From the archive: this article was published in July 2016 and is kept for reference. Tools, versions and figures may have changed since.
This is probably the most common question asked.
First, we need to take a look at the evolution of trade:
- Initially, trade was done through a barter system. You have an asset I want, I have an asset you want, let’s trade. Here, a apple farmer can trade his apples to a sheep herder for wool.
- Here, we run into a problem. What if you don’t have something I want? Metals, particularly gold and silver, were often used as a mechanism for trade.
- With the rise of kingdoms and nations, many wanted to show their reign and would melt metals and recast them to showcase an emblem with their nation.
- Eventually, nations realized that metals weren’t efficient, and paper money was created.
- With the rise of the internet, we now have online banking, where currency is just digital figures.
This is a simple look, but it’s obvious that cryptocurrencies are the next evolution of trade.
Like most features in evolution, the unregulated capitalistic supply/demand aspect is based off the Great Recession of 2007.
Sources
- http://bitcoin.stackexchange.com/q/182/30316
- https://medium.com/@sebfung/cryptocurrencies-101-c1c0a5a3cc2
This article originally appeared on lightrains.com
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