You cannot understand cryptocurrency without understanding Blockchain:
Rahil Hussain
Salesforce Engineer @Silicon Labs | TedX Curator | 2X Certified, 6X Super Badges | Decorated Toastmaster |
Introduction:
Bitcoin prices reach their peak value of $62,900 in March 2021. With companies like Tesla run by Elon Musk, one of the biggest entrepreneurs and the brightest minds of the digital age it is clear that crypto has the potential to take over financial institutions, investors’ markets, and even as the medium of exchange in specific situations [1]. In addition to Bitcoin, Ethereum, the second most invested cryptocurrency has experienced an exciting figure of $2,228.8 in the same timelines. This is evident that the people and market drivers today trust cryptocurrency more than they used to. In 2018, global economist, Roubini, gave a controversial or rather disheartening argument that Bitcoin is among the most hyped tech of the age. ‘Bitcoin is the mother of all scams’, Roubini added [3]. This claim in front of congress took away the interest of a lot of people who were actively focussing on Bitcoin. The first-ever and only digital currency that had the potential to disrupt our financial means was neglected by more than the predicted number of people not just in the usual audience but also in the groups of economists, investors, and tech enthusiasts. This brought polarization in the opinions of people who saw bitcoin either as a scam or as a tech that has the potential to run the future. In my opinion, the self-proclaimed expert made some unintended yet strong judgments that were not in the favour of Bitcoin or any other cryptocurrency. However, Bitcoin will serve as a high-potential market and slowly get normalized and accepted by even the usual audience [2]. My argument will state a concrete basis and rightly woven analysis to envelope the same.
I will build an open-ended context on the following divisions to support my take on why Bitcoin is in its best state today and how in most of the ways it has disproved Roubini’s arguments.?
Cryptocurrency technology
When it comes to currencies or any little change in the financial structure it requires a reliable manner to ensure trust and uninterrupted working. Cryptocurrency has been a questionable technology to many and this is because of several reasons. The usual audience thought it was not tangible, cost of interest, working mechanism, unfamiliarity, etc. But with time the governing technology for all cryptocurrencies, Blockchain, has seen advancements that made experts understand crypto better [4]. Let us try to understand Blockchain and its features a little better in relevance to cryptocurrencies.?
Blockchain is a growing set of records linked to work as a distributed ledger. This link is created using cryptography, which is a developed method of securing, storing, and transacting data. This governing technology has helped in building a framework for cryptocurrencies and many other databases that require resistance to modifications and almost zero tolerance to data tampering.?
The two fundamental explanations about the working of Blockchain are peer-to-peer networks and the abiding of a protocol that helps in inter-node communication throughout the length of the blockchain [5]. Node is any device that is capable of data transaction in the chain and blocks are the divisions of blockchain that contain required data. These blocks are generated with every modification in the blockchain post-authorization by the distributed ledger. Familiarity with the features of Blockchain will help in understanding how cryptocurrency is handled.?
Attributes and transactions of Bitcoin:
Bitcoin has a great reputation for being secured. It is faster than other currencies when it comes to its technical liquidity [6]. It eradicates the additional costs of moving cryptocurrency from one digital wallet to another. As Blockchain governs cryptocurrency there is no physical stop during the processing of cryptocurrency. This makes it immutable and the ‘cost of trust’ is reduced significantly. Whenever there is a transaction of data/cryptocurrency in the blockchain, it requires a majority of the peer-to-peer network to authorize it. These members are a part of the decentralized network that blockchain is. Unlike banks and other financial institutions, there is no singular or supreme person/power that avoids any kind of influencing or controlling of the currency.?
Decentralization:
Let us consider a system that has about 100,000 nodes capable of transacting data/cryptocurrency [7]. A cryptocurrency needs this system to build the blockchain required for bitcoin storage and transaction. This decentralization is in every dimension. Geographically and authoritatively, the blockchain and its dynamics are governed by individuals who own a single node/entity in the blockchain network. All of these blocks hold the data which gives the history and current status of bitcoin. Therefore, any authorization or error has thousands of references available as individual nodes making it almost impossible to tamper.?
Transparency and security:
Blockchain allows everyone to view live transactions in all instances. It only requires one to have a node in the blockchain or access to a blockchain explorer. As understood, every block holds a copy of every single activity in the blockchain. This itself strengthens the entire blockchain network especially when it comes to bitcoins [8]. Blockchain has a great reputation when it comes to theft. There are only certain specific technical methods of attacking blockchain to attempt to corrupt it and perform a data breach.?
A brief idea of these methods is the 51% and 33% attacks. The decentralized peer-to-peer network demands authorization from every node in the blockchain. Therefore to bluff, the system one has to convince the majority of the blocks to believe that a corrupted data is true. This requires a lot of power and technical performance. There have been only a handful of events where a data breach in blockchain was found and all of them were eventually trackable.?
Even if there is a hacker who successfully breaks into the system and tries to steal cryptocurrency, the hacker might be able to keep their identity anonymous but the crypto data which is available on every block is easily trackable [9]. The stolen bitcoin can be tracked based on its movement in the chain or the data where it was spent.?
