Overview of Cryptocurrency and Blockchain
To understand blockchain and cryptocurrency, it’s essential to look at the history of money and how transactions have evolved over time.
History of Money
We use money daily, but the ways in which transactions have been conducted have evolved significantly:
- Barter Trade: The earliest form of trade, where goods were exchanged for goods.
- Cowries: Small shells used as currency in ancient times.
- Coins and Paper Money: Physical currencies that replaced barter trade and cowries.
- Credit Cards (Plastic Money): Introduced a new way to pay for goods and services without cash.
- Electronic Money: Platforms like M-Pesa and PayPal emerged, allowing transactions without physical money.
- Cryptocurrency: The latest evolution in the transaction process, offering a digital, decentralized form of currency.
The above stages highlight how transactions have evolved from the barter system to the digital age. Most people are familiar with the fiat currency stage, but in recent years, technological advancements have made it possible to carry out transactions with just a mobile phone or credit card.
Kenya’s Evolution with M-Pesa
M-Pesa, launched in March 2007 in Kenya, revolutionized how transactions are conducted. Today, many Kenyans rely on M-Pesa and cards for daily transactions, even surviving a week using only M-Pesa. However, international remittance platforms like PayPal, Skrill, and Western Union also exist but come with limitations such as limited transfer amounts, high conversion rates, and bank closure during off-peak hours.
Introduction to Cryptocurrency
Advances in technology have led to the creation of new ways to conduct transactions, such as cryptocurrency. Cryptocurrencies offer numerous advantages, including reducing transaction turnaround times and harmonizing the various currencies used worldwide. For example, the Kuwaiti Dinar is the strongest currency globally, but cryptocurrencies aim to create a more unified financial system.
Understanding Blockchain Technology
In traditional banking, all transactions are recorded in a database that can be retrieved at any time. Similarly, in the world of cryptocurrency, transactions are processed and recorded in a ledger known as the blockchain.
The term “blockchain” is derived from two words: “block,” which refers to digital information, and “chain,” which refers to the public database where this information is stored. All cryptocurrency transactions run on blockchain technology.
Cryptography’s Role in Blockchain Cryptography is crucial in blockchain technology. The term “cryptography” combines “cryo,” meaning hidden or vault, and “graphy,” meaning writing. Cryptography can be defined as secure information and communication techniques derived from mathematical concepts and algorithms that transform messages in ways that are difficult to decipher. This method protects information with codes, ensuring that only intended parties can decode it.
What is Cryptocurrency?
Cryptocurrency is digital money, existing in a purely digital form, opposite to fiat currency or paper money. Examples of fiat currencies include the Kenyan Shilling (KES), US Dollar (USD), and Euro (EUR). Cryptocurrencies, on the other hand, are used for online payments and transactions for goods and services. Bitcoin, Ethereum, Solana, Matic, and ZCash are just a few examples.
Currently, there are over 10,000 different cryptocurrencies in existence, each offering unique features and uses. Among them, Bitcoin remains the most popular and widely recognized cryptocurrency.
This overview serves as an introduction to the world of cryptocurrency and blockchain technology. As we move forward, we’ll delve deeper into the specifics of blockchain types, how cryptocurrencies work, and the future of digital money.
ENG WANJIKU
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