From the birth of Bitcoin -- which effectively was the birth of the modern cryptocurrency and crypto asset scene -- it has been known as being in some ways anarchic or promoting some sort of counterculture. This misconception (a misconception that is slowly and steadily going away as Bitcoin, Ethereum, and other cryptoassets enter into the mainstream financial world) is detrimental to the cryptocurrency and cryptoasset industry because it causes people to not pay attention to the real strengths of cryptoassets and the blockchain technology that generally underlies it.
One major step on the cryptoasset scene was the creation of Ethereum - Ethereum is a second-generation cryptoasset that remedied many of Bitcoin's problems. Ethereum is one of the most prominent of these newer cryptoassets (aka altcoins) that was created to solve a whole lot of the problems that we know Bitcoin to have - chiefly by enabling users to create what are called smart contracts. Ethereum itself, however, has not been immune to problems - this is one of the main reasons for the creation of Cardano by former Ethereum developers, a third-generation cryptoasset which seeks to further improve on Ethereum.
Cardano is based on Peer-Reviewed Research
One of the key things that make Cardano standout among all other cryptocurrencies is that the ideas that were used to build it and with which its developer team continue to improve the network are a product of meticulous peer-reviewed research. This means that unlike almost all other cryptocurrencies and cryptoassets on the market today -- whose underlying ideas are just published by its team of developers without any scrutiny or tests before being rolled out -- most of the principles upon which Cardano is built are scientifically-researched. With former Ethereum CEO Charles Hoskinson being a prominent member of its development team, Cardano perhaps boasts of one of the most credible foundations of any cryptocurrency and cryptoasset outfit in the industry
Problems Solved with Cardano
Cardano attempts to solve various problems that have plauged other cryptocurrencies and cryptoassets. Cardano's benefits include the following:
Cardano's Mining Protocol
Cardano uses a proof of stake (PoS) mining protocol that is known as the Ouroboros, which is a cutting-edge and scientifically-proven mining protocol that has been proven beyond doubt to be scalable and completely secure.
By implementing proof (something that Ethereum will likely implement in the future), the Cardano network allows for the printing of new blocks without wasting a lot of electricity - the mining problem is something that Bitcoin is currently dealing with.
When most people think of digital currency or cryptocurrency, they think of Bitcoin. Bitcoin is only one of many cryptocurrencies and cryptoassets available today, however. Among all of the new members of the cryptoasset scene (also called altcoins), none has made a bigger impact (both in terms of mindshare and in terms of market cap) than Ethereum.
Many people Ethereum akin to silver if Bitcoin is considered gold. However, many others in the crypto industry believe that Ethereum has the potential to overtake Bitcoin due to its inherent characteristics and capabilities that Bitcoin does not possess.
What is Ethereum?
Ethereum is a distinct blockchain platform different from Bitcoin - it was created by Vitalik Buterin and went live in the Summer of 2015 (read the constantly updated Ethereum white paper here).
Ethereum was designed as the ultimate blockchain upon which all kinds of blockchain-based applications including newer cryptocurrencies can be built. The Ethereum blockchain was designed with the target of fixing many of Bitcoin's problems/weaknesses as well as to enhance the efficiency of any application that is built on the Ethereum blockchain.
Ethereum has been one of the major reasons for the explosion in the number of initial coin offerings (ICOs) that are constantly happening all over the world due to the relative ease and reduced costs it now takes for a startup to release its own blockchain application or cryptocurrency. Effectively, many of the world's ICOs are build upon Ethereum.
Similar to Bitcoin, Ethereum uses a Proof of work (PoW) approach whereby computers solve complex mathematical problems in an attempt to receive a reward; this is also how transactions are validated around the world in a decentralized way. Ethereum used a slightly different hashing algorithm than Bitcoin and there are plans and discussions to transition Ethereum away from a Proof of work (PoW) approach to a Proof of Stake (PoS) approach - a Proof of Stake (PoS) approach is considered more sustainable and will likely require less intensive computing power.
Being a distinct blockchain platform, the creators of Ethereum recognized the importance of the platform having its own native currency with which transactions can be conducted on the Ethereum platform. This why the Ether token was created, which is the means of exchange on the Ethereum platform - users can use Ether (ETH) pay for the space to build their own applications as well as use ETH to make peer-to-peer payments in a decentralized way similar to Bitcoin.
But, Ethereum is more than just a means of exchange
Ethereum is touted as the biggest thing to happen in the crypto and blockchain scene since the creation of Bitcoin in 2009. This is because it brought about a number of new innovative features that have the potential to prove very useful. The main differentiating feature of Ethereum is the ability to engage in what are called "smart contracts" on the Ethereum platform - whereby Bitcoin is simply a means of exchange, Ethereum has the potential to be a lot more through the use of smart contracts.
