Why People Started Using Cryptocurrency
It seems at times like cryptocurrency arrived out of nowhere as a technological marvel and financial instrument that has excited people worldwide. In actuality, it has been a process of about a decade for the digital tokens to make their mark. Yet slowly but steadily, cryptocurrency has risen to prominence and is now a force that even long-standing institutions like banks, regulatory bodies, and governments have had to recognize.
Many people know that there is something called cryptocurrency and that it has something to do with money. They also might be vaguely aware of Bitcoin, which is by far and away the most popular cryptocurrency, but it's far from the only one. What they might not understand is why these digital coins were first created, what features about them made adopters so excited, and why they continue to evolve from those beginnings to take new shapes and forms practically every day.
To properly understand cryptocurrency, in terms of both Bitcoin and all of the altcoins that followed it into the market, it is important to understand the motivations behind the movement. If the beliefs that spawned cryptocurrency are in line with yours, you might just want to adopt it into your own life. And if nothing else, you'll have a clearer picture of what it's all about in case you want to invest in it somewhere down the road.
The Thoughts Behind Cryptocurrency
The cryptocurrency movement was a reaction against the fact that the finances of individuals are often taken out of their hands. This isn't to say that people have no control over their money and the way it is spent. But it is true that you often need large, third-party companies to complete transactions with that money, hold it for safe-keeping, and basically be a kind of facilitator for any move you might want to make.
This kind of thing has frustrated many people with independent views for quite a long time. It's that kind of frustration that makes people refuse banks and hide all their cash away somewhere only they can find it, or invest in gold that they hold onto themselves. Those ideas are extreme, however, and it is difficult to participate in society if you hold them.
At some point, a group of developers decided that they wanted to sidestep the banks, credit card companies, and every other financial institution with the ability to get their hands on the finances of everyday people. But they had to come up with a way that people could pass money from peer to peer without having to be in the same room to do it. And if not in the same room, how would these people then be able to trust that this proposed transaction would be carried out in any verifiable way?
The Bitcoin Solution
Bitcoin was first conceived in 2009 by a group of developers that was trying to come up with a solution for that trust problem. Blockchain technology proved to be the solution, and it was the key to the invention of Bitcoin, which would start the cryptocurrency revolution.
These blocks are added by a network of computers that attempt to solve a coding problem presented to them. The first of these to solve the problem is the one that verifies the block and provides the trust factor; this so-called "miner" is also presented with digital coins as a reward for their success.
These digital coins, which the developers termed Bitcoin, became the first cryptocurrency. And the miners were the answer to the problem of verification and trust. Hence a new kind of money was born, but it would need some people to use it before it could be anything more than a theoretical exercise.
Unfortunately, the first attention that Bitcoin received on a widespread basis was not very positive. For the most part, its first five years of existence took place in relative anonymity. Only certain internet communities seemed to be aware of the coins and traded them amongst each other.
One community that caught wind of Bitcoin and the fact that it allowed you to make transactions with it without anyone finding out your identity was the criminal underground. Bitcoin was used to fund a few high-profile criminal enterprises, which made for a somewhat disappointing first impression with the financial community at large.
On a gradual basis, those bad associations started to fade. People began to become aware of Bitcoin for many other reasons. And when they discovered the coins, the number of people using the coins soon multiplied at an impressive rate.
Reasons Why People Adopted Bitcoin
For the most part, Bitcoin was the only game in town in the early days of cryptocurrency. Yet it wasn't long before it became a well-known name in both technological and financial circles. The most obvious reasons for its growth are the same reasons it captivates people today.
With a Bitcoin transaction, there is generally little wait time for it to be processed. Once it is verified on the blockchain, the coins will show up in the digital wallets of the receiver in hardly any time at all. This stands in stark contrast to, for example, a credit card transaction, which can take days, especially if it is begun on the weekend, to be completely settled.
One of the most unfortunate aspects of the digital age has been the ease with which hackers and other computer experts can steal personal information. It often requires them just getting a credit or debit card number. Worse yet, if you use a credit or debit card to buy from a vendor, and that vendor is hacked, your financial and personal data could go to the hacker as a result.
People who started using Bitcoin realized that none of this was a concern. Only the amount of coins that needs to change hands is proffered in a Bitcoin transaction. The rest can be kept safely away in a digital wallet with offline storage.
