crypto basics

Why were cryptocurrencies introduced?

Daksh Murkute | |

Bitcoin and cryptocurrency as a whole is the next step that we humans have taken in the monetary system.

 

I’ll consider that you know what cryptocurrency is, what blockchain is, and how each one of them works but, do you know why all this was introduced in the first place?

 

In this blog post, I am going to discuss just this. What led to the rise of Bitcoin and other cryptocurrencies? What were the events that happened prior to this? You will get all the answers in this blog post.

 

In the end, I will also critically analyze whether the world even needs cryptocurrencies or not, so do read this blog post till the end.

Contents

Perils of 2008

Rise of the cryptocurrency

Why cryptocurrencies?

Do we need cryptocurrencies?

What do you think, do we need cryptocurrencies?

 

Perils of 2008

 

Perils of 2008

 

2008, the year of the financial meltdown, when the biggest of banking institutions were over-leveraged on the subprime housing mortgage. Even giants like Goldman Sachs and the Lehman Brothers were in compromising situations, the Lehman Brothers declaring bankruptcy while the US government bailed out Goldman Sachs.

 

The unfortunate incident affected lives all around the globe and it also exposed the system that was prevalent. After the incident, many attempts were made to narrow down on the exact reason and it was concluded that not one person is to be blamed for it but rather the entire system. 

 

There were certain shortcomings and irregularities in the banking system, the rating agencies, and the government. All this piled up and exploded at once. The biggest losers in this were the ordinary people that were oblivious to the things happening in the background.

 

The big guys were bailed out by governments, while some declared bankruptcy and moved on to other things, but the small individuals that were just living their day-to-day lives lost a lot.

 

Rise of the cryptocurrency

 

Invention of cryptocurrency

 

On 31st October 2008, a man named Satoshi Nakamoto released a white paper titled, “Bitcoin: A Peer-To-Peer Electronic Cash System.” Bitcoin is a type of cryptocurrency and it was for the first time that the world was introduced to the concept of cryptocurrencies.

 

The white paper mentioned everything about Bitcoin and its workings. Little was it known at that time that this would revolutionize the global payments industry and the way people look at the concept of money

 

To date, it is still unknown who exactly is Satoshi Nakamoto. He was active and often interacted until 2010, after which he completely disappeared.

 

Satoshi has mentioned that he did not completely intend to create a whole new currency initially, but rather was looking to build a decentralized digital cash system. There were attempts made to develop a decentralized digital cash system before Satoshi, but all attempts failed.

 

Why cryptocurrencies?

 

Why cryptocurrency invented

 

Satoshi stated that he did not completely trust the institutions within the financial industry. He mentioned that the traditional method may have worked in the past and continue to work at present too but it failed when it came to transactions made online.

 

In the white paper, Satoshi has mentioned concerns of forgery and security. Cyber attacks and cases of hacking were not new and happened often attacking the servers of the banks and other financial institutions which caused loss of money as well as data theft. 

 

Whenever individuals look to transfer money digitally, they are charged an amount as a service fee by banks. Satoshi mentions that these fees are unnecessary and are just eating away from one’s own money. The involvement of a third party in the transactions between two parties simply increases problems.

 

Satoshi also wasn’t a fan of the influence the governments had over the financial system. Giving examples of the bailouts of banks by the government, he mentions that it further raises doubts over the actual structure of the system.

 

In the traditional system where individuals have to trust a third party like a bank for their transactions, there is still no guarantee of complete security. Hence, the system of a peer-to-peer transaction is top-notch as the parties simply have to trust one another and carry out the transactions. 

 

Also Read: Are cryptocurrencies safe and legal?

 

Do we need cryptocurrencies?

 

Do we all need cryptocurrency

 

We know about how cryptocurrencies work and why they were brought into place, but the question still lingers whether we even need it. If seen from a short-term point of view, it’s completely subjective. But if seen from a longer-term point of view we might actually make good use of cryptocurrencies.

 

Cryptocurrency is the next big step ahead in the monetary system. We have come all the way ahead from using the barter system as a system of exchange, to coins and then to banknotes and digital money, and finally now to cryptocurrencies.

 

Each step ahead would have had the critics that doubted it and argued against it, but in the long run, it ended up changing society as a whole and carving new paths for future generations.

 

There are many advantages of cryptocurrencies that are listed against their fair share of disadvantages, but we believe that in the given case, the advantages have an advantage over the disadvantages.

 

Cryptocurrencies solve a problem that individuals today did not even realize that they had. The financial system that we have in place has its pros and cons, and it shouldn’t be denied the fact that it worked well in the past and helped our society and governments to evolve into something that we know it to be today.

 

Anything that once worked in the past and even if it continues to work in the present, has no guarantee of working in the same manner in the future as well.

 

Since the introduction of cryptocurrencies, several arguments have been in favor of it and against it. There have even been instances where certain mishaps have taken place involving cryptocurrencies. It would be immoral to label it as collateral damage for the greater good.

 

This should make individuals shy away from the long-term impacts that cryptocurrencies will have on our society. The debate that has been going on regarding this is simply a short-term noise. 

 

Measures are already been taken to incorporate cryptocurrencies into the financial system and to work ways out to acknowledge the attention it has garnered over the years.

 

It would be futile to make predictions about cryptocurrencies as it would be nothing but speculation. With a big thing like this, the best one can do is to be patient and to be aware of everything that happens in the space. Being aware will allow one to reap the benefits rather than getting the feeling of being left out.

 

need of cryptocurrency

 

What do you think, do we need cryptocurrencies?

I would like to know what you think about this new and crazy, in a good way, of course, the world of cryptocurrencies, and do you also think that it can add a lot of value.

 

Do let me know what you think in the comments section and we could have a little chat on it too.

 

Feel free to ask questions or queries and I will make sure to answer everything.

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