Cryptocurrency is a game-changer in the contemporary and also futuristic fintech ecosystem. Bitcoin is the first cryptocurrency that pioneered the debut of crypto in the modern economy in 2009. Blockchain is the underlying technology that empowers all cryptocurrencies, including Bitcoin. Check out more at Multibank.io.
Blockchain
Before you delve deeper into cryptocurrency and Bitcoin, you have to understand blockchain.
Overview of Blockchain
Blockchain is a type of revolutionary Digital Ledger Technology.
In other words, blockchain serves as a shared digital ledger built upon a decentralized infrastructure, backed by a cryptographic signature. The decentralized nature of blockchain eliminates the presence of centralized authority, thereby facilitating transparency for all nodes (participating computers) across the entire network.
How does blockchain work?
A blockchain system serves to keep record of crucial data; the “data” here could range from cryptocurrency transaction data to supply chain data of a company to medical records.
Here is a brief on how blockchain works:
- Data is entered into a block
- The block storing the data gets time-stamped
- Once the block gets saturated with data, it is added to the existing chain of blocks
- Data entered into the block cannot be manipulated and edited
Unique advantages of blockchain:
- Equal access
As blockchain is a shared ledger, it provides the same level of access to the entire ledger for all participants of the network.
- Immutability
A blockchain ledger is completely immutable which means data recorded in the database cannot be manipulated. A blockchain network always assures a high level of security for confidential or sensitive data.
- Completely decentralized
A blockchain network works through P2P interaction and is never governed by any centralized authority. It follows complete decentralization which enables the technology to allow complete transparency across the whole network.
- Concept of consensus
No data can be entered into the blockchain ledger unless it receives approval from the largest section of nodes.
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Significant use cases of blockchain technology-
- Storage and safe-keeping of transaction data of cryptocurrencies
- Monitoring of supply chain
- Faster and simpler payment processing for banks
- Safe storage of other kinds of data like medical data, confidential legal documents, academic data, and so on
- Development of NFTs
- Development of Metaverse
- Secured storage of credentials of IoT networks to enhance network security
- Advertising insights
- Improvement in voting mechanism
- And more
Cryptocurrencies
Cryptocurrency is the most celebrated use-case of blockchain technology.
Overview of cryptocurrency
Essentially, cryptocurrency refers to a digital asset, more precisely, a digital currency. Cryptocurrencies have proven their eligibility as both a mode of payment and store of value. As of 2022, the crypto world is bustling with 18,000+ cryptocurrencies.
Blockchain advantages of cryptocurrency
Harnessing the power of blockchain technology, cryptocurrency is driven to democratize the contemporary financial world through a decentralized ecosystem.
- Democratization of modern economy
1/3rd of adults (worldwide) are unbanked. The problem is especially rife in developing countries, such as Nigeria. It might come as a shock but in the USA too, around 22% adults are unbanked, or else, underbanked. Cryptocurrency eliminates governance by a centralized authority (say government) or financial institution. The decentralized infrastructure makes it easier for a lot of people (who are otherwise unbanked) to take part in financial activities globally.
As of 2022, around 1/3rd of the Nigerian population owns cryptocurrency. Added to using it as a valid form of payment, they also use cryptocurrency for sending funds to near and dear ones staying across the border.
- More transparency
Again thanks to the decentralized nature of blockchain, the cryptocurrency ecosystem allows easy transparency and traceability of all transactions.
- Faster and cheaper payment
As blockchain eliminates the need of intermediaries during a transaction, cryptocurrency assures faster and more affordable transactions worldwide. Crypto transactions follow a P2P model and users are not burdened with paying 3rd party fees here.
- No risk of counterfeiting
The immutability quotient of blockchain prevents risks of counterfeiting in cryptocurrency transactions.
Types of cryptocurrency:
As of now, the cryptocurrency world offers 4 major types of cryptos.
- Currency or payment cryptos
Though almost all cryptos can be utilized as a “store of value”, there are some major ones that have witnessed more active use in the payment ecosystem. Bitcoin and Ethereum are most common examples here.
- Asset cryptos
As the name says, these cryptocurrencies are mostly considered as valuable investment assets rather than mode of payment. Stablecoins form a major crypto asset class, as, unlike regular cryptos, they are always backed by collateral. USDT, DAI, BUSD are some examples of stablecoins.
- Purpose-driven cryptos
These cryptos are driven by a mission to solve major problems, like power crisis, threat to environment etc. Some examples would be SIA and MANA.
- Meme cryptos
Meme cryptos are created majorly out of fun and they are not exactly driven by a specific purpose. Most popular meme cryptos are Shiba Inu, Dogecoin, Dogelon Mars, etc.
Bitcoin
Bitcoin is the largest of all cryptocurrencies and holds the maximum market share in the crypto scene. BTC is the native coin of Bitcoin. The coin was developed by Satoshi Nakamoto (pseudonym) whose original identity is still unknown to the world.
Capped with 21 million supply, Bitcoin boasts a growing market value- accelerated by scarcity of supply and surging demand. The cryptocurrency was initially developed to serve as digital cash that could be used as a P2P payment mode. But over time, Bitcoin has proved to be a highly potential digital asset as well.
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How are Bitcoins generated?
Bitcoins are based on PoW (Proof-of-Work) consensus mechanism. The process of generating Bitcoins is technically termed as “mining”. To mint or mine Bitcoins, miners have to solve certain mathematical equations. The first one to come up with the right answer, officially known as “Hash”, will be rewarded with Bitcoins.
- Bitcoin’s value has grown from $0.01 in 2010 to around $30,000 in 2022
- Bitcoin reached its first ATH in 2017, clocking in $19,000+ and hit second ATH in 2021, recording around $69,000
- Bitcoin is expected to reach $100,000 by the final lap of 2022
- Block. one is the biggest owner (private) of BTC, holding 140,000 BTC
- Bitcoin ATMs have grown to over 34,000 from 14,000 in 2020
- Last Bitcoin mining will take place in 2140
Bitcoin gained trust from leading companies
Bitcoin is witnessing increasing interest from both individual and institutional investors. Some of the topmost companies of the world have invested in Bitcoin and also use the cryptocurrency as a mode of payment. Leading companies that use Bitcoin are Tesla, Microsoft, Walmart, Starbucks, Virgin, Expedia, and more.
Bitcoin ETF
Bitcoin ETF is a revolutionary development in the Bitcoin scene. Bitcoin ETF allows investors to invest in Bitcoin futures and the trade can be conducted through conventional stock exchanges as well. BITO is the first ever Bitcoin ETF. Bitcoin ETFs have played a major role in the recent surge in BTC prices.