Security of data is not just about securing the data but also ensuring that it is storing all the records in the right manner. The blocks in the blockchain store record in a proper chronology. Meaning that as we proceed in the blockchain linearly, we can see a progression in the data related to it. For the audience, investor, and node, it is much easier to read this information.
The Bitcoin blockchain has more than 650,000 blocks in it. These contain data of all the transactions in the Bitcoin blockchain. Initially, the blocks were added only when a miner found a new bitcoin, Today, as the bitcoin is usable and people are buying assets using bitcoin the blockchain technology is used to keep a record of the same. There is no other technology that has the features or the ability to provide a framework to bitcoin. Every cryptocurrency has a virtual layer over it. This is true in all dimensions from intrinsic technicalities to processing methods, the features of blockchain are complementary to bitcoin and all the other cryptocurrencies.?
Scope and support to cryptocurrency:
When we compare the situation of Bitcoin from a few years ago, we see that the audience and tech community has a lot more trust in it. They understand that it has potential and is being used effectively in the sectors where it has seen acceptance.?
The trust in bitcoin is firm today because people understand the technology that builds its framework [10]. There are open resources that explain blockchain and the advancements in it. Some students are actively learning blockchain and taking up courses that provide the certification. Institutions and online platforms have designed professional courses that have helped students gain skills in blockchain technology and build a career in it. This makes it evident that blockchain is gaining market value and people see it in applications like supply chain, data science, and learning models.?
When people understood blockchain, they started to give bitcoin the attention that it needed. Giving blockchain a place in organizations that run the technical front of global industries. Today, we can deal with bitcoins because of the technical support and reliability that blockchain has gained, and consequently, bitcoin is today trusted for what it is.?
Advancements that resulted in the higher market value of Bitcoin:
When we look at the argument presented by Roubini, he portrayed doubts not just against the ability of bitcoin but also called it a scam that directly implies that he believed bitcoin is not reliable. In his complete discussion, he stated that the people who are ever trying to invest their time, money, and energy in bitcoins are foolish and would suggest dropping the idea of it.?
He specifically has given references to holiday time in the USA where people showed a lot of interest in Bitcoin. The self-explained expert would get many requests about bitcoins investment. He would shut the curiosity calling it a scam.?
The global economist was not a visionary. He was unable to make a predictive analysis of what is going on in the cryptocurrency industry [11]. During his time bitcoin was seeing fluctuations which made people uncertain. However, many other experts believed that bitcoin will rise above the crisis that it faced in the market. Some enthusiasts like Troteman and Rosenfeld working for Deloitte and Bitcoin association respectively along with other drivers of cryptocurrency continued to develop the technology that can accommodate bitcoin and restore the trust of people to an extent where people are looking at bitcoins as one of the smartest investments of our century.?
Companies in the fintech industry are equipping their employees and lead to work with blockchain and bitcoin technology. The use of bitcoin in these multinational corporations has educated the working class and the normal audience to learn about bitcoin. Even if you are unrelated to the fields of technology but read news, market, or articles regularly, chances are that you are familiar with the current affairs of bitcoins and how incredible the market has gotten for it.?
During the global pandemic that was imposed due to coronavirus, almost every division in the market took a hit. It impacted businesses and small size companies terribly. However, the top 1% of the financial population gained worth due to many human reasons. Especially in the entertainment industry.?
Similarly due to several factors like passive income, investment, learning how investors in the big game deal, people started investing in bitcoin. Recently Tesla’s founder, Elon Musk adopted bitcoin as one of the major additions to his company. You can now buy a Tesla car with bitcoins alone. This establishes the fact that bitcoin is moving in a direction where it can create market space. After the worth of bitcoin was understood and defined in the investor’s market its utilization was an obvious discussion.?
With the help of e-wallets which provide the basic technology to store and spend bitcoin and other cryptocurrencies, users today can proceed with bitcoins. Zela coin and other companies in Asia have brought this learning to the non-western parts of the globe where the number of people and youth who are interested to learn about the market and invest in it is much more. A network of people is enabled to understand bitcoins use and they are actively using it for exchange, purchasing, reinvestments, and much more [12].?
Though some institutions and governments don’t trust bitcoin to be liquified in their vicinity, it is because they realize that they are not equipped enough, or their population requires more time to be able to work with bitcoins. Countries that have witnessed a worsening graph of cybercrimes refrain from making further additions to control or avoid their system from technologies that are foreign to them. The number of regions that are now dealing with bitcoins is more widespread today. To add to this, the privatization and use of bitcoin by individuals are not restricted in any way. It is completely on the individuals to look at bitcoin when it is argued technically and from an investor’s perspective.?
Potential of Bitcoin and other Cryptocurrencies:
Not too long ago did we see a highly anticipated reaction in the market. Coinbase was added to the Nasdaq listing. This event brought digital assets higher in the market and gave it visibility among all groups of readers. As soon as bitcoin found the buzz on the charts it was addressed by usual investors. The numbers of people who were now trying to understand bitcoin market value and even other cryptocurrencies were taken interest in.