Anybody with a bank or a credit card account knows how easy it is for fees to become burdensome, fees so hidden in the fine print that you'd need a magnifying glass to see them. In addition, businesses are often hit with processing charges that make it really daunting for their operations to stay afloat.
With Bitcoin, people realized that there were no real fees attached at all. On top of that, they could use this currency without needing any third party to be around to make it happen. People looking for their financial independence couldn't pass that up.
For those people looking to bring the far corners of the world much closer to them, cryptocurrency was just the ticket. Many parts of the globe that don't have access to a bank do have access to an internet connection. Those people could trade coins with others from far across the globe without having to worry about obstacles like tariffs or borders.
Cryptocurrency Becomes an Investment
The more people used Bitcoin, the more valuable it became. That is because its creators limited its supply. In addition, the only way that you could get some was to mine it or to buy it from one of the exchanges that began to pop up once it became a little more popular.
Suddenly, as more people started to hear about Bitcoin, the value of the coins began to rise. And once they started rising, they didn't seem to stop. In the span of less than a decade, Bitcoin went from being practically worthless to being one of the hottest investments on the planet, with the coins at one time reaching an incredible level of $20,000 for a single token.
So who was it that was spurring the rise in prices? Well, they could be broken down into three distinct groups, each of whom had their own motivation for cryptocurrency investment.
These were the people who were finding ways to use the coins right from the beginning. Sensing that they were on to something special, many of these early proponents bought as many of the coins as they could, including Bitcoin and some of the early alternatives (more on those in a bit). Many of these earliest investors have taken a buy-and-hold approach to the coins, and as a result, they are sitting on fortunes because of that initial huge rise.
This second batch of investors tended to be those who looked at the coins as investment properties more than anything else from the moment they heard about them. Whether these people were tech-savvy opportunists or just investors with a knack for what was hot, this secondary group helped to solidify the gains of Bitcoin and the others. This group was much more likely to sell off the coins, however, than the buy-and-hold crowd.
Finally, there were investors who tried to catch the wave as Bitcoin soared but were perhaps a bit too late to the dance. When the backlash against Bitcoin and other cryptocurrencies started and questions were raised about their legitimacies, these people who had bought in at a higher price saw their investment capital take a serious hit.
The Motivations for People Using Altcoins
As briefly mentioned above, there were other coins that started to pop up and stretch the realm of cryptocurrency far beyond Bitcoin. Developers and entrepreneurs were quick to catch on to the fact that the blockchain was a pretty versatile piece of technology. It could be used to create other forms of cryptocurrency, which could in turn serve many other purposes.
These altcoins didn't need to be pigeonholed as either Bitcoin-like products or investment vehicles, although they certainly could serve those purposes. They really could fit into any niche that would have previously required some kind of bureaucratic institution to be at the center of the picture.
As an example, the coin known as Ether, product of the Ethereum blockchain, became extremely popular, in part because of its ability to help users out with smart contracts. Smart contracts, as you might be able to tell from the name, are contracts that can essentially self-execute thanks to the blockchain. Terms are set by a pair of peers, and once those terms are met, the network automatically sets the provisions of the contract into motion.
Of course, such contracts eliminate the need for costly lawyers. And that idea of eliminating costs and the third parties that impose them spread through many of the altcoins that soon came into existence. In any place in society where two people might need the services of a large company and organization to enter into some kind of agreement or relationship, they could use cryptocurrency initiatives built on the blockchain instead.
The Lure of the Cryptocurrency Movement
Throughout the examples cited above, a common theme emerges. The people who use cryptocurrency, whether as a payment system or for some other daily purpose, have the ability to take their autonomy into their hands. They don't need to be reliant on corporations or big businesses at every minute of every day.
As a result, cryptocurrency, both in the beginning of its existence and now nearly a decade into it, tends to appeal to those who have an independent spirit about them. Many people have no use for the feeling that they are just a tiny part of some big machine over which they have no control. Cryptocurrency, especially the coins that were created for the right reasons and with the right amount of ingenuity behind them, gives them back that control.
Now that cryptocurrency has evolved and survived some growing pains, the next step is to ensure that the applications that the coins promise will be used on a widespread level. For that to happen, it might mean that the cryptocurrency community will need to come into alliance with some of the powers that be that they have previously tied to evade. It will be interesting when that happens to see if cryptocurrency loses some of the essence that made it so popular in the first place.
In any case, the rise of cryptocurrency should continue. And as more people get exposure to the coins, they figure to keep finding more reasons for using cryptocurrency.