This blog was written to explain some of the high-level concepts within cryptos, bitcoin, and blockchain technology
Blockchain technology is a revolutionary innovation that powers cryptos. It’s transforming the global economy and building a new type of financial system. An open financial system that allows value to be exchanged securely and freely with anyone anywhere in the world at any time. The financial system is owned collectively by its users and not under the control of any one government or corporation.
It’s best to begin with Bitcoin, the first cryptocurrency in the world. This will give you a better idea of the crypto’s value.
Origins of crypto
The idea that money should not be controlled by governments or powerful institutions was the inspiration for cryptos.
An anonymous group or person referred to as Satoshi Nakamoto published a white paper of 8 pages to an internet forum in 2008. It laid out the foundation for a new kind of internet currency. This paper was published during a global financial crisis when trust in financial institutions was at its lowest point.
Nakamoto wanted to create a currency that was completely independent of the financial system. Nakamoto devised a clever way to encourage people around the globe to use their computers to install software that would allow his currency to function.
Nakamoto’s currency was known as bitcoin and the system that maintained it running became known as a Blockchain. Nakamoto disappeared in the years that followed its publication and was never heard from again.
Bitcoin’s software can be accessed openly, so anyone can contribute and make it better. In Satoshi’s absence, thousands upon thousands of people around the globe helped to build Bitcoin into a multibillion-dollar financial network. It is open to everyone and owned by no one.
Nakamoto’s identity is still one of the greatest mysteries in modern times.
Read more: What Is The Crypto? How Does It Work?
According to the Bitcoin system, 21 million bitcoins will never be created. It has never been possible to hack bitcoins or use bitcoins they don’t have. This is the first time that a digital asset, which is rare, can be traded on the internet without the support of a third party such as a bank.
The idea that we can freely exchange digital assets via the internet is changing the way we view money and the global financial system in general.
How does it all work?
This is where blockchain technology steps in. It involves complex computer science but at its core it allows you to track digital assets’ ownership.
There are a few key ingredients that work together in blockchains:
- Global peer-to-peer network
- special accounting ledgers
Here’s how Bitcoin works:
Tony can announce his intention to all the network if he wants to pay Lala 1 Bitcoin. Each computer checks its ledger individually to verify that Tony has enough funds to pay Lala. The payment is made if the network agrees that Tony has sufficient funds to pay Lala. Every computer on the network updates its ledger at this point.
Each ledger groups new transactions into “blocks”, which are “chained” together so that it is impossible to alter transactions from the past. This is why the term “blockchain” is used. This is possible through cryptography, the science behind the term cryptos.
Privacy and decentralized networks
Who is running the computers that verify transactions on this network? Many people around the world have downloaded Bitcoin software. They do this because they love it. They get paid in bitcoins created through mining.
Nakamoto’s brilliant system is not dependent on any central entity for operation. It is a decentralized network. It will still run smoothly even if a large portion of the computers are taken out.
If you haven’t told the government about the connection between your identity, and your Bitcoin wallet, it is difficult for anyone, such as the government to track your transactions or associate them with you, because Bitcoin has no central authority. It also means that you can’t have your finances affected by inflationary policies of central banks or other financial events. Bitcoin transactions provide a level of freedom that is not provided by traditional currency systems that rely on central banks.
Beyond the bitcoin
Bitcoin seems like a new and innovative way to send money over the internet without the need for a bank account. If you look deeper, you will see that Bitcoin is a new way for people to trust each other and collaborate over a shared network. Money is just the first application.
Blockchain technology can transact any value, such as the title to the property, data, company shareholdings, ownership of the art/music, and even the carbon credit. As of now over, 3,600 cryptos were created to facilitate various value exchanges.
Smart contracts, which are blockchain-based such as Ethereum, allow value to be programmed to perform interesting things. The Ethereum blockchain can store the title to a single rental property. Smart contracts allow the owner to sell shares of their property to another person on the other side of the world. A Korean resident could buy 15% of a New York apartment building and earn 15% each month as rental income on an automatic basis. This transaction is powered by Ethereum’s native cryptocurrency, ether.
Bitcoin is used by less than 1% of the global population or 45 million people. The Human Rights Foundation estimates that more than half of the world’s population lives in an authoritarian regime. It is possible to make a difference for the 4.5billion people who don’t trust their leaders or can’t access the bank system if we spend the time and money to create user-friendly wallets, more trades, and better educational materials for Blockchain. Blockchain-based cryptos and financial systems can offer them a way out.
Conclusion: the value of the blockchain-based crypto matters for freedom and future
Cryptocurrencies don’t just make you rich or make you wealthy. Cryptocurrencies offer a new way to be free in places where traditional banking is not possible or impossible. They protect finances, preserve privacy, and increase access to financial resources. This strengthened social justice, making the world a better place for more people.
Our global financial system will be rebuilt in the next few years, allowing for peer-to-peer business. Whole industries will be affected and new businesses will era.