Blockchain and Cryptocurrency
The terms “blockchain” and “cryptocurrency” have been hot topics over the past few years. While both have been around for quite a while now, it has only been over the past five or six years that both have seen astronomical spikes in use and popularity.
What is the blockchain, though? Is it just there so you can buy cryptocurrency, and if not, what else is it for, and how deep is the relationship between the two?
What is blockchain?
Blockchain is a technology that has been used by developers to create cryptocurrencies but has also now expanded to help build tech applications of the future. In simple terms, you can think of the blockchain as a series of connected boxes.
You can store data in one box and then connect another to it. Connecting this second box will make the initial box harder to hack or cheat. As more boxes are added, the ones before them become even more impenetrable.
Essentially, the blockchain is an online ledger that keeps records of transactions in an accessible yet highly secure way.
Why is blockchain important?
Blockchain is important as it is one of the best ways to securely store information. It lowers the risk of the data being hacked or changed, and therefore improves security and stamps out fraud. Nothing is hidden on the blockchain, but you also can’t change the data.
This means blockchain technology can be used across a variety of fields, from storing medical information to banking and food supply chains.
Blockchain mining
Blockchain mining is the process of adding a block to the chain. To do this, a complex series of equations need to be run to find one of over 4 billion numbered codes. Once this code is found, a block is added to the chain. This process is highly technical, but there are several sources that explain it.
Decentralization
The main draw of the blockchain and cryptocurrencies is that they are decentralized. This means there is no one person, company, or entity that can control or manipulate them. The blockchain is a “public record,” per se, and any and all actions are recorded and can be easily found.
For crypto investors, this means there is no bank or financial institution that can manipulate their investment. No one has access to your crypto other than you; you have complete control. This isn’t like a bank where they can take your money to pay off debt and then reimburse you later, for instance.
Blockchain and Bitcoin
The most popular use of the blockchain so far is in the creation of cryptocurrencies; decentralized digital currencies can be bought and sold and, in some instances, used to purchase tangible life goods and services.
Bitcoin is the most famous crypto, as in 2009 it was the first blockchain “project,” and therefore, Bitcoin was the first blockchain in existence; there are multiple reasons for creating a currency on the blockchain.
The first is the security aspect: your money and investments are very secure in the blockchain. The second is that investors have control over their money, not banks or financial institutions.
Potential blockchain uses
The blockchain has a ton of potential uses as the technology improves and we learn more about it. A simple yet effective use is being able to make fast, secure payments overseas very cheaply, and sometimes even for free.
Insurance is another big area for blockchain. Insurers and customers can create smart contracts which can’t be changed or manipulated and are transparent for all to see. This protects both the insurer and the client and prevents false claims and fraud.
Potential cryptocurrency uses
On the crypto side of things, the potential uses are seemingly endless. Many crypto advocates want their tokens to become common-use currency like the dollar. The biggest draw here is that it would have the same spending power as the dollar, but without the politics and financial rollercoasters that affect fiat currency.
Locations, where you can spend your crypto, are almost endless. A very famous story from years ago is how a man spent 10,000 Bitcoin on pizza. While that’s a crazy story now, it shows that even in the early stages of Bitcoin, companies, and businesses were already experimenting with accepting it instead of cash. The potential uses of both the blockchain and cryptocurrency are only limited by what technology and governments will allow.