Cryptocurrency is one of the newest trends around the world and stories about cryptocurrencies like Bitcoin have made the news for the past few years. Having both positives and negatives, this new technology is a fascinating and rapidly developing prospect. But how exactly does it work? And what is blockchain? Let’s have a look.
One should start by understanding blockchain, the technology that’s behind cryptocurrencies such as Bitcoin. Then you should know how cryptocurrencies work and why they’re so popular.
What is blockchain?
This technology is important to understand as it is at the heart of many cryptocurrencies, including Bitcoin; the uses of blockchain technology go far beyond just digital currencies.
A blockchain is a type of database. It may be defined as a collection of electronically stored information or data. It offers many unique features that make it different from a traditional database. It is a series of data “blocks” linked together. This chain of blocks records the activity and information within the chain.
All the blockchain ledgers are stored globally with thousands of different servers. All the traders at the network can see (and verify) everyone else’s entries — so it’s nearly impossible to falsify or tamper with data within a block.
What is blockchain technology used for?
Basically, blockchain technology can be used to create cryptocurrencies like this bitcoin robot, but it has more practical uses besides this. We can understand this with some real-world examples:
- Transferring money and processing payments: All the leading banks around the globe are realizing the power of blockchain technology to settle payments and money transfers in a quick, secure and efficient way.
- Assuring safety to confidential records: This is the technology that gives a tamper-proof way of sharing information.
- Creating smart contracts: This is one of the most widely adopted uses for blockchain.
- Streamlining supply chains: It is also very useful in the field of logistics This technology can be used to easily and instantly record and recall data from within a supply chain.
Why are blockchain skills so popular?
You might be surprised to know that recently blockchain technology has totally left behind its mysterious and suspicious character and transformed into the darling of modern business thinking. The leading industries such as logistics, health care and fintech are all making use of systems built on blockchains. As you can see, people skilled with blockchain are in high demand.
According to a data report from LinkedIn from 2020, blockchain remained the most in-demand skill in the U.S., UK, France, Germany and Australia. The role of blockchain developers increased by 488% from December 2020 to January 2021, making it the second-most sought-after job during that time.
What is cryptocurrency?
You might have listened to several news stories about various cryptocurrencies, but what are they? And what is their connection with blockchain?
Cryptocurrency is a kind of digital money. However, it has some unique features; unlike regular fiat currency (such as dollars, pounds, yen, etc.), it is decentralized. No central authority such as a bank, government or country backs it.
There are many differences between crypto-assets and regular fiat currency. There is no physical existence of cryptocurrencies — there are no coins or bills that you can use; they are all digital. Also, they are not stored in a bank or financial institution.
The pros and cons of cryptocurrency
Any regular follower of cryptocurrencies in the media must have heard both good and bad stories about them. You might have come across some stories about both record-breaking all-time highs and stories of lost fortunes. This is amazing, but what are the actual positives and negatives of cryptocurrency? Here are some facts:
Pros
- These are entirely decentralized, meaning no one authority can influence the price.
- They’re secure and private. You receive an immense degree of anonymity for transactions.
- They’re fast and cost-effective. Its users can easily transfer funds without having to pay excessive fees.
Cons
- They’re volatile. Any small groups of users can influence the unregulated market. The prices can rapidly rise and fall, making them an insecure investment.
- They’re susceptible to hacks. In case you lose your cryptocurrency wallet private key, you would lose access to all the funds that are in there.
- They use a lot of energy. During the process of mining for cryptocurrency, a lot of electrical energy is consumed.
What is Bitcoin?
Bitcoin is a cryptocurrency based on blockchain technology. It also has positives and negatives features that come with it.
This popular cryptocurrency was launched in 2008 after the financial crisis. Initially, it was introduced as a way for people to make purchases and trade funds without having to go through banks and financial institutions. Several elements of linking digital money to cryptography had been introduced since the 1990s.
Final Thoughts
These are the basics of blockchain, cryptocurrency and Bitcoin. Blockchain technology is an exciting and versatile technology that has many uses, including powering cryptocurrencies such as Bitcoin.
