The Basics of Cryptocurrency: What You Need to Know
One of the most talked about things related to blockchain today is cryptocurrency. By now everyone has at least heard of the word “Bitcoin” once, whether it be through some random ad/article online or straight from the daily news. Despite its trendy status, the mainstream impression of crypto seems to be that such digital money are only worthwhile to make a quick buck due to its high volatility. However, this new kind of currency is much more than just speculation and profiteering. In this article, let’s discuss crypto and the values they bring a bit more in-depth.
As we all know from the previous article, blockchain are distributed ledgers that transparently record and broadcast “blocks” of data logged onto the network “chain”. Cryptocurrency, on the other hand, is a form of digital currency made possible through blockchain technology. It is an asset or resource on the blockchain, used either as a “coin” with transactional value or a “token” to fuel user interactions on the network. Coins and tokens are staples of (almost) all blockchain networks. Each blockchain only has one native coin, but it can have many different tokens.
Coins: A Whole New Way to Own and Pay
Coin acts as a form of virtual money that can be held and transacted by holders, as well as purchasing other cryptocurrencies and blockchain services.This can be done via crypto exchanges or nowadays, even crypto wallet applications. Each coin has a pair of public and private keys for holders to receive transactions/identify themselves on the network and secure ownership of funds, respectively.
In general, cryptocurrency serves as new, more advanced form of digital payment as they need no middleman to process payment, thus reducing or even outright eliminating intermediary transaction fees. Payment is also transparently and securely recorded, ensuring a seamless experience for both businesses and customers. In fact, many global businesses are already accepting cryptocurrency as a payment, such as Microsoft, Apple, Paypal, Rakuten WordPress, and many more. Currently, most countries adopt rather laid-back policies towards cryptocurrency with few imposed regulations, mainly for Bitcoin as other currencies are not formally recognized.
Tokens: Decentralize and Tokenize… Just About Anything
Meanwhile, tokens are typically used to enable usage of blockchain services, or in some cases, to power network operations in the case of Ethereum, NEO, EOS, etc. Each blockchain may have many different token standards. For example, Ethereum has ERC20 (by far the most common), ERC-721, ERC-223, ERC-1337, and more.
There are two primary types of tokens: utility and security. Utility tokens can be used to fuel the operations and usage of software (i.e. smart contracts and dApps) on the network, serve as payment for transaction fees (in certain blockchains such as NEO, ONT, etc.), and various other functions depending on its creator’s aim. Security tokens, on the other hand, are more similar to stock. Their value derive from external, tradable assets and they are subject to federal regulations just as regular securities do.
As a whole, token is deemed as an upgraded form of one-way virtual currency that represents ownership of goods and services instead of cash. Therefore, they are generally implemented in retail loyalty schemes, as seen from recent initiatives from American Express and Singapore Airlines. In the case of security tokens, they are essentially digital stocks and bonds on the blockchain, which means improved transparency and exposure for financial securities through the removal of intermediaries. Blockchain companies as well as traditional enterprises are actively working to bring this cutting-edge form of securities to the mainstream world; whether through establishing standardized security token trading/issuing platforms or releasing new security tokens to the market.
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It has been projected by IT industry research and analysts that blockchain spending in 2019 will grow to almost 3 billion USD, a sharp increase of 88.7% compared to the previous year. Experts remark that the industry has successfully grown out of design phase into practical implementation. This will serve as the main driving force behind the expected surge in spending and undoubtedly, innovations hitting the market. Combined with the increasing in legal recognition and institutional adoption of blockchain and cryptocurrencies, the future of decentralized tech as a whole is looking to be a vibrant one.