A smart contract is a simple idea which made cryptocurrency payments safer for users all over the industry. It is a few lines of code (instructions) which dictate that a certain number of ETH should be transferred from one user of the Ethereum platform to another user upon the fulfillment of certain stated conditions and not otherwise. Smart contracts were designed to enable honest business between total strangers, in which the seller knows that as long as they deliver their part of the bargain, they will receive a full payment (or whatever else was bargained for). Additionally, buyers know that their payments remain safe until they receive the good or service they are paying for.
How to store your Ether
Ether and Bitcoin are completely separate things in the crypto space - they are built on different source codes and utilize different hashing algorithms. ETH and BTC cannot be stored on the same crypto wallet - a separate Ethereum wallet is required for the storage of ETH. In order to effectively and securely store your Ether, you'll need to find a reputable wallet that caters to ETH storage.
The world is abuzz with talk of Bitcoin and other cryptocurrencies and cryptoassets. Not long ago these revolutionary means of transacting were considered a fringe idea that was going to die a natural death or evolve into some niche part of a more broad product schema. Fast-forward to the present day, however, and you'll see that the cryptocurrency and cryptoasset industry has snowballed and has a market cap (the total value in USD of all material cryptocurrencies and crypto assets) that rivals the largest firms in the US (with little sign of things slowing down).
So, what is this new thing called cryptocurrency and what is all the commotion in the financial news related to it about?
What is a cryptocurrency or a cryptoasset?
A cryptocurrency or cryptoasset (these terms can generally be used interchangeably) in general terms can be defined as any member of the new blockchain-based platforms that are made specifically to enable people to make peer-to-peer payments in fast, highly secure, and private ways that requires no recourse to banks, payment providers, or third-party clearing firms. A cryptocurrency is generally a stateless borderless digital currency, the first example of which came into existence in 2009 with the creation of Bitcoin by Satoshi Nakamoto. The cryptoasset industry has since grown exponentially and presently has over 1000 distinct currencies - many of these are scams and useless gimmicks while others are potentially very useful and add capabilities beyond what Bitcoin originally possessed.
Cryptocurrency vs. Fiat Money
The following are a few key aspects of cryptocurrencies and cryptoassets that distinguish them from traditional fiat money (eg. USD, Euro, Yen, Yuan, etc.):
How do I store cryptocurrency?
Being a totally decentralized and boundary-less currency, cryptocurrencies don’t need the present banking infrastructure to be kept safe by their owner. They are stored in encrypted software known as “wallets”, which carry unique codified address with which the user sends and receives them. Additionally, cryptocurrencies and cryptoassets can be stored with third parties where the third party stores the key cryptographic information (eg. your private keys) that will allow access to your cryptocurrency or crypto assets.
Such third party services include Kraken, Poloniex, Coinbase, and Xapo. There is an inherent risk present when using third-party firms for cryptocurrency and crypto asset storage - you are trusting them with the proper maintenance of very key and unique information.
How can I acquire cryptocurrency?
There are two main ways in which to acquire cryptocurrencies or cryptoassets. The first is by following the technical process of creating them (which is generally known as mining), where computers are coupled with specialized hardware to solve massive mathematical puzzles with the chance earning a reward which is the cryptocurrency. The second method is by simply going the route of using your fiat money to buy the cryptocurrency of your choice from the nearest reputable exchange you can find (eg. those third-party firms referenced above).
Prices of cryptocurrencies and cryptoassets from one cryptoasset to another as each digital currency has its own distinct features and peculiar purpose it serves - these unique features and/or purposes influence demand and the addressable market, which in turn influences price. Currently, cryptocurrencies and cryptoassets have proven to be very volatile when compared to traditional financial instruments such as stocks, bonds, real estate, and commodities - this volatility makes it riskier when purchasing cryptocurrencies and cryptoassets because it is hard to know whether the price of a cryptoasset will move against you soon after purchase.
A cryptocurrency is a secured decentralized digital medium of exchange developed to facilitate secured peer to peer transactions. While many people have heard of cryptocurrencies and some are involved in the purchase and sale of cryptocurrencies and cryptoassets, only a few are aware of the history behind this potentially world-changing application of cryptographic technology.
As such, compiled below is the history of cryptocurrency. This history will be both useful for newcomers to the cryptocurrency and cryptoasset worlds as well as those that are more seasoned - understanding the history of a topic or technology almost always is useful in terms of adding context and grounding to one's understanding.
The late 1980s to Early 1990s - Foundations begin to Form
In the 1980s people began conceiving the idea of the creation of digital cash and/or virtual currency. These people then began to seek ways to bring this idea to fruition. However, none of their efforts and/or the results was reported.
