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What does it mean to invent a currency?

On Behalf of | Dec 23, 2021 | Emerging Business

When some of the first cryptocurrencies emerged, they seemed mysterious and possibly risky. Many dismissed these early cryptocurrencies as only for specific groups or types of people.

Over time, a couple of them began gaining traction outside their narrow groups. As these cryptocurrencies started to become popular, they also started gaining value. Fast. It began to beg questions from less tech-savvy people about starting a new cryptocurrency.

Here’s an overview of what it takes to start a cryptocurrency.

It starts with a block

Cryptocurrencies are made up of blockchains. Each block holds specific data and a link to the blocks before and after it. These blocks make up a chain.

Blockchains are incredibly secure. If someone tampers with one block, the whole chain will fail because the data no longer matches the neighboring blocks. Additionally, the block would show evidence of the change in data, so it would be obvious that someone tampered with the chain.

And it’s worth something?

Giving something arbitrary a monetary value is not new. The current (fiat) paper money system felt very abstract for people who were used to gold and silver coins.

Like paper currency, cryptocurrencies begin to have value when people can use them in exchange for goods and services. Once a cryptocurrency takes the step into being used, it starts to have value.

However, unlike the fiat system, there is no centralized bank to dictate the currency’s value. Instead, these highly volatile currencies directly link to the supply and demand of the currency.