Just like the evolutions of humans, money too, has evolved in the most unexpected way over the years. From carrying out barter transactions to making use of cowry shells, gold coins, copper coins, notes, and now bitcoins, to purchase goods, we humans have been successful in finding new ways of carrying out transactions.
Moreover, the coming of technology and the Internet have led to innumerable disruptions, especially in the financial arena. An accurate example of this would be the creation of a new kind of ‘intangible’ money or ‘digital currency’, known as Cryptocurrency.
To put it simply, Cryptocurrency is digital money that takes the form of tokens and coins. Unlike the money or coins, that require physical mining, cryptocurrencies are digitally mined using computers. While we know that the word ‘currency’ is used to identify a system of money used in a particular country, the word ‘Crypto’ means complicated cryptographic codes that enable the creation of digital currencies and transactions using various decentralized platforms. Apart from the ease of doing transactions, one of the greatest features of cryptocurrency is that it is free from any control of the authorities.
There are presently various kinds of cryptocurrencies or more specifically, altcoins (coins which are alternatives to bitcoin type of cryptocurrency) that enable people as well as companies to make payments digitally. Presently there are around 2000 cryptocurrencies. Let’s have a look at some of the most commonly used ones:
The first cryptocurrency to be created in 2009 and the most common one, Bitcoin is open-source software that uses blockchain technology. Every bitcoin is a computer file that is stored in a digital wallet in either a smartphone or laptop/computer. It enables the transfer of money from one person to another digitally. Anyone can see the transactions you make with someone as the record of it gets stored in a public list known as the blockchain. However, your identity remains anonymous. To begin using bitcoins, you can either buy Bitcoins using real money, sell something as ask the buyer to pay you in bitcoins, or create them using computers (but it’s not easy, obviously!)
Companies like Microsoft, PayPal, Burger King, Subway, are some among the many that have started accepting payments in bitcoins. Joining this list is India’s Karan Gupta Consulting (KGC), the 1st education firm in the country, to accept payments in Bitcoins.
After Bitcoin, Ethereum is the second biggest and widely used cryptocurrency that was launched in 2015. This cryptocurrency functions on its platform-specific cryptographic token, known as Ether. Etherum too is a blockchain-based, decentralized software platform that helps one carry out smart transactions safe from theft, fraud, government control, and third-party interference. To make any transactions using Etherum, one just needs to have an internet connection. Apart from just being digital money, Etherum is also a one-stop destination for financial services, games, and apps that you can totally use.
Some companies that make payments using Ethererum include the video game giant Ubisoft, Dutch bank ING, JP Morgan, and Amazon Web Services.
Launched in 2011, Litecoin is an open-source, peer-to-peer, global network of payments. Though it is very similar to Bitcoin and popularly recognized as ‘silver to bitcoin’s gold’, Litecoin is speedy in the generation of blocks and confirms a transaction much faster. Moreover, it uses “scrypt”, a password-based key derivation function, that acts as a proof of work, which can be decoded taking the help of the CPUs of consumer-grade. Earlier, only developers were making use of Litecoins, however, now even the merchants have started using this cryptocurrency.
MrChrissyCloud, Snel.com, Cristal Clerc Gemwater, are among the many companies that use Litecoin to make payments.
Pegged to the United States dollar, USDC or the USD Coin is a cryptocurrency that is managed by Centre, a consortium formed by Circle, a payments & treasury infrastructure for the internet, and Coinbase, a cryptocurrency exchange. It was launched in 2018. These USDCs tokenize the US dollars facilitating their use on the internet and public blockchains. This cryptocurrency, however, isn’t totally free from government interference.
Companies like PayTrie, Travala.com, Biki, Mercado Bitcoin, BiTTrex, and Gilded use USDC for carrying out monetary transactions.
Besides Cryptocurrencies, there are now Crypto tokens that have come into existence. Though there isn’t much of a difference between the two, the crypto tokens, apart from facilitating transactions, operate on top of a blockchain that enables the developing and implementation of decentralized apps and smart contracts. Crypto tokens or crypto assets are unique virtual currency tokens that stay on their own blockchains and represent an asset or utility. They are mostly used to fundraise for crowd sales but can be used for other purposes as well. Crypto tokens are developed, distributed, and sold by making use of the standard initial coin offering (ICO) process.
Apart from these, there are many other cryptocurrencies like Libra, Ripple, Tether, Monero, EOS, etc. which have collectively made global payments easy. While cryptocurrencies have a long way to go before becoming a full-fledged part of the mainstream financial infrastructure, the world is starting to see the benefits and potential it holds in making trading and transaction across the globe, seamless.