So let‘s walk through the whole story. What are cryptocurrencies?
Cryptocurrency Basics
Satoshi Nakamoto, the unknown inventor of Bitcoin, the first and still most important cryptocurrency, never intended to invent a currency.
In his announcement of Bitcoin in late 2008, Satoshi said he developed “A Peer-to-Peer Electronic Cash System.“
His goal was to invent something; many people failed to create before digital cash.
Announcing the first release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double-spending. It’s completely decentralized with no server or central authority. – Satoshi Nakamoto, 09 January 2009, announcing Bitcoin on SourceForge.
The single most important part of Satoshi‘s invention was that he found a way to build a decentralized digital cash system. In the nineties, there have been many attempts to create digital money, but they all failed.
… after more than a decade of failed Trusted Third Party based systems (Digicash, etc), they see it as a lost cause. I hope they can make the distinction, that this is the first time I know of that we’re trying a non-trust based system. – Satoshi Nakamoto in an E-Mail to Dustin Trammell
After seeing all the centralized attempts fail, Satoshi tried to build a digital cash system without a central entity. Like a Peer-to-Peer network for file sharing.
This decision became the birth of cryptocurrency. They are the missing piece Satoshi found to realize digital cash. The reason why is a bit technical and complex, but if you get it, you‘ll know more about cryptocurrencies than most people do. So, let‘s try to make it as easy as possible.
The term cryptography is derived from two Greek words – ‘Kryptos’ and ‘Graphein’ – which literally translates into ‘Secret’ and ‘Writings’.
In the modern era, this secret way of writing is referred to as encryption which is achieved by mathematical theories and complex computer science algorithms which are arduous to crack. These cryptocurrencies are also sometimes referred to as ‘Digital Currencies’ or ‘Virtual Currencies’.
It is needless to say that Bitcoin was the first cryptocurrency post which, numerous other cryptocurrencies have been created. They are famously called ‘Altcoins’. Some of which are:
The existence of such cryptocurrencies was not possible in earlier times, despite the cyberpunk movement being prevalent since the 1980s. It was so because no one had invented ‘Blockchain’ by then.
What Is Blockchain?
Is Cryptocurrency Safe?
As mentioned, there are scams to be wary of. Cryptocurrency is still a relatively new thing that many frequently misunderstand, and it's easy to rip someone off.
So can cryptocurrency be safe? If you're careful, cautious and make the right choices, yes. Doing cold storage (keeping your wallet offline via a paper wallet or unplugged hardware wallet) can keep your cryptocurrency offline. Keep your computer updated and protected. Do as much research as you possibly can before deciding on a cryptocurrency and the exchange you purchase it from.
Can Cryptocurrency Be Hacked?
Yes. It's something cryptocurrency owners need to be wary of, and why so many choose to store them offline as soon as they purchase any digital coins.
The most notable form of cryptocurrency hacks is hacking a cryptocurrency exchange. Once a bitcoin is gone, it's gone forever. That exchange no longer has it, and cannot recover it. This year, South Korean exchange Coinrail was hacked and may have lost as much as $40 million worth of coins.
It's hardly the first instance of a hacked exchange. Japanese exchange Coincheck lost over $500 million in a hack. And the Mt. Gox exchange went through multiple hacks that cost them hundreds of millions of dollars in cryptocurrency; eventually, they had to shut down.
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