After Bitcoin became a sensation and reached amazing prices in 2017, practically everyone who invests became curious about the phenomenon. Seeing its value go from under a $1,000 to almost $20,000 in less than a year left everyone speechless. Unfortunately, many people did not take the time to properly educate themselves on this market. As a consequence, the number of investors grew to a point where the market entered a so-called “bubble.” After a while, the value started plummeting and went back to just a fraction of its original peak as that bubble burst.
Regardless of the price-related rollercoaster, many people still fail to understand the basics of blockchain and cryptocurrency. And given the number of altcoins that have been created in the past few years, it seems that this market is here to stay. Thus, understanding some of the key principles can still be important and lucrative. So, what exactly is blockchain and how does it relate to cryptocurrency?
Verification, Transaction, and Blocks
Blockchain is the type of technology that offers decentralization and independence from intermediaries. For example, banks are the most popular intermediaries in the world as they control most dealings in the field of finance. With blockchain, however, transactions are initiated by the end-user, verified by an independent miner, and added to a public ledger that others can see. That way, there is no need to have a uniform middleman like a bank. Well, the way that the verification is done boils down to the miners who solve a series of puzzles. Once they solve them, the transaction is added to the block. After they fill the block with the most transactions possible, they will add it to the chain of the network. Hence the name of this technology.
Bitcoin Jump-Started a Movement
According to a cryptocurrency expert and a contractor who builds mining rigs, Nando Caporicci, this entire movement was started by Satoshi Nakamoto. The tricky part, however, is the fact the absolutely nobody knows who this person or group of people are. The way that they brought cryptocurrency into the world was by creating Bitcoin a decade ago. At first, it was nothing but a negligible project with a minuscule value. As time went by, that value started increasing exponentially and others began following suit. It was not long until hundreds of different cryptocurrencies were created as minor modifications to the original code that was used to establish Bitcoin.
Purposes of Cryptocurrency
There are two underlying reasons why anyone would want to own cryptocurrency. The first one is that they want to transact with people online in a safe and reliable environment. Thus, they can let go of any fiat currency and use their digital coins to make payments. The only downside to this use is the fact that a lot of providers have yet to implement cryptocurrency into their platforms. The second reason for owning things like Bitcoin, which is much more common, is to use them as store-of-value assets. For those unfamiliar, this means that they are strictly viewed as investments. In other words, the person bought them expecting that their value will increase and, in turn, earn them passive income. In reality, this is pretty similar to owning any other type of investment like stocks or bonds.
Since there are no middlemen who can serve as the check-and-balance portion of the system, cryptocurrencies were essentially free to operate as they wanted. Sadly, this led to a lot of payments that originated in the black market but got executed in the online spheres where they were protected by blockchain. Since then, most countries have taken firm action towards regulating the market and putting certain provisions that digital coins must follow. This also led to a drop in prices as investors and users saw their possibilities with the networks become limited under the new laws. Some countries have even gone as far as to completely ban the existence and usage of any cryptocurrency in the world.
What Does the Future Look Like?
According to Nando Caporicci, even the most seasoned experts cannot predict where exactly the market will go. Some people believed that it would crash under its own weight and disappear as fast as it rose to fame. Then again, however, it has been around long enough to see that those predictions were wrong. Still, the current prices indicate that there are worrisome issues. Ultimately, focusing on the present ways to leverage cryptocurrency is much better than trying to guess what the future holds.