BACK TO BASICS: Cryptocurrency and its benefits

Let’s get into the whys and hows of crypto.

Bitcoin, Ethereum, Ripple… these are just few of the thousands of cryptocurrencies available in the digital landscape today. Whether the concept of cryptocurrencies has been warmly welcomed, slightly doubted, or fully rejected, it is undeniable that this rising technological phenomenon has been continuously garnering popularity worldwide. But, wait — what are cryptocurrencies and what makes it so popular anyway?

What is cryptocurrency?

Cryptocurrency is a digital currency that only exists electronically — yup, it’s a fully digital form of cash meaning you can’t see it, touch it, nor feel it. It also means that there is no central regulatory or issuing authority that monitors it unlike the traditional financial institutes we’re accustomed to. This may get you thinking: with no organization looking into the production, tracking and fraudulent transactions of these cryptocurrencies, why do so many people trust and invest in this foreign system of digital money?

The early beginnings of Bitcoin

In 2009, alias Satoshi Nakamoto successfully implemented what many have been trying achieve all throughout the 90’s — the creation of a digital currency. Nakamoto, inspired by others’ failed attempts to create centralized digital currencies, innovated a consensual decentralized digital cash system called Bitcoin, which became the most important cryptocurrency ever invented.

Bitcoin is made of two components: cryptography and blockchain. Cryptography, rooting from the word, “crypto” (meaning hidden), is a set of special mathematical codes that protect users’ information from unauthorized access. When information is hidden through cryptography, it is nearly impossible to hack. While blockchain, a peer-to-peer network, is a distributed ledger where data is stored in blocks and chained together in order to create a continuous linkage of information. Information is distributed among a large network of computers and is not centralized to one main source. Read more about the blockchain

How does it work?

Bitcoin is basically an entry that people keep track of in a public ledger, the blockchain. Think about it this way: whenever someone buys or sells Bitcoins, the transaction is announced to the whole network as information is decentralized and transparent to all. In this network, there are groups of people using high powered computers to solve complicated math problems to record all transactions on the blockchain. As of June 2018, the complete ledger takes up about 173 GB of data.

Why would people invest time and machinery to add information on the blockchain? As there is no central authority that monitors transactions, it is up to the network of computers to keep synced ledgers of everything. For doing so, anyone who adds a block of information to the chain is tipped and rewarded a certain amount of Bitcoins. The people who do this are called Ledger Keepers or more popularly, Miners.

Every Bitcoin in existence was created to reward Miners. It is also important to note that for every 210,000 blocks added to the chain, the number of Bitcoins rewarded is reduced to half. What originally started as a reward of 50 Bitcoins per block added, will continuously reduce to half until there is nothing left to mine. The last coin is projected to be mined in year 2140 — this patterns after the concept of gold, where there is a limited supply making the value higher as time passes.

There’s a reason why cryptocurrencies are said to disrupt the traditional banking system. Here are some of its benefits:

1. Fraud — Cryptocurrencies are in a encrypted decentralized network, hence it is impossible to be counterfeited. Unlike digital multimedia files like music and movies, cryptocurrency is not a string of data that can be replicated and shared.
2. No more intermediaries — Because the blockchain is a trusted decentralized system, the need to hire third parties to facilitate transactions on your behalf is no longer necessary.
3. Lower transaction costs — Since there are less people involved in transactions, less fees are imposed.
4. Identity Theft — With cryptocurrency wallets, users are assigned with two keys — private and public. The private keys are used by a user to sign off or authorize transactions. Public keys, on the other hand, are used by the public to validate if a transaction was signed off using its private key counterpart. If the public key validates the private key, it means the transaction is legitimate. This makes identity theft nearly impossible.
5. Accessible to Everyone — There are millions of people all around the world, especially in emerging Asian Markets, that do not have access to traditional banking institutions. Through blockchain and cryptocurrencies, the unbanked will finally have financial inclusion.

Because of these benefits, more and more companies are working on digital financial inclusion solutions. As for XONIO, we aim to be the catalyst of mass adoption of blockchain technology for emerging markets like the Philippines, Indonesia, Vietnam, and Myanmar. We are working on a platform that will allow anyone to convert telco prepaid airtime into a digital currency (XON), and then, crypto (XONIO Tokens).

For more info, visit www.xon.io. Join the community on Telegram.