Digital Currency Essay

559 words - 2 pages

Throughout history many types of currencies have been used in their purest physical
form for simple transactions between people. Initially it all started with the primitive
trade of cattle until the use of somewhat more advanced Chinese cowrie shells
replaced such currencies. Today, humans have evolved so drastically that technology
has pretty much become an extension to our Phenotype. Physical currency is no
longer required, so innovators have found ways to create our reality more and more
virtually by developing currencies which no longer require to be consisted of physical
matter.
One of the most notable digital currencies in today’s online world is bitcoins. In the
past years it has found its place within the Age of the Internet even though previously
many people had doubts concerning the future prospects for such digital currency.
However due to the network effect of the bitcoin, the anonymity of transactions and
simply the widespread growth of the bitcoin, the future of this crypto-currency seems
both promising and prosperous.
The network effect is based on establishing a solid network of users to the extent of
being invulnerable to competition. Facebook would be a good example in the
category of social networks. Any new, innovative and flourishing social networks
hardly stand a chance in terms of replacing the current elite. If Bitcoin manages to
build up a vast user base before any real competitors arrive, it’s promising to last a
while. Currently roughly 30million people use Bitcoins globally. However competition
is on the rise as the Canadian government for example is developing their own crypto
currency called MintChip.
Unlike physical money, which is created constantly in massive money factories
usually by the respective governments, bitcoins are generated by the online network
through a process called “mining”. Mining is not restricted to higher authorities, so...

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