You have probably already heard of certain terms such as ‘Bitcoin’, ‘Cryptocurrency’ or ‘Blockchains’. Especially after the end of 2017, when there was a boom in the market, making several people rich. To give you an idea, the worth of bitcoin shot up from €2600 to €17000, making people millionaires in a span of a few days. But what is a Bitcoin?
A bitcoin isn’t a physical currency you can hold in your hand or use at a corner store. This is because it’s a digital currency or cryptocurrency. The system used to trade with these cryptocurrencies is called a blockchain.
Blockchain is the basis on which cryptocurrencies are built. There are several uses for blockchain and cryptocurrencies are only one of them. A blockchain is a digital ledger. This means that it lets people record transactions and track their assets. Assets are anything that possess great value such as a house or a car to a business. The blockchain itself behaves like a network so when a new transaction takes place, everyone connected will be updated with the details of the transaction at the same time. All the transactions are recorded forever, and no one can tamper with their details. But why is this useful?
For instance, we can imagine the process of building and selling a house. This process involves a lot of people. Starting with the builder, who buys the land from someone. The builder will need to get planning permits, register the address in order to establish a connection with the water, electricity and telephone companies as well as put the house up for sale. Finally, a buyer is needed. All of these documents and information are in the possession of the individual companies. This may cause confusion, errors and even drawbacks. When all these documents are eventually passed on to the buyer, it could be too overwhelming especially if an unnoticed error resurfaces after a few years. If blockchain would have been used in this situation, all parties would have a copy of all the information. When the buyer buys the house, he/she will have access to the blockchain, hence all the information in one secure place. This way the buyer will know that all the information is correct and legal because nothing can be edited in a blockchain. This makes one common process much easier than it initially was, let alone its effects on a worldwide scale.
Although the above example was made safer than it was, limits on currencies can still slow down the entire process of buying, selling and in general, transferring funds. This is because these physical currencies use a centralized system where transactions need the approval of the central authority (i.e. banks). Cryptocurrencies like bitcoin use a decentralized system where there is no need for a central authority so funds can be transferred instantly. After these changes in business, there will be very little time wasted on these problems. After all, wasted time is wasted money.
Written by: Max Zahra