By Marc Georgijewitsch
This week we celebrated an important birthday, that gives the perfect starting point for our weekly column. On the 31st October 2008, the mysterious Satoshi Nakamoto publishes the paper Bitcoin: A Peer-to-Peer Electronic Cash System, laying the foundation for the development that we all know under the general term “Cryptocurrency”.
Although many people will have heard of Bitcoin, especially after the insane price surge of late 2017, not many know what a cryptocurrency actually is, and even less will know how to explain them. Lets see, if you are smarter after this article.
There are many different important words you should know, if you want to appear knowledgeable in this field: such as cryptography, Blockchain, Altcoin, Mining, Timestamping, Wallets, ICOS. But today we will concentrate on what the purpose(s) of a cryptocurrency is, and what different kind of cryptocurrencies exist.
A cryptocurrency is an asset, that exists in binary form (that’s the computer language with all the 0’s and 1’s) and comes with a right to use (just like you have the right to use the 5€ note that is in your wallet right now). Cryptocurrencies can be used as money, as it entails the characteristic “medium of exchange”, although it uses high-level cryptography to ensure the security and verification of the financial transaction. Basically, if you want to give someone else your cryptocurrency, to pay him for something, the safety of the transaction is ensured by using secret codes, just like a secret message. A further big difference to normal money is, that it is decentralized, meaning you don’t have to trust in any banks or other third parties, but every transaction happens between the users directly, all possible through the underlying system Blockchain. If you want to learn more about Cryptography and Blockchain, tune into our newsletter next week!
So far so good, we can use our Bitcoin as an alternative to paying in Euro, but why are there all these other Cryptocurrencies (more than two-thousand!)? Basically, we have to differentiate between major Crypto Currencies types, that come with their own use cases. Some of them are just an alternative payment possibility. Some of them enable you to build an app on their blockchain, like the second biggest cryptocurrency Ethereum, where you can rely on smart contracts, to automatically execute a transaction. This could look like: “WHEN A sends 4 Ether into the smart contract, THEN B’s cake will be sent to A”.
That might just be enough of information for today, but there is so much more to come!”