Why the blockchain is here to stay
By: Ethan Banks
Tags: Cryptocurrency, Bitcoin, Ethereum

Why the blockchain is here to stay

By its very nature, it still matters a lot.

This is a very interesting time for the blockchain.

Bitcoin has surged in popularity in the last few years, leading to other cryptocurrencies (often referred to as altcoins) also seeing huge jumps in value. Ethereum, for example, saw a massive price increase through 2017 and became one of the most well-known altcoins.

Plenty of people have become wealthy as a result of these price fluctuations. Some people buy, wait until it rises in value and then sells. Others will try to trade the market through frequent buying and selling, trying to time each of the dips and rises in value.

As you may know, the last year has not been very positive for this new technology, but only in terms of the price. It might be tempting to believe that the blockchain is no longer relevant, but I think that would be taking a short term view on what is possibly a huge technological revolution.

The market is actually growing fast in many ways. More and more industries are looking into how they too can use it as the benefits are starting to become clearer — even as the price drops.

But to truly understand why it’s likely to be a part of our future, we need to look to its past.

How it all started

Bitcoin was the first cryptocurrency and is still the most popular. It started an entire industry of other digital currencies and has challenged all notions of how money and value work.

In January 2009 the first version of Bitcoin was released online by someone known only as Satoshi Nakamoto, whose identity remains unknown. The aim of Bitcoin was to create a new form of money.

While the concept of a digital currency was not new, Bitcoin was unique in that it used the Blockchain — a public ledger containing a record of all transactions, viewable to everyone. The reason why this was a brilliant innovation was that it allowed cryptos to be decentralized.

Decentralization is perhaps the greatest benefit of cryptos since it means that they are not controlled by any single source but rather a network of computers processing all the transactions that get added to the ledger. Anyone can add their computer to the network if it has the required power — this is known as mining and is also how new Bitcoins are released. There is a limit of 21 million Bitcoins that can exist and eventually all of them will be mined.

The fact that it works on consensus is what makes Bitcoin decentralized. The strength of this is that it means no single authority can take control, though there is much debate within the cryptocurrency world about whether or not this is fully achieved since there are large mining pools (groups of people working together and sharing the rewards) processing transactions. Nonetheless, the fact remains that it is possible for the average person to take part in mining if they have the hardware and internet connection.

If decentralization as a concept becomes completely mainstream, it can have an enormous impact on institutions. For most industries, there is right now the need for a central authority to maintain control, but decentralization can change that by instead allowing decisions and changes to be made based on consensus, the same way that Bitcoin works now.

The public ledger also offers far more transparency — all transactions and wallets can be seen. There are many cases where this would be beneficial — for example, it’s easy for people and companies to prove ownership of assets. Likewise, there can be no question whether or not cryptocurrency was sent from one person to another because the transaction can be clearly seen. Even as the transaction is being sent, it’s possible to see in real time what stage they are at.

That is ultimately why Bitcoin as an invention is bigger than just currency — it’s a whole new technology in its own right.

But it was not immediately popular. At first, each Bitcoin was worth very little, but in the years that followed their value started going up considerably as more people began to mine and buy them.

As the demand for Bitcoin grew, exchanges started appearing. The value of cryptos work like stocks and shares — their price is determined by a market of buy and sell orders. Most of this buying and selling takes place on exchanges, which is what the focus of this guide will be. There are other ways to buy cryptos and that will be looked at too, but for a beginner, exchanges are the best way to do so.

Since Bitcoin was made, thousands of other coins/tokens have appeared. Two of the biggest ones apart from Bitcoin (at the time of writing) are Ethereum and Ripple.

Some coins are innovative in that they don’t use the Blockchain at all. IOTA (another very popular coin) uses the Tangle, in which people who start a transaction need to confirm two others. This effectively means that everyone using it is doing some mining, which makes it easier for the network to expand.

Satoshi Nakamoto has not been heard from in years. He stopped posting online in 2010 and exchanged emails with developers just a few times after that. His absence is not necessarily something negative given Bitcoins inherently democratic nature — nobody controls it after all and development has effectively been left with the community. However, Satoshi does still hold a huge number of Bitcoin, which appear to remain unmoved (not used in a transaction).

Free speech

The blockchain as a way to counter online censorship is perhaps one of the uses that have the highest potential, given how contentious this issue has become in the last few years with social networks and other platforms enforcing rules that some disagree with.

They are only able to enforce these rules since it is a centralized system — that wouldn’t be the case in a system run using the blockchain, a technology that long needed a strong use case apart of digital money.

Free speech may be the most important application to truly take the blockchain mainstream.