The evolution of blockchain
Back in Spring of 2017 we explored the use of blockchain for its potential in security and version control, cybersecurity being one of the most promising areas of growth for blockchain technology. Today blockchain has been implemented in a wide range of applications from securely storing medical records through to logistics and transport solutions.
So what is the blockchain?
The blockchain is a distributed, transparent, secure and fully decentralised database. This forms the basis of all transactions, whether for Bitcoins or any other cryptocurrency. The chain is a time-stamped, shared and public transaction log where all confirmed transactions are included, protected by the principles of cryptography.
Blockchain technology theoretically allows for any type of transaction, sometimes at three times less the price. Bitcoins, for examples, are not tied to any country’s infrastructure, or subject to any regulation (yet!).
The technology is having an increasing impact on the global economy, with public companies such as PAYPAL and Tesla providing institutional support through their exposure to Bitcoin. Not surprisingly the acceptance of Bitcoin from Wall Street banks doesn't look to be far off.
So what are cryptocurrencies?
Cryptocurrencies are virtual currencies. Unlike fiduciary currencies, their value cannot be controlled by a central bank and they cannot be printed or controlled by a government.
The best-known cryptocurrency is Bitcoin, which represents around 60% of the market. Bitcoin was created in 2009 by an unknown person using the alias Satoshi Nakamoto.
The journey of Bitcoin has been extraordinary, but market analysts and commentators warn not to conflate its performance with the potential of all cryptocurrencies.
That said, it’s fun to think that if you purchased USD$100 of bitcoin at 0.003 cents in May 2010, your investment would have been worth a cool USD$46 million in March 2021.
What is cryptocurrency mining?
When an amount is transferred in Bitcoin or another currency, the transaction is included in the blockchain and signed with a private key - providing mathematical proof of the issuer and preventing that transaction from being modified. When a transaction is issued, it must be "confirmed" by the "mining" process.
All cryptocurrencies are maintained by a community of cryptocurrency miners who are participating in the validation and processing of transactions.
The mining process is a distributed consensus system that allows confirmation of a transaction. This is done using computing power, for the most part via a graphics processor. Once a transaction is transmitted, it is effective only when the transaction has been confirmed by the network.
It is currently standard for transactions to receive at least six confirmations from miners and, for each confirmation, the chances of it being hacked or compromised in any way decrease exponentially. In order to be confirmed, the transaction is included in a block that meets very strict rules.
Transparency and emissions
Cryptocurrencies must face down the major problem of anonymity, mitigating risk around the facilitation of tax evasion and money laundering, without being hampered by excessive regulation.
Added to this Bitcoin supposedly has a carbon footprint comparable to that of New Zealand, producing 36.95 megatons of CO2 annually, according to Digiconomist. What we have to consider is the alternative which is a banking system with its own waste and emissions challenges. Whatever your standpoint is appears that the uptake in blockchain and cryptocurrencies is only going to increase.