What Is Cryptocurrency and How Does It Work?

Do you ever feel like you’re being watched? By big corporations? The government? Banks? Companies you’ve never even heard of? Escaping from that all was the original promise of the first cryptocurrency. Bitcoin.

The beautiful anonymity of cash, but cash that wasn’t printed by governments. Instead, it was made by a bit of code powered by citizens of the internet, and you could trust it.

Today, anyone can buy cryptocurrency. Just a few signups, type in your credit card number, and trade in your money for digital cash. Bitcoin got so popular, that by the end of 2017, it was as valuable as the big banks it stood against.

And with a few more steps, you can use Bitcoin to buy what the majority of Bitcoin is spent on illegal services. Virtual currencies can pose challenges for law enforcement, given the appeal, they have among those seeking to conceal.

There are now thousands of cryptocurrencies, like Ethereum, Litecoin, Ripple and even a Dogecoin. You can buy them on exchanges, and you can mine them.

Dogecoin started off in 2013 as a joke based on an internet meme. Well, Dogecoin now is worth about half a billion dollars in market cap, which just blows everyone’s mind.

Add them all up, and people had bet half a trillion dollars on something. So what are they betting on?

The world’s largest bank account is in our bank. That account belongs to the US government. Bitcoin doesn’t constitute legal tender. It’s probably the biggest innovation we’ve seen since the internet.

Any money is counterfeit, unless issued by the federal government. The fundamental promise of Blockchain is decentralization. The only thing that’s worse, than having a few people control the currency, is having absolutely nobody controls a currency.

To understand cryptocurrencies, you have to go back to an earlier form of digital money. Diners Club was the first-ever credit card, and it advertised itself as the ticket to a new modern lifestyle. In the 1960s, the executives at Diners Club talked about how cash was not sufficiently modern. It couldn’t interface with our fast-moving world.

Credit cards were a revelation. By 1970, half of the American households had one. They freed us from carrying around cash, everywhere. And in the age of Amazon, Google and Uber, there’s no need for cash at all. Until there is.

For as long as we’ve been tinkering with computers, on any mass scale, there’s been a dream of digital cash. A cash that would function like cash, in the sense that it’s non-traceable, anonymous, instant, free to use, and, yet, would be able to interoperate with computer networks.

In countries that have dictators or other negative influences on the transactions in the country, they can choose not to allow certain types of transactions, they don’t want to, and people can’t spend their money freely.

A way to buy and sell things online without Big Brother watching. That’s a lot harder than it sounds. It’s actually a problem that flummoxed computer scientists for decades. It even had a name The Byzantine Generals Problem.