The term ‘cryptocurrency‘ refers to digital currencies that are not controlled by a central bank or government. Cryptocurrency is usually represented by a digital wallet, which holds the private key to a specific address. These wallets can be stored on any device that has an internet connection and a web browser. The currency is held in the wallet and can only be transferred with the owner’s permission. It can also be converted into other currencies like dollars and euros.
In the early days of Bitcoin, the currency was traded on a decentralized peer-to-peer network. However, the network had some flaws. For example, if the user lost his wallet, he could not recover the coins. Also, there was no way to regulate the currency and it was vulnerable to hacking. As a result, several governments started to take an interest in this new form of money.
In January 2009, the first government-backed cryptocurrency was launched. This was called the ‘Dogecoin’. The coin was named after the popular internet meme, ‘Doge’, which was created by a Japanese Shiba Inu dog. The Dogecoin was backed by a central bank and a monetary policy.
The next year saw the launch of Litecoin, which was also backed by a central bank. Unlike the Dogecoin, the Litecoin was not based on a dog, but instead was named after a popular television show.
In 2013, the third cryptocurrency to be backed by a central bank was launched. This was called ‘Tether’ and was issued by the New York based company Tether Limited. It was backed by a dollar for every token issued. However, many people were suspicious about the veracity of these tokens.
As a result, the price of the currency began to fall and many investors withdrew their money from the market. This led to the collapse of the company behind the project, Bitfinex.
Currently, there are two cryptocurrencies that are backed by central banks. These are ‘Ethereum’ and ‘Bitcoin Cash’. The latter is the largest cryptocurrency by market capitalization.
While the above currencies are backed by central banks, there are other cryptocurrencies that are not. Some of these include ‘Litecoin’, ‘Monero’, ‘Zcash’ and ‘Dash’.
