Exploring Cryptocurrencies
Cryptocurrency is a compound term built from two independent words ‘Crypto’ and ‘Currency’.
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‘Crypto’, here, is used to denote the cryptographic architecture and security system for maintaining the confidentiality, integrity and accountability while ‘Currency’ is a term for denoting a form of wealth, an asset. Cryptocurrency can be thought of as a digital asset encapsulated by cryptographic functions.
If we date back to the dawn of the stone age, primitive transaction system, the barter system was prevalent. It has undergone a major shift during the succeeding milleniums due to the restriction of double coincidence of wants. Then came a breakthrough where different metal coins with varied shapes and sizes replaced the old barter system. The currency was usually localized to a prefect or province of a state. In the past few hundred years, paper currency/fiat currency was the new milestone for enhancing flexibility, portability and convenient transactions. In the recent decade, an amelioration of the existing fiat currency was proposed for opening new doors of possibilities of transferring tangible and intangible assets via internet to anyone from any part of the world without intermediaries and without compromising with the security and integrity of the transaction. These cryptos represent both tangible assets (assets like land deeds, gold, petrol, etc) and intangible ones like platform tokens and payment tokens. They are generated, validated and verified with the help of Cryptographic Hash Functions and various Consensus mechanisms.
Based on the above inferences Cryptocurrency can be formally defined:
A cryptocurrency is a digital intangible asset generated by cryptographic functions, usually a native to a specific blockchain protocol, designed and intended to store as a general purpose medium of exchange or as a pegged tangible asset representing a physical asset(it could be a land deed, gold, coal, fiat currency) which derives value on the basis of the underlying asset.
As we know, currency’s credibility can be measured by
- Its potential in facilitating the exchange of products and services. (Durability, Portability, Fungibility)
- Its sovereignty in terms of a National Currency (Stability, Non-counterfeitability)
- Its indicativeness in the accurate and precise measurement of value for goods, assets, liabilities etc. (Divisibility)
Most cryptocurrencies are exceptional at being a Unit Of Account, for instance
Satoshi is the smallest denomination of bitcoin 10⁸ Satoshi = 1 Bitcoin (BTC)
and as a Medium Of Exchange too, but are substantially precarious in relation with being a consistent/stable Store Of Value. Fungibility, Divisibility, Portability and similar features make cryptocurrencies have a greater edge over other popular fiat currencies.
Owing to these features, Crypto market is booming and there is a constant upsurge in the new forms of cryptos/tokens(short for cryptocurrency) that are being created.
According to coinmarketcap.com, as of August 2023, over 20,000 cryptocurrencies are listed on popular chart sites, with an estimated total market capitalization of $1.07T.
The global crypto market cap is $1.07T. a 1.61% increase over the last day.
The total crypto market volume over the last 24 hours is $34.2B, which makes a 1.96% increase. The total volume in DeFi is currently $2.05B, 5.99% of the total crypto market 24-hour volume. The volume of all stable coins is now $32.42B, which is 94.79% of the total crypto market 24-hour volume.
Bitcoin’s dominance is currently 48.34%, a decrease of 0.11% over the day.
This brings us to the question, how can we leverage cryptocurrencies, as an individual, an organization and as a community? To answer this we need to understand the plethora of taxonomic options we have for creating a crypto. Based on your usecase you would want to opt for one or more of those classifications or may even come up with a new kind of crypto with a combination of features that you want to include. Popular examples among the different classifications of Cryptocurrency are:
- Payment Tokens/Cryptocurrencies — Bitcoin, Litecoin
- Utility tokens — Golem Network Token, FunFair Token
- Platform Tokens — Ethereum, Polkadot
- Natural Asset Tokens — SUN Contract, EARTH Token
- Cryptocollectibles/NFTs — CryptoKitties, Mutant Ape Yacht Club NFTs
- Security Tokens — ERC 20 Fungible Tokens, ERC 777 Tokens
- Crypto-fiat currencies & stable coins — Tether, Digital Gold Token DGX
Each classification has its own purpose, for instance, an art gallery or a gaming industry would want to leverage the power of NFTs, A petroleum industry may want to invest in creating a Natural Asset Token for representing themselves in the crypto market and so on.
The above explanation should give you a brief idea of what are cryptocurrencies and how they create an impact in the realm of currency transactions. Do share any other examples of organisations leveraging cryptos for marketing their product and services. Namaste and Thank you for giving it a read.
