What is blockchain and cryptocurrency?

There is a revolution in the horizon of money going by the name of cryptocurrency, digital gold. Cryptocurrency is an emerging global phenomenon that is being exploited by speculators and ordinary investors. Although the ideology behind the whole cryptocurrency concepts sounds geeky, a lot of banks and other financial and government institutions are beginning to recognize the impact of cryptocurrency in global economic growth. Cryptocurrencies solve a lot of problems facing centralized currencies such as inflation which seems to be non-existent in this digital money system. There are two primary ways cryptocurrency draws value; Asset of value and Currency value.

Cryptocurrency is a digital asset that uses cryptography for security measures. This facilitates the ease of transfer of funds between parties through the use of both public and private keys. Transfer of funds is processed with a minimal processing fee which allows end-users to avoid steep fees charged by most banks and wire transfer institutions. Cryptocurrencies emerge as a result of an invention called Bitcoin by a group/person under the pseudonym Satoshi Nakamoto.

Bitcoin, launched in 2009, was developed with the aim of creating a “Peer-to-Peer electronic cash system”, based on a decentralized digital cash platform, unlike ordinary cash which is subject to regulations by monetary policies. The reason why Bitcoin succeeded where many other inventions failed is that of decentralized systems, security and anonymity. At the center of the success of Bitcoin was a new invention known as Blockchain.

Blockchain is an online ledger used to store transactions that have been conducted by cryptocurrencies and secured using cryptography. Blockchain operates as a shared database, meaning its records are readily available to the public and easily verifiable. Since there is no centralized version for hackers to target, it is said to be an incorruptible digital ledger. This technology is useful to the cryptocurrency technology as it can be copied by all computers running cryptocurrency softwares.

Blockchain is made up of blocks which store information. Each block contains a hash pointer which is used as a link between previous blocks, a timestamp which securely keeps track of the data in a manner that not even the owner of the data can change it once it has been provided making the time stamper’s integrity uncompromised, and transaction data.

 

What is blockchain and cryptocurrency? Pros and cons:

Blockchain
  • The blockchain technology allows for a transaction to be made without third parties. The control is in the hands of the Users.
  • Durability and reliability since blockchain operates on a shared platform.
  • Maintains User integrity.
  • Information transparent.
  • Quick transactions.
  • Low transaction cost.
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  • The adoption of the technology is still relatively low.
  • Privacy concerns.
  • Large energy consumption.
  • Uncertain regulatory status.
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    Crypto's
  • The adoption of protocols such as Proof-of-Stake greatly decreases inflation in the cryptocurrency system.
  • No barriers to global transfer of money.
  • Information transparent.
  • Low transaction fees.
  • Almost instant money transfer.
  • Decentralization means there is no regulatory body to block access or freeze your crypto wallet.
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  • Scalability of cryptocurrencies is still a common issue.
  • Cryptocurrencies such as Bitcoin have been used to facilitate illegal transaction such as money laundering and tax evasion which poses the question of legality.
  • Constant change in protocol such as the recent change by Ethereum to Proof-of-Stake from Proof-of-Work.
  • Price volatility.
  • Fear of being targeted by hackers such as the hack on the Decentralized Autonomous Organization in June 2016.
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