You’ve probably heard of Bitcoin, but did you know it wasn’t the first attempt at cryptocurrency? The idea of a virtual exchange system has been around nearly as long as the internet.
Since it’s birth and development in the eighties and nineties, people like Wei Dai and Nick Szabo were playing with the possibility of virtual currency.
Bitcoin is the first to crack the code, or should I say, make the code and launched cryptocurrency followed by blockchain into what some are calling “the next era of the internet.”
So why did Bitcoin succeed while other attempts failed? There are various factors, of course, things like timing were important.
The internet was so new and the idea of virtual currency was something people had to warm up to. Banks seem to offer more security, but it wasn’t until a paper published by Satoshi Nakamoto (whose true identity is still unknown) called Bitcoin: A Peer-to-Peer Electronic Cash System that everything changed. Fedlfj
Up until this point, no one had been successful in every facet of the digital currency. Bitcoin succeeded in combining decentralized control (no banks or “middlemen”), user anonymity, record-keeping via a blockchain, and built-in scarcity all into one currency.
All of these components were essential ingredients to Bitcoin’s success, especially blockchain. Blockchain is basically what makes cryptocurrency so hard to hack. Even though Bitcoin was hacked back in 2016, the virtual currency has since recovered.
This ledger or record-keeping system provides more security than any bank or financial service today. Many believe it will forever change the financial world.
Pros and Cons
Like anything, cryptocurrency has its pros and cons. For example, one pro is the speed of transactions. Sending money internationally can have all kinds of fees and depend on the amount, can take days or even weeks to be transferred.
This helps many lower-income people who have other dependents that rely on them for financial support. There are many here in the U.S. who send what we call “remittances” or part of their paycheck back to family members back in their home country who have yet to immigrate or cannot for various reasons.
Cryptocurrency allows people like this to send money to loved ones and have it arrive and be available the same day.
One of the cons has to do with the lack of regulation. Because cryptocurrency is decentralized, there are many who use this as an opportunity to evade taxes. Cryptocurrency can be harder to track in some cases and unfortunately, there are some who take advantage of this component.
Cryptocurrency is still currency and by law, you are required to report all transactions are expenditures as part of your yearly taxes.
Filing cryptocurrency taxes is a little bit different process and there are important details you will need to learn in order to do it correctly, but knowing how can save you in big ways.
The Future of Crypto
Bitcoin may have started the cryptocurrency excitement and popularity but today, there are over 2000 types of digital money available. Whether you like it or not, cryptocurrency is here to stay and will continue to transform the way we do business and banking.
The information age of the internet is evolving into the value age, where products, art, music, etc. can be treated as such. The lack of middlemen, artists and sellers will get the money they deserve and physical currency will become one for the history books.