There are only two absolutely certain things in the world of cryptocurrencies. One is no one knows what will happen next with them. Things are always changing really fast.
And the second is it’s sure that they will bring a lot of changes in the world, not only in finance. So, it’s a good idea to get to know both the blockchain technology and cryptocurrencies better.
On first glance, both seem overwhelming and confusing to explain and understand. However, we will keep it simple. First things first:
What is a blockchain
Essentially, a blockchain is a distributed database. While a traditional database is stored in a single location, the distributed database lives in the network and all of its participants. This means there’s no single copy of it. A blockchain is/should be basically public, it’s continually shared and reconciled. As a result, it’s easily verifiable and extremely difficult to corrupt. It’s hosted on millions of computers all at once all over the world. Basically, it’s like Skynet from the Terminator movies, but without the bad intentions… or the self-awareness. It’s on each device part of the blockchain and can be accessed by anyone with an Internet connection.
So, a blockchain basically has no single point of failure. And it can’t be controlled by any single entity. It’s practically impossible to corrupt as any change on the blockchain would require a vast amount of computing power to override the entire network. And in the case of Bitcoin and similar cryptocurrencies, a corruption of their blockchain will destroy their value. So, there’s no point to try and hack it to steal it. Also, each cryptocurrency has its own blockchain. And the data on all of them in decentralized and transparent.
But the blockchain technology can be used for more than just cryptocurrencies. For the digital money, the blockchain is basically the record of all transactions. It serves both as а guarantee and backbone of the cryptocurrency, but also as the value. Transactions are separated into “blocks” with a certain number of transactions. Each transaction is added to the block almost real time, then verified and pushed out to the blockchain.
Beyond the financial world
The principle of the blockchain technology remains the same for other use cases. What changes, is the data that is used for the blocks. It can serve as a distributed cloud storage, digital identity data, digital voting and so on.
A popular use case for a blockchain is the so-called smart contracts. They are slowly making their way into banking, but also have a vast potential. Basically, a smart contract is/should be a legally binding programmable digitized contract in a blockchain. Developers can add variables and statements that can release funds or activate something else when they are completed. The easiest example is a smart contract that releases the payment for a service once that service has been provided. But it can also be used for other types of contracts and should add more trust between the parties.
The blockchain technology can be a big part of the sharing economy. Other potential uses are cutting costs by keeping records on it, reduce errors in securities, add better security and make fraud much more difficult. The old cliché stands: the possibilities are pretty much limited only by the imagination.
If you want to learn about the blockchain technology in much more detail and how to use it on IBM Z, then you should check out this course. It covers all of the fundamentals of Blockchain, the key architectural components and will help you build the foundation for a business Blockchain network.
Back to the cryptocurrencies
- While there’s a lot of possibilities for the blockchain technology, there’s no denying that the biggest use for it now is the cryptocurrencies. More specifically Bitcoin. This is where all the hype is right now. You could also even say it’s a bubble. But that’s only valid for the price of Bitcoin. It will continue to record sky-high jumps followed by severe corrections. That comes with the huge popularity surrounding Bitcoin right now.
Bitcoin as a technology is here to stay. And it will do and mean a lot more in the years to come. Bitcoin was created in 2008 and at first, it remained a niche tech. It wasn’t until around 2013-2014 when it started to gain more popularity and higher value. Since then, there have been a lot of sharp price changes and increasing interest from investors. 2017 is the biggest year yet for Bitcoin with the prices skyrocketing over $7000 with $10 000 and more in the foreseen future.
What is Bitcoin?
Bitcoin is the digital monetary representation of its blockchain. You basically own a digital key which tells the chain how many bitcoins you own.
There are two ways to obtain Bitcoin. One is to buy it from an online exchange. You can also buy only portions of it for less than the full price of one Bitcoin.
Another option is to “mine” it. This is the whole point of Bitcoin and at first, it was quite easy. Bitcoin mining essentially means to use a part of your computer system resources to crunch the numbers for the rest of the Bitcoin transactions. Basically, your system becomes a node in the blockchain and adds to it with resources and also has a copy of the blockchain. For that, you get a small amount of Bitcoin. But the more Bitcoin is created, the smaller the reward becomes. Plus, Bitcoin is limited to 21 million bitcoins. And the reward is halved with each 210 000 completed blocks. When the limit is reached, the reward will be small transaction fees. The goal is not to create hyper-abundance of Bitcoin and keep their value. The limit though will be reached after tens of years from now.
This means there is a lot of time left to mine Bitcoin for profit. But don’t rely on this for your income. Mining Bitcoin is already extremely difficult and even vast server farms created for this reason only have trouble. And this comes with hefty energy bills. So hefty, it’s actually contributing to the global warming. Citibank estimates that the bitcoin network will eventually consume roughly the same amount of electricity as Japan. According to Digiconomist, the processing of just one bitcoin transaction already uses as much electricity as the average US household does in a week. And this will only get worse as the mining for Bitcoin becomes more and more difficult. So, it’s bound to lead to regulations at some point.
Still, even this won’t stop Bitcoin. The cryptocurrency will continue to grow more and more. Regulators around the world are already working on rules for it and it’s sure to become fully mainstream at some point. So, if you want to learn more about Bitcoin and the opportunities, now is the time. This eBook is all about Learning Bitcoin. It will give you all the fine details about the cryptocurrency.
And if you want to put together the blockchain technology with all other technologies like cloud, virtualization, IT security, Big Data and so on, there’s also a course for that. The IT Essentials will cover a vast amount of technologies and trends, helping you be ready for the digital age.