Cryptocurrency and Bitcoins have officially become mainstream. In 2017 they became so big that nobody could escape from it, and people were obsessively searching for it on Google, both what it was and how to get into it. A great example of this is when the search for Bitcoin and Cryptocurrency suddenly spiked in 2017. There was at least one person in each household urging people to invest in Bitcoins. However, Cryptocurrencies like Bitcoin are just one of the applications of a technology that has been heralded by many as the next Internet, called Blockchain. Just like the internet, no one really understands what the technology can do, but the experts say it’s going to be big. Let’s explore the latest news in this complex world of Cryptocurrency and Blockchain.
The rise of Cryptocurrency
So what exactly is Cryptocurrency and why has it become an industry of billions of dollars? Cryptocurrency is a digital currency who’s most popular and accurate description is “limitless entries in a database that no one can change unless specific conditions are fulfilled.” It gets the word “crypto” from the fact that cryptography is used to regulate the number of
units created and helps to secure as well as verify all digital transactions.
Cryptocurrency became big when an anonymous person or a group of people going by the name of Satoshi Nakamoto published a paper called “Bitcoin: A Peer to Peer electronic cash system.” In the January of 2009, the first Bitcoin software went live and Nakamato worked with various cryptographers remotely to improve it and make changes. However, after mid-2010, he/they handed over everything and disappeared, vaguely claiming to “move on to other things.” It should be noted that their identity is still unknown.
Soon after, in 2014, Canadian programmer Vitalek Buterin came up with the idea for a platform called Ethereum. The idea behind this was to make a place where people could create Blockchain applications. Many people compare the use of Blockchain technology and Cryptocurrencies to the Internet in 1997. People then didn’t really understand what it was when it first came around, and it seemed to be used mostly only for emails, but in just a few
years, it took over and life has never been the same.
Practical application of Cryptocurrency and Blockchain Technology
One of the easiest explanations of the relationship between Bitcoin and Blockchain was penned by Sally Davies a FT Technology reporter: “Bitcoin is to Blockchain what the Internet is to Email. A big electronic system, on top of which you can build applications. Currency is just one.”
Blockchain technology is already being used by the Estonian government to back-up all the data to save a lot of time and resources in the future. One of the world’s leading digital society, the citizens in Estonia can do everything online. From e-commerce to online voting to even digital schoolbags soon to take over traditional school systems, the potential for Blockchain technology is immense.
Goldman Sachs among other big finance institutions have set up a team of researchers to find out how the new technology can revolutionize the financial world. They have an interactive space on their website dedicated to what they think about the Blockchain technology. They agree with everybody else that it will soon take over everything else and give examples of transactions with images and records as to how it can realistically
work. From selling your car to somebody to just transferring money or even buying music from your favourite artist could be done directly with no need of a middle man. The transaction record is held by everyone else in the network which would guarantee the safety of all transactions as nothing can be changed without the knowledge of others. Transactions aren’t approved without all other “peers” on the network verifying that the seller as well as the buyer has what they claim to have, that is, the seller should have the goods and the buyer should have the means to pay for it. This way, nobody can scam anyone with false promises or fail to deliver promised items. Everything is tracked at regular intervals, making any falsification of data impossible.
Some of the larger scale Blockchain usage, that are already being put to test include tackling the refugee crisis, creating a pathway to provide money to the world’s most impoverished people, for voting to prevent voter fraud and make sure elections go as smoothly as possible and to improve government efficiency.
While the use of Blockchain technology is racing ahead, Cryptocurrency on the other hand, has become an investment property. Those who buy it hold on to it as its price keeps fluctuating. In the beginning, when a user posted 10,000 Bitcoins for 50 USD, there were no takers. However, since then the price of Bitcoin has soared in value. In 2011, one Bitcoin
became worth 1 US dollar, six years after that in December of 2017 one Bitcoin was valued at 17,900 USD. Since then however, the Cryptocurrency saw the biggest decline it has seen in a month on January 2017. With more than 50% decline in just a month, it was valued at 6,200 USD on February 5th. This is how volatile Bitcoins are.
Reasons behind the sudden fall
Throughout history, there are instances of economic bubbles, where a commodity is hyped and its price increases disproportionately, only for it to crash. One of the prime examples of this phenomenon is the tulip bubble in Holland in the 17th century. People sold houses, lands and life savings for one tulip head with rare design on it, and when the prices (finally) declined, nobody left the bubble unscathed. The government tried to intervene but the decrease was so rapid that it had to standby helpless as the country went into an economic depression.
There were a series of bad news for Bitcoins that lead to this intense fall. Firstly, the US Commodity Futures Trading Commission launched an investigation on Bitfinex, one of the largest Cryptocurrency exchanges on the web. This investigation ties to an online digital asset, Tether: a coin that allows flexible Cryptocurrency trading. To provide a stable base on the ever flexible digital market, for each tether coin, the company claims to have a dollar equivalent in the bank, essentially backing up the coin with cash. The two companies, Tether and Bitfinex share the same CEO, but apart from that have a clear divide between their jobs and employees. However, an initial investigation on Tether drew light on the fact that the company may not have the funds required to backup more than 2 billion coins that are in use. This made the exchange rate shaky and could have resulted in an inflation of
billions of dollars, which would then significantly bring down the cost of a
Another shock to Bitcoin and other Cryptocurrencies came from China blocking all exchanges and Initial Coin Offering (ICO) websites. These have been added to the great firewall in order to counter “financial risks.” Although most of the users have now set base in nearby Japan, the websites are now not accessible through mainland China, and also
Other recent hurdles include, Facebook banning digital currency advertisements on its platform. India announcing a ban on Cryptocurrency to put a stop on criminal activities. And, Bank of America and JP Morgan Chase banning the ability of purchase it with credit cards. However, some experts claim that the coin will climb in value soon, and remain positive that Blockchain, and by extension Cryptocurrency, is the way ahead.
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