A blockchain cryptocurrency is a digital or virtual currency and does not physically exist. It is a type of digital currency that uses cryptography for chaining together digital signatures of asset transfers to create and manage the currency.
It is used either as a means of payment for which there are several advantages (e.g. privacy) and disadvantages (cost and lack of universality) or as an investment for which there are attractions (e.g. the chance to make quick profits) and problems (e.g. risk and fraud).
The distinguishing feature of cryptocurrencies is their decentralized control as opposed to centralized electronic money and central banking systems by means of what is known as a ‘blockchain’ which is a public transaction database, functioning as a distributed ledger. Cryptocurrency is a hardly regulated space that survives on a collective user consensus of value. Whether the future will be Bitcoin, some amongst the existing cryptocurrency, or the one yet to come in existence, the reality is that the turbulent way of the crypto market is on the prompt track for a potentially wide transformation for innovation on a global scale.
In many countries, politicians have also expressed concerns about the cryptocurrency craze, and have warned about the dangers of initial coin offerings (ICOs), where rather than a start-up company issuing debt or raising equity capital, they sell tokens. Some, such as China and Korea, have banned ICOs, but Switzerland is heading in the other directions, and has ambitions to become “the crypto-nation”, according to economics minister Johann Schneider-Ammann. Of the 10 biggest proposed ICOs, four have used the country as a base, according to PwC, although the Swiss are looking into just how they should approach regulation in this area.
The mainstream attention and hype has largely been associated with these cryptocurrencies. To date there are over two thousand various related cryptocurrencies invented and currently listed. However, this is just the tip of the iceberg, and as promised, this report aims to distinguish the extremely volatile cryptocurrency market to the technology of distributed ledgers and blockchain which underpins most of these digital currencies. Cryptocurrencies are just one way of using blockchain technology.
Blockchain in operation
Bitcoins and other cryptocurrencies don’t begin to unlock the true potential of blockchain technology.
The volatility in the cryptocurrency industry has created a loose impression on the blockchain technology. Therefore, they also assume that blockchain technology is as well unusable. However, this is not the reality. They perceive that the negativities will be seen in smart governance and smart contracts, which is not true either.
People are to be educated about the true potential of blockchain technology. They need to know that this technology is full of opportunities and that open-sourcing of finance using the trustless technology is going to be more useful than they can imagine.
Blockchain makes sense for business. While there are many who call Bitcoin and other cryptocurrencies dangerous or even frivolous investments, the technology behind them – blockchain is even more reliable than the technology and processes behind tradition bank transactions.