What is cryptocurrency and blockchain technology and how is it changing the world of finance?
A (very) short story
Once relegated to the outer fringes of the global financial system, cryptocurrencies such as Bitcoin and Ethereum have entered the mainstream consciousness in dramatic and disruptive fashion.
Many of us think of cryptocurrency as new. But the idea of creating a more open and accessible financial system with greater privacy and lower costs goes back to the 1980s.
Bitcoin was the first viable cryptocurrency, although there had been several previous attempts to design more private ways of conducting financial transactions.
Initially, Bitcoin enthusiasts were a select group of early adopters, mainly programmers and technologists. Computer programmer Hal Finney was the first to download the original bitcoin software in 2009, receiving 10 bitcoins for his trouble.
How does cryptocurrency work?
It would be best if you didn’t get into the weeds, so I’ll just give a brief overview of what makes cryptocurrencies tick.
Bitcoin, and alternative cryptocurrencies, are built with something called blockchain technology.
Blockchain software is a decentralized, distributed, typically public database that records transactions across multiple computers. Briefly defined, a blockchain is a type of digital ledger made up of records known as “blocks”. No one can retroactively change blocks on the chain without changing all subsequent blocks.
Blockchain is not limited to financial transactions either.
It also acts as a real-time ledger of contracts and physical assets. Because it is open, everyone on the blockchain can see the details of each block. Once a block is stamped and encrypted, the only person who can make changes is the person who “owns” the block.
Owners of blocks can only access them through a unique private key. The entire blockchain is updated and synchronized in real time when a block is edited.
Banks and companies are taking notice of blockchain.
Blockchain technology could revolutionize the world of finance.
It cuts out middlemen, reduces costs, saves time and provides greater financial privacy.
Using blockchain reduces transaction complexity. For example, if you buy stocks using blockchain, your transaction is done in minutes, not hours. You do not need anyone else to process your share purchase.
Also, while nothing is “hack-proof”, blockchain appears to be much more secure than anything else available today.
Currently, only about 0.5% of the world uses blockchain technology. However, it is all set to go mainstream very soon. Major banks, insurance and technology companies and venture capitalists dedicate billions of dollars and thousands of staff hours to blockchain projects every year.
Experts estimate that the banking sector alone could save as much as $12 billion annually by switching to the blockchain ledger.
Summing it up: Cryptocurrency, based on blockchain technology, has the power to drastically change how we do business and make global transactions faster and more seamless.
Cryptocurrency cannot be manipulated or controlled by a central bank like paper currency. It provides more security and privacy than our current system, and in many ways it is freer and more democratic. As technology advances, transactions on the blockchain will become easier and more accessible to ordinary individuals.
If you are thinking about investing in cryptocurrency. If blockchain technology and cryptocurrency interest you, many excellent YouTube videos are available to give you more in-depth information about this incredible new financial option. Websites also help you get to grips with the more technical aspects of blockchain.
Good luck.
