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Cryptocurrency, crypto, digital currency, “the currency of hope” (according to RFK Jr.) is a form of digital money, a medium of exchange comprising coins and tokens that exist and are managed and transacted within their own decentralized ecosystem, using cryptography and blockchain technology. Cryptocurrency was invented as an alternative financial system following the 2008 financial crash, in a period of fierce disillusion with traditional currencies, banks, and financial institutions and systems. Crypto transactions offer many benefits compared to traditional money, such as the euro, dollar, or pound, which are known as FIAT currencies. Crypto transactions are peer-to-peer, fast, private, transparent, cost-effective and borderless, which makes them hugely advantageous for global businesses, expats and migrants, international trade, as well as everyday micro transactions.
In this article, we provide a comprehensive summary of what cryptocurrency is, how it works, its origins, as well as its future prospects. Let’s dive in.
Who invented cryptocurrency?
Cryptocurrency was invented by Satoshi Nakamoto, a pseudonym for an individual or group whose true identity remains unknown. Bitcoin, the first cryptocurrency, was launched in 2009 following Nakamoto’s publication of a seminal paper in 2008 titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper outlined the idea of Bitcoin as “an electronic payment system that relies on cryptographic proof rather than trust.” Each transaction within this system is verified and recorded on a blockchain, ensuring transparency and security, as crypto payments are immutable. As of today, 15 years following its launch, Bitcoin is the most widely traded cryptocurrency and currently has a market cap of over $1.13 trillion (August 2024). In March 2024, Bitcoin’s market cap soared to $1.4 trillion, surpassing that of Silver.
Examples of cryptocurrency
There are many different forms and examples of cryptocurrency in the crypto sphere: Bitcoin, altcoins, stablecoins, tokens, and everything in between. Each one is based on a protocol; a basic set of rules that allow data to be shared between computers and establishes the structure of the blockchain —the distributed ledger that allows crypto to be securely exchanged over the internet. The cryptocurrencies that came after Bitcoin are generally referred to as altcoins and introduce new features or improvements over Bitcoin, such as faster transaction times or enhanced privacy measures. Then, we have stablecoins, which are designed to maintain a stable value by being pegged to a reserve asset like the US dollar, providing a bridge between cryptocurrencies and traditional financial systems. Finally, tokens have various uses beyond acting as a form of exchange (money) and can represent things like access to a service or ownership of digital artwork, which would be the case of non-fungible tokens, NFTs.
Can you pay for goods and services with crypto?
Yes! One of crypto’s main functions is to pay for goods and services. As a digital currency, cryptocurrencies offer a decentralized and secure means of transaction, bypassing traditional banking systems. Many merchants and businesses, both online and offline, now accept cryptocurrencies such as Bitcoin, Ethereum, and others as direct forms of payment. Other merchants and businesses have chosen to onboard a crypto payment gateway, such as ForumPay, that allows both consumers and merchants to transact in the same way they would using a debit or credit card. ForumPay’s solution is designed to enhance the utility and real-world applications of cryptocurrency and acts as a bridge between crypto consumers and FIAT-based merchants and businesses. It is, in fact, often much cheaper for merchants to accept crypto payments than accept debit or credit card payments, as the crypto transaction processing fee is likely to be cheaper than the commission charged to the merchant by companies such as Visa or Mastercard.
What are the benefits of crypto?
As a digital, virtual means of exchange, there are numerous benefits of cryptocurrency compared to traditional money and financial services.
Peer-to-peer, private, and transparent
First of all, all crypto transactions are peer-to-peer. Unlike when dollars or euros are sent from one holder to another via a centralized bank or financial institution, crypto transactions and payments are sent directly from one crypto wallet to another across the decentralized blockchain. Whilst the blockchain is designed as a public ledger, meaning it is possible to see transactions happen, and trace transactions back to the birth of that specific blockchain, they are private. No personal details are listed alongside that transaction, only anonymous keys, which link the transaction to the two wallets involved. They are not monitored by governments or institutions, which makes them a popular choice for high-value transactions, the purchase of sensitive goods and services, and more.
Fast and efficient
Crypto transactions are also much faster and more reliable than those sent from centralized bank accounts, especially when it comes to international payments. Sending FIAT currency from one country to another will expose it to regulatory measures, currency exchange rates, and frustrating delays that hold the funds between the sender and receiver in control of the sending entity, i.e., a bank. In contrast, cryptocurrency transactions can be completed in a matter of minutes —especially if they are sent over the Lightning Network, Bitcoin’s Layer 2 solution for faster micro and macro payments— regardless of the geographic location of the sender or receiver. This rapid processing greatly enhances efficiency and reduces the risk of transaction errors and delays, making it a popular option for businesses and individuals involved in global commerce.
Global and cost-effective payments
Cryptocurrency is borderless, and so payments are not restricted by state lines or national boundaries. They, therefore, offer significant benefits for global payments and remittances and are changing the way businesses, individuals, and communities send money around the world. Understanding what cryptocurrency is —a decentralized digital currency secured by cryptography— can help increase adoption and allow people to send faster, more secure, and cost-effective global payments. Unlike traditional banking systems, crypto payments bypass intermediaries, such as banks, reducing fees and eliminating delays caused by regulatory hurdles and currency conversions. This streamlined process not only facilitates smoother international trade but also promotes financial inclusion by providing unhindered access to a global market.
To find out more about cryptocurrency, crypto payments, and ForumPay’s crypto payment gateway, or to talk to a member of our team, visit www.forumpay.com.
