History of cryptocurrency
The first cryptocurrency was created in 2009 by Satoshi Nakamoto who named it Bitcoin. He created the platform in the wake of the 2008 financial crisis that seized the world’s economy. At that time, people were upset at the government and the banks for having to trust them with their hard-earned money. They felt that the act was outside their control and needed an alternative means of storing and processing their transactions. Also, they were upset by the fact that financial assets in the form of cash, belonging to regular citizens were always continually frozen for any reason. Creation of bitcoin helped lessen government control and gave people the freedom from the limits placed on their money by banks, companies and even foreign powers.
The first use of cryptocurrency was recorded when Laszlo Hanyecz purchased two pizzas using 10,000 bitcoins. To date, the bitcoin pizza day is commemorated as the day when cryptocurrency proved its effectiveness. In 2011, bitcoin managed to attain parity with the United States’ dollar, and at the same time, many cryptocurrencies were emerging. In 2013, the cryptocurrency had achieved ten digital assets which included Litecoin, which was later joined by XRP (Ripple). However, the bitcoin company dropped severely in 2013 following a fraud that led to the loss of 2,000 bitcoins, whose value was around $ 30,000 at the time. The loss was a significant setback and a challenge for them to improve their security and insurance system. In 2014, Mt. Gox became the major cryptocurrency hack which lost 850,000 Bitcoins, which currently values to over $ 3 billion.
In July 2015, the Etherium network was introduced, and it brought smart contracts to the digital transaction world. It has evolved from the first initial coin offering to support the use of various tokens for transactions. To date, more Etherium cryptocurrencies-20 have been created, and there are over 200 000 ERC-20 within the market of capitalization. The cryptocurrency world has never stood still again and is continually evolving to greater heights. Prices rose higher at the beginning of 2018, and new cryptocurrencies have been created since then, including EOS, Tron and Cardano which were invented in 2017. The market has also increased with major cryptocurrency platforms hosting up to 2,000 digital currencies.
Exploring cryptocurrency platforms
Cryptocurrency platforms are online sites where people can exchange cryptocurrency for different cryptocurrency. Each platform has its terms and conditions in which the parties involved in a transaction should agree to. There are traditional cryptocurrency platforms that allow the exchange of currencies between the buyer and the seller based on the current market prices of their cryptocurrencies. In the conventional platform, some fees apply when a transaction is made. They mainly deal with cryptocurrency, but some allow vendors to explore other monetary options such as U.S dollar cryptocurrencies as in bitcoins. Examples of cryptocurrency platforms that allow users to use other currencies include Coinbase and Kraken.
Other platforms only allow cryptocurrency exchange through a broker. They are known as cryptocurrency brokers and are a website based that resemble currency exchange in the airports. The platform enables its users to buy and sell currencies set by brokers who usually charge an extra fee compared to the market price. The parties involved in the transaction are the buyer, the seller and the broker. New users can take advantage of the broker because there are fewer risks involved. Plus, the rates are slightly higher than that I the market. Use of brokers in cryptocurrency is user-friendly and secure since the broker does all work.
Direct trading platforms offer the direct buyer to seller trading and does not use the fixed market prices. The sellers are at liberty of setting their exchange rates while the buyers can choose to find their sellers on the platform or denote their prices they are willing to buy for, and the system matches them to potential sellers. Direct trading platforms are useful in many regions where trading is limited to direct exchange. Another platform that offers cryptocurrency is the cryptocurrency fund which consists of professionally managed crypto assets. The platform allows its users to buy and hold crypto via the funds. An example of such a fund is GBTC. People can use the fund to invest directly into cryptocurrency without having to purchase the coins or store them directly. The cryptocurrency obtained from the fund cannot be used as money because they are strictly for investment.
Rise of cryptocurrency scams
With the wake of COVID19, cryptocurrency scams continue to be extensive in the crypto world. The scams range from malware to fake donations to the health sectors where the scammers are taking advantage of the desperate situation and people. The most prominent scam currently is the PlusToken platform whose operations led to the March crash after they allegedly sold stolen bitcoins. It now owns a lot of bitcoins which amounts to about 61, 230 whose current worth is around $ 420 million. They have caused a decline in the bitcoin prices which were recorded higher in December 2019 and early 2020 before the novel Coronavirus.
With news on hacking and breaches frequently making headlines, user protection is not guaranteed. As technology becomes more refined, there is a need to update the software and the entire cryptocurrency system to avoid losses. Also, the hackers evolve with technology and can easily detect loopholes in the cryptocurrency platforms. The user anonymity tool can also predispose the site to hackers because they centralize the risk. The users should be protected by all means possible to avoid loss of bitcoin and a bad review on the platform. There is also a need to scrutinize platforms before joining them as some are fraudulent and unreliable.
Lack of accountability, transparency and professionalism can poison the benefits of digital currencies. It can also undermine the strength and influence of the blockchain adoption in industries, hospitals and private sectors. Sketchy practices in the monetary systems should come to an end, and the promotion of ethical standards and professionalism should be the theme of business campaigns. Also, exchanges need to be carefully assessed since the majority of the initial coin offerings which are meant to attract investors to turn out to be scams. Thus, the exchange should be strict and enough to those listed in the crypto coins. The prices of the cryptocurrencies should be regulated to avoid shady manoeuvres.
Cryptocurrency is an innovative model of transactions based on the digital network that is present in all computers. It uses source codes and controls for security which is a significant challenge in many bitcoin platforms. Its existence across many computers makes it decentralized and, thus, exists outside control of the central authorities and the government. The tool has been widely applied in industrial settings, hospitals and is gaining popularity and momentum in third world countries. The significant challenges that should be addressed in the cryptocurrency world include decentralization, price manipulation, liquidity, credibility, transparency and trading charges.