In the year 1990, American cryptographer David Chaum invented DigiCash, the first form of electronic currency. This new "e-cash" gained tremendous publicity and sparked interests in various diverse intellectual quarters, including libertarians, anarcho-capitalists, and those interested in the applications of cryptography. Chaum's DigiCash was however later found to have some faults and subsequently, was no longer used.
1998 - A Precursor to Bitcoin
In 1998, Wei Dai, a computer engineer created and published an article on "b-money". Dai regarded b-money as an anonymously distributed electronic cash system which allows for senders to directly communicate with buyers over “an untraceable network”.
Also in 1998, computer scientist Nick Szabo, designed the mechanism for a decentralized electronic currency he termed "bit gold". To use bit gold, a person would have to solve cryptographic puzzles whose solutions would be sent to a registry and then assigned to a designated public key representing the solution provider. Each solution would then become a part of a subsequent challenge which would then help to create a growing chain of new property for the solution provider. This design was created to help validate new coins.
Although bit gold was never implemented, it is regarded as the precursor to Bitcoin - those who know anything about Bitcoin mining will see the somewhat shared intellectual DNA between Bitcoin and Szabo's bit gold.
2009 - The First Truly Decentralized Digital Currency, Bitcoin
The year 2009 can be said to be the year the concept of cryptocurrency became established. Although much work (both technical and non-technical in nature) had been done in the previous two decades pertaining to digital currency and the potential application of cryptographic methods to make them effective, 2009 can easily be considered the genesis of cryptocurrency proper.
In 2009, Bitcoin was established. This establishment and its subsequent use can be attributed to Satoshi Nakamoto, who is a pseudonymous individual (or more likely, a group) that developed Bitcoin. Nakamoto articulated the concept of Bitcoin in a white paper published in the same year. Per his white paper, Nakamoto called Bitcoin a peer-to-peer cash payment system - little did the initial readers of the white paper (and possibly Nakamoto himself/herself) know what Bitcoin would become over the course of the coming decade.
This system was able to actualize true decentralization which was a feature many before him/her could not achieve. He was able to achieve this such that there could be a consensus between parties without the need for a central authority (eg. a financial firm or a government). Additionally, Nakamoto's Bitcoin was able to seemingly solve the double spending problem, something that seemed unachievable without a proper centralized network or clearinghouse.
Bitcoin has since gone beyond being the first cryptocurrency to also be the most popular, most sought after, and most used cryptocurrency with over 16 million in circulation (out of a total of 21 million that will ever exist per Nakamoto's original design).
2009 to Present - Altcoins, Proliferation, and Investing
Since the creation of Bitcoin in 2009, over 850 cryptocurrencies (often referted to as altcoins) have been developed and are now in circulation. Some of these altcoins are Litecoin, Peercoin, Robocoin, Ethereum, Salt, Cardano, Iota, Viacoin, Siacoin, Bitcoin Cash, Ripple, and Dogecoin.
Many of the new cryptoassets or altcoins that are on the market today are not considered high-quality cryptoassets like Bitcoin but are instead considered frauds, scams, gimmicks, or schemes that allow the creators of the coins to make a quick profit (through the use of what are called initial coin offerings or ICOs).
Other cryptoassets or altcoins, however, seem useful and add capabilities beyond what Bitcoin is currently capable of. For example, Bitcoin is generally only used for payments while Ethereum has the capability for use in what are called "smart contracts" and Iota is created to assist with the creation of an internet of things (IOT) world.
The concept behind cryptocurrencies is now being researched by financial institutions and governments, its’ monetary value is on a steadily rising (in terms of fiat currency such as the USD or the Euro) and many are beginning to see cryptocurrency as an investment option.
Foggy Future - Where will cryptoassets go from here?
Given the past 30 years in cryptocurrencies, cryptography, and the concept of decentralized digital cash (and especially the last 10 years since the creation of Bitcoin), it's a fool's errand to try to predict in any meaningful way where things will go in the cryptoasset space. However, it is likely that many of the early trends seen today will continue on. Specifically, it is likely that cryptoassets will consume more mindshare globally, will break into Wall Street (eg. futures, ETFs, hedge funds, etc.), and that a broader infrastructure (both in support of and in use of crypto assets) will be built up over the coming years and decades.
And now, given the rise of cyrptocurrencies and crypto assets to quasi-mainstream financial assets, we're dedicated to providing quality, relevant, and interesting material on cryptocurrencies and cryptoassets. Articles on Bitcoin, Ethereum, Ripple, Cardano, and many more cryptocurrencies and cryptoassets can be found on Pennies and Pounds - all that in addition to a plethora of information on what cryptoassets are, how the entire crypto industry came to be, blockchain/immutable ledge technology, mining, proof of work, proof of stake, and how to prudently invest in crypto if you are so inclined (based on your risk tolerance and ability to withstand the volatility that will come with a crypto portfolio).