“Cryptocurrencies” and “Blockchain” – whoever hears this concept these days, is probably connecting it with Bitcoin – the most successful cryptocurrency financially. This cryptocurrency got more and more attention over the years, especially in 2017, and brought itself doubtful glory. For the most, it is just “virtual money” without any real equivalent; a currency for criminals, or just a speculation object from nerds, who spend too much time in front of their computer screens.
Only a few know something about the core concept of Bitcoin, the technology that makes up the cryptocurrency. Today we live in a centralized world – created by the trend of the last few hundred years: states, insurances, energy suppliers, trade and communication routes – everything has a structure with centralized processes – the same is true in the financial system.
This centralized control over money and money-transfers is not good. Due to increasing globalization, the probability of a domino effect in financial markets when something out of the ordinary happens increases too (for example, the Great Recession). The latest crisis, which shook up not only Europe and the United States but the whole world, was the birth hour of Bitcoin. The anonymous inventor (codename: Satoshi Nakamoto) picked up the concept of “Digital Money” that was developed in the early 90s by the “Cypherpunk” movement. He used it to develop the requirements for the cryptocurrency – the blockchain technology and thus the Bitcoin was born.
It is self-explanatory that a blockchain is a “chain” of different blocks. Each block (comparable to an order book) represents a cryptographic secured hash of the block before. In the case of a Bitcoin transfer, information about the transaction and a timestamp is saved. Nevertheless, the blockchain is not centralized, it is organized over a worldwide computer network with different entities involved. A Bitcoin transaction has to be verified by different members of this network in order to be carried out. Thus, the completed order cannot be faked or revoked. With this technology, it is possible to send money all over the world within a minimum amount of time, without any middleman (e.g. a bank).
Blockchains are useful not only for new digital currencies, it can be a game changer in a lot of economic areas that affect the daily lives of all people worldwide, such as the organization of state processes. Honduras in cooperation with the American company “Factom” is developing an anti-hacking solution for its central servers. In order to prevent fraud with property papers and map changes in ownership structure, the country is creating a decentral database with the blockchain technology.
More application areas can be found in logistics (tracking of deliveries), automatization of processes for smart homes or solving legal claim disputes in creative industries. Blockchain technology can help to create new, efficient solutions for our modern world centralized structures, as well as answer question, we do not even ask yet.
“Every once in a while, a new technology, an old problem, and a big idea turn into an innovation.” – Dean Kamen
Let us see where the blockchain technology and cryptocurrencies take us when we work with it!