Cryptocurrencies are unique instruments in the investing world. They share many characteristics of traditional currencies but can also serve as platforms for more sophisticated financial products.
Judging by their price history alone, cryptocurrencies are easy to dismiss as a bubble. And, indeed, the crypto space is filled with questionable offerings.
However, a discerning look reveals a new financial technology with the capacity to fundamentally change the global economic landscape.
The cryptocurrency phenomenon traces its roots back to 2009, when someone writing under the pseudonym Satoshi Nakamoto laid out its theoretical framework in “Bitcoin: A Peer-to-Peer Electronic Cash System.”
While the idea of electronic cash wasn’t new, it had never attracted wide acceptance. One important roadblock was the “forgeability” of electronic information: It meant that bad actors could potentially create money out of thin air. Earlier systems relied on centrally managed servers that “held” electronic cash. Their vulnerability to cyberattacks also posed a serious problem.
Since then, the cryptocurrency space has come a long way. There are now many new cryptocurrencies that seek to address bitcoin’s shortcomings — its transaction time, transaction throughput, scalability, and resource-friendliness — one way or another. The technology is developing fast and the best types and use cases of cryptocurrencies are yet to come.