Cryptocurrency and Blockchain, explained (For Beginners) Philippines
If you’ve been following me on my social media accounts, you would know that one of my “financial wins of the week” would be finally taking a leap into the Cryptocurrency arena.
I have currently bought some on Coins.ph while still learning the ropes of capital.com. Though I am nowhere near a “crypto whiz”, I hope the information in this article can light the wick of your crypto journey as you understand how it has evolved into one of the most sought-after investments today.
Evolution of Money
Cryptocurrency is a big hit in search engines these days, with so many people seeking wisdom on what this new trend is.
Money, or currency, has gone through a series of changes ever since the dawn of civilization. As you can see in the image above, it all began with the barter system and has transitioned through time into the cryptocurrency you are currently searching for today.
Barter was simply an exchange for one commodity or good with another. Obviously it had mishaps, because how can you clearly define the value of a cow in exchange for a cart?
Then gold was used as a means of exchange, but the purity of the materials used became in question. This gave birth to metal coins which are still observed in circulation to date, but they lacked the value for higher amounts which led to the development of paper money.
The digital era marked the beginning of online transactions and paperless economies. This is when plastic cards (your favorite debit and credit cards) and electronic currencies began being a mode of payment. Of course, developing countries were slow in the transition towards electronic money, and now, another type of currency was born – cryptocurrency!
Cryptocurrency | The basics for beginners
The word cryptocurrency is a combination of the terms: cryptography and currency.
By definition, cryptography is an art where you protect information and texts through the use of codes. This way, information is authenticated and free from access of uninvolved people.
While currency is a medium used in exchange for products or services, ergo cryptocurrency is simply the encrypted or protected process of exchanging currencies for goods and services, on a digital platform.
If you didn’t understand that, it simply is a type of currency that is an alternative to bank accounts, credit cards, cash, and checks.
Moreover, it allows you to be fully encrypted (code to prevent unauthorized transactions) and have reasonably pseudonymous transactions where there is no need for third-party platforms to facilitate the transaction like banks.
Blockchain technology, explained!
Blockchains are the alternative media used by cryptocurrency to store information on transactions that occur within the system. This is unlike the conventional transactions we have today where information is stored by third-party platforms such as banks.
To give a clear perspective on the process, check this step-by-step below:
- A crypto transaction takes place
- The transaction is transmitted to a peer-to-peer network of people called miners who will then verify the legitimacy of the transaction
- They solve the algorithm for the validity
- Confirmed transactions are made into blocks
- Blocks are added to a long blockchain that features all the transactions that have been performed; blockchains are transparent to all nodes (people and devices) within the system so revision of information is impossible
- Transaction complete
Okay. Okay. If that process is still unclear to you, let me provide you some easy-to-digest analogies to have a better grasp on the main concept of crypto blockchains.
Blockchain analogies: Simplifying the concept
1. Google Docs (By William Mougayar)
What are some of the best features of Google Docs? Two things I love about it is its efficiency and transparency features.
You see, anything written in a google doc can be seen by anyone who has the link and the access.
If you try to edit or change anything with what’s written on the doc, the same changes will be visible to anyone who has access to the file.
Blockchains share the same transparency. The completed transactions that have been established are transparent to everyone in the system. This allows for decency, reputation, and honesty.
2. Safe Vaults (by Fabricio Santos)
Imagine a vault in a bank. You know that big iron metallic room where they put all the money before they close the bank?
Imagine that inside, there are lots of transparent or glass deposit boxes stored.
Each deposit box represents the crypto wallet of each person and every account owner owns a specific key to that box. Within each box are the money and receipts of the owner, which represents all the cryptocurrency and transactions the owner has ever done.
What this analogy shows is that everyone has access to view all the transactions you have made in the past. But they are not allowed to access it and create changes because it is solely yours.
However, any changes you make with the contents will also be transparent with others, hence, the transparent deposit box analogy.
Summary and Final Thoughts
- Cryptocurrency is the shift of transaction media that is founded on encryption and security
- It reduces the dependence and cost of using third-party platforms to facilitate transactions (e.g. banks)
- Every data is stored in a blockchain of information where your transactions are transparent to the networks or nodes (people or devices) using the system.
Well, what do I think? After watching a couple of YouTube videos about Cryptocurrency, I now understand why this is the new trend. I also do believe that it will potentially be the standard of all currencies in the foreseeable future. But of course, take what I say with a grain of salt.
Nonetheless, it is important to be informed of it now so we can slowly reel ourselves to this new system – that is to avoid culture shocks in the years to come.
Cryptocurrency and Blockchain, explained (For Beginners) Philippines