Anyone with a smartphone or laptop has been witness to the rising popularity of bitcoin (BTC). In the summer of 2018, you couldn’t walk down the street without hearing the words ‘cryptocurrency’ or ‘bitcoin’. Before then, the mainstream population knew very little about cryptocurrencies, however, it began to sprout the question, “should we be investing in bitcoin?” Before we go any further, it’s important to have a basic understanding of what bitcoin is. Bitcoin is a digital currency which uses encryption to regulate and validate transactions. It’s essentially a currency that’s not supported by any government and can function without any third party such as financial institutions.
Of course, if you’ve been following the ups and downs of bitcoin, then you know how the story goes. At one point, literally, almost no one knew about bitcoin or what it was capable of. However, over the past couple years, bitcoin hit the mainstream market. People rushed in to buy bitcoins, raising the value to $10,000 per coin in December of 2017, and then making it hit $20,000 per coin, reach its all-time high. At that point, people were on a high, thinking, how could it ever go down? But the important thing to understand about bitcoin is that it’s based off of human trust. You remember that there’s no third party involved and that it’s based off of peer-to-peer networking. So, what kept it gaining momentum? The belief people had in the coin. People who invested into bitcoin believed that the coin existed and will continue to gain momentum, making it a harsh competitor in both legitimate and crypto markets. However, people forgot human nature. It’s typical behavior that once something reaches a high, human fear is engaged, people freak out and of course, they sell their coins in a panic. Which is what happened.
Since the bitcoin market is extremely volatile, it also means people can profit massively from investments. Understandably, the attraction to bitcoin is there. It’s an unregulated currency and independent from global economics. However, it’s not independent of human engagement, in fact, it relies solely on human interaction in order for the coin to exist. Bitcoin is based off on human speculation. When we have these types of investments, which is a word used lightly, people are battling each other, using these investments in order to obtain money or as the crypto world calls it, fiat currencies. This is the thing about bitcoin, it doesn’t hold intrinsic value to its name, rather is a digital and intangible. This is why bitcoin is so volatile.
Though we can argue about whether or not bitcoin is worth anything, if it’s a bubble or if it will ever reach the heights and popularity it once did, but there is something of great value that runs bitcoin and that’s blockchain technology.
In order for blockchain to have even of achieved its level of success, it needed to use blockchain technology. Thus, for bitcoin to be decentralized, transparent, and function as a peer-to-peer system, it needed the support and functionality of blockchain. So, what exactly is blockchain? Blockchain is, in layman’s terms, a public record of all transactions made which are called blocks. These transactions are linked and secured via cryptography, hence the name blockchain. Blogger, Unassuming Banker, simplified how blockchain works in relation to bitcoin:
“Imagine a gigantic piece of paper that lists every transaction ever completed. Then imagine that there are thousands of copies of this paper, and all of them are automatically updated when any two people agree to exchange Bitcoins. Every time a transaction takes place all these copies are checked for consistency to make sure you actually have the Bitcoins you claim to have. If everything checks out the new transaction is added to all the pieces of paper at once.”
And in essence, that’s exactly how blockchain works. However, here’s the thing, blockchain isn’t only usable for bitcoin and other cryptocurrencies, it’s usable in almost every industry. Blockchain is foundational technology which has huge potential to influence and improve industries around the world. For example, automobile companies such as BMW, Ford, and GM are implementing blockchain technology in their products. Why? Well, they’ll be able to use blockchain to implement secure payment options, car-to-car data sharing, and vehicle ID (for stolen cars and vehicle accident history). This technology is highly useful as you’re unable to tamper with the information in blockchain since every transaction is recorded and locked into the blockchain. Once it’s on the chain, it’s irreversible. As blockchain manages contracts, transactions, and records in a way which is permanent and untouchable, more and more industries will jump on board as they see the validity and benefits of having transparent and shared databases which are out of human hands.
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