchain is a digital book that organizes data into groups called blocks, each of which contains a collection of data. Blocks have specific storage capabilities, and when they are filled, they are linked onto the previous block, establishing a data chain known as a “blockchain.” All additional information added after that newly added block is compiled into a new block, which is then added to the chain after it is filled.
It’s helpful to think about blockchain in terms of how it’s been implemented by Bitcoin to gain a better grasp of it. Bitcoin, like a database, relies on a network of computers to store its blockchain. This blockchain is simply a form of database that contains every Bitcoin transaction ever made for Bitcoin. In this case, unlike most databases, these computers are not all housed under one roof, and each computer or group of computers is run by a single person or group of people. Furthermore, the blockchain of Bitcoin is used in a decentralized manner in this example.
Also, each node in a blockchain contains a complete record of every data stored on the blockchain since its beginning. The data for Bitcoin is the complete history of all Bitcoin transactions. If a node’s data has an error, it can use the thousands of other nodes as a point of reference to rectify it. This ensures that no single node in the network can change data. As a result, each block in Bitcoin’s blockchain has an irreversible history of transactions.
At this point, the question to ask now is what is the difference between stocks and cryptocurrency?
While stocks and cryptocurrencies are all types of investments, there are a few major distinctions.
To begin, stocks have been around for centuries, but cryptocurrency has only been around for a few years. Bitcoin was founded in 2009 as mentioned earlier.
Furthermore, stocks are not the same as cryptocurrency. When you buy a stock, you’re making a long-term investment in a company that you believe will continue to expand. However, you can buy cryptocurrency tokens to use as a form of payment or simply hold on to them in the hopes of seeing their value rise. Cryptocurrencies aren’t traded on typical stock exchanges, either. You’ll need to use a crypto exchange and save your tokens in a digital wallet if you want to invest in crypto. To put it another way, you can’t trade crypto like a stock.
Nonetheless, despite its rapid growth, cryptocurrency is usually considered to be riskier than stocks.
Obviously, not all stocks are made equal, and some are riskier than others. However, Bitcoin is a new concept, and no one knows what the future holds for it.
In addition, it has the potential to be the next great mechanism, but it might also fail. So, while crypto has the potential to gain a lot of money, it also has the potential to lose.
In conclusion, stocks are often the safer option when compared to cryptocurrencies.
But, it will be easier to balance risk and profit if you do your study and choose your assets wisely.
Royal, James, and Kevin Voigt. “What Is Cryptocurrency? Here’s What You Should Know.” NerdWallet, 3 July 2021, www.nerdwallet.com/article/investing/cryptocurrency-7-things-to-know.
Conway, Luke. “Blockchain Explained.” Investopedia, 1 June 2021, www.investopedia.com/terms/b/blockchain.asp.
Brockman, Katie. “Which Is Safer: Stocks or Cryptocurrency?” The Motley Fool, 27 May 2021, www.fool.com/investing/2021/05/27/which-is-safer-stocks-or-cryptocurrency.