What is cryptocurrency, and why it is the future.
By: Ryan Mook
Bitcoin, probably the most well-known cryptocurrency, has seen considerable progress since its inception in 2009 – currently trading at upwards of $3,000 per coin. But will Bitcoin, or any other of the 900 cryptocurrencies be enough to mount a future takeover of our current banking system? For those of you who do not know what cryptocurrency is, it is a digital currency that uses encryption techniques, such as algorithms, to secure the transfer of digital money via the blockchain, which I will touch upon a little later in this piece. People can receive Bitcoins in a number of ways like exchanging paper currency at a Bitcoin ATM or exchange, selling products, providing services or mining Bitcoins. Bitcoin mining is a method of certifying that transactions are legal and fair for both buyer and seller. But we will dive deeper into this topic another time!
Bitcoin was designed to benefit both buyers and sellers in a couple key areas. First, it eliminates the middleman, aka banks, through the use of the internet, which means that those using Bitcoin will not be subjected to any extra financial fees. Second, all transactions are made public via a digital ledger or blockchain for anyone to see and verify online. This means that a Bitcoin cannot be owned by more than one person at a time, unlike counterfeit money. The blockchain is a growing database distributed over the internet to computers all over the world, and it consists of blocks or recorded timestamps of each transaction which are all connected to one another. Each time a transaction is made that transaction is recorded in a block which cannot be altered unless validated by all the other blocks in the chain. In other words, your transaction is checked and validated by non-bias third party users (bitcoin miners). This leads to our third benefit which is that because the blockchain is distributed all over the internet to computers worldwide, it cannot be hacked at a single point. If someone attempts to hack one block, the other blocks will signal a disruption in the blockchain and will not process the illegal transaction. Lastly, because the blockchain extends worldwide, users of Bitcoin can make transactions with other users from all over the world without having to exchange money or get permission from banks.
Although Bitcoin has received a bad reputation because of its association with the dark web and more specifically the former infamous online black market known as the Silk Road, it should not be viewed as a means of performing illegal activity online. Buying illegal drugs online can just as easily be done on the street with paper currency.
Given this brief background on what Bitcoin is and cryptocurrency, what are your thoughts on what might become of this relatively young form of financial technology and how it will impact world banking institutions in the future?