The current value of the most valued cryptocurrency, bitcoin, is marked at $62,900. The CEO of BuyUcoin, Shivam Thakral predicted that in the next one month bitcoin will cross the golden $75,000 number and that will mean that now bitcoin will be seen as a regular name on the charts that will not fall for a very long time.?
The recent trends in the market show that there has been almost no drop in the bitcoin value. In fact over the past few weeks, it saw steady growth. While at the beginning of the refreshed market this growth went exponential it then slowly started to settle as a more common figure. This proved to be in the favor of bitcoin [13]. In the past whenever Bitcoin has seen betterments in their market value it was a steep spike and then a sudden and steady fall. This diverted peoples’ minds into thinking that it is a regular fluctuation and nothing more.?
This time the market has been more accepting of bitcoin and it could stay in a steady state of investment. Even in the near future, I don’t see any possibility for bitcoin to see a downfall. Both the technology and market are looking equipped for bitcoin and other cryptocurrencies that were made infamous or neglected completely due to all the understood reasons.?
When I look at how bitcoin will be able to penetrate the financial and technical sectors around us, I see an ecosystem formation. It is obvious that it is a mirror of what we see the physical currency as but it in no way is a collaboration for the same. Acceptance of bitcoin and other virtual currencies are mutually exclusive with money. Meaning that introduction of one will bring the other down if not at once but slowly. This has more advantages than cons.?
There will be probably zero theft risk if bitcoins are made fluid as cash in the market. The financial institutions will be made high-tech and every single usage of bitcoin will be automated with minimum human interruption. This is efficient, less power-hungry, saves human time, and reduces the ‘cost of risk’ significantly. With all these close to perfect attributes it becomes difficult to now allow bitcoin and other cryptocurrencies to not be an integrated part of our future.
The arguments that we see in a mutual understanding of the tech community or biased opinions of experts like Roubini are provoking but not concrete. A technology like bitcoin can only be justified or given a review by the audience that will use it in the future, which is the people themselves. While the experts are to give an opinion on what is wise and what is not, it is entirely on the audience to dive into a new concept and fall or gain from it to understand how practical they are. There are more than a handful of people who might regret not holding on to bitcoin or completely neglecting them back then when the cost of every bitcoin was fewer dollars. Today, it is a high-value investment that requires you to be of a financial status to deal with.
The fact that it is going to gain more value and now stay a part of the higher-ranked market. Delaying it will be a question of ability and judgment. The theoretical and market value analysis of bitcoin says that the best time to invest in bitcoin is now. Exchanges are being made every day and all of them are highly profitable for one side.?
Individual analysis for bitcoin can be made clearer and beneficial when the reader can eradicate the opinion of others and learn it as per his/her requirement. This is the same for other stalks or options in the investor’s market. When Burger King opened its doors for people in India it saw a flood of investors while others held back to see its market performance. The result of this was that it brought in higher returns and now it is difficult for others to invest due to a hike in value. Very similar to bitcoin has seen every time it made a breakthrough in the market.?
Conclusion:
A clear indication of Roubini’s argument was that even “experts” can have false predictions. An opinion should be broken down for understanding something that is defined diversely as a technology. Bitcoin was inevitable to see a great comeback in the market. It had to happen and the beginning of this decade paints a clear picture of how the coming ten years are going to be. The fact that bitcoin is stable and keeping its worth high shows that Roubini and his argument is contradicted. Only an unseen factor or unwelcomed event can bring the value of bitcoin down. In its current state, it has great potential and will run an ecosystem where groups and the involved individuals will only transact using bitcoin and use it as an asset. The stability of value, zero technical risks [14], anti-theft governing technology of blockchain, investors’ interests, curious learning, and MNC's investment of both time and money make it a reliable and smart investment. As an individual of a company, bitcoin will prove to be an amazing asset and skill to learn to experience a sustainable near future.?
Therefore the arguments about bitcoin in the past have been situational which are much clearer today due to the technical advancements and curiosity of blockchain and cryptocurrency education.?
领英推荐
Sources:
Bitcoin Explorer - Interface to study bitcoin exchanges and transaction information. [1]
Coinbase - cryptocurrency exchange platform [2]
Livemint - News and current affairs updates. [3]
How Bitcoin works? Investopedia. [4]
CNBC - news article on Roubini’s statements and his perspective in detail. [5]
Blockchains: How They Work and Why They’ll Change the World by Morgan E Peck [6]
Bitcoin: The Cryptoanarchists’ Answer to Cash by Morgan E Peck
Research Perspective and challenges for Bitcoin and Cryptocurrencies by Joseph Bonneau and co-authors, Concordia University. [7]
Do You Need a Blockchain? By Morgan E Peck [8]
How Blockchain works? By Morgan E Peck [9]
Will We Realize Blockchain’s Promise of Decentralization??by?Hanna Halaburda ?and?Christoph Mueller-Bloch ?[10]
Understanding Peer To Peer Network [11]
A review on blockchain security [12]
Implementation and Analysis of the use of the Blockchain Transactions on the Workings of the Bitcoin [13]
Research on application model of blockchain technology in distributed electricity market [14]