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What is Blockchain and Bitcoin

blockchain illustration, computers connecting

Will Cryptocurrency Replace Hard Currency?

Cryptocurrency has taken the world by storm and even if you have not invested in it, the chances are you frequently hear about it. Every time someone mentions cryptocurrency, you may have also heard the term “blockchain technology” and “bitcoin”. Now, for someone who is not tech-savvy, all of this can be a bit difficult to wrap your head around. However, judging by how quickly things are moving forward, it is crucial to at least understand it if not be well-versed with it.

Regardless of how difficult it may sound, blockchain and cryptocurrency are actually simple to understand. So, let’s start first by looking at what is blockchain?

What is Blockchain?

blockchain illustration, computers connecting

The name blockchain is pretty self-explanatory in itself, and it simply means – a chain of blocks (not literally). In this context, blockchain means digital information or what you consider as “blocks” which are stored in a public database “chain”. In short, it is a chain of digital information.

So, what do these blocks contain? Let’s find out.

1)  Transaction Information

The primary purpose of these blocks is to store transaction information. This includes time, date as well as the amount of your recent purchase.

2)  Participants Information

These blocks also hold the information of the participants, such as their username. Except, instead of using your real name – a digital signature is used to keep your identity confidential. That digital signature is always unique for each individual, so that helps in significantly battling the problems of identity theft.

3)  Unique Information

Now there may be millions of different blocks, correct? So how can one distinguish among them? Well, that is done with the help of “hash” codes. A hash code is a unique code that is assigned to each block created through cryptographic algorithms.

Now that you know the basics of blockchain, where does cryptocurrency come here? And what is this “bitcoin” that you keep hearing about? So, let’s discuss that as well.

What is Bitcoin?

bitcoin illustration

If you understood what blockchain is, then understanding bitcoin is going to be a walk in the park for you. To keep things short and simple, bitcoin is a digital currency that you can store in your “digital wallet”. What is keeping a record of those bitcoin transactions that are made to your digital wallet? You guessed it right, the blockchain!

Here are a couple of key pointers that you need to keep in mind to truly understand how bitcoin transactions work:

1)  Recorded Transactions

Each bitcoin transaction is recorded by a public list of blockchain. Why is this necessary? To keep things simple, it helps you avoid scams and online thefts. Since each block of the blockchain can be uniquely identified, if something looks fishy, then the history of the bitcoins can be traced through the unique hash code the blocks contain.

2)  Stored Online

Nowadays storing bitcoins has become easier than ever. You can easily download a digital wallet application and store your bitcoins with any problems.

3)  Online Payments

Bitcoins can be used for an array of different purposes. Many people often use it nowadays for online payments. All you need is the recipients’ email or bitcoin address, and you can send it to their wallets within a few taps.

Now that you know what the blockchain technology and bitcoins are, how were they created, and in what way do they affect the economy nowadays? Let’s see.

Origins of Bitcoin and its Creator

When you observe the hype surrounding bitcoins and blockchain technology, it would surprise you to know that it is relatively new. Bitcoin was first introduced in 2009 by a Japanese man using the alias of Satoshi Nakamoto. It all started with the registration of the domain bitcoin.org in 2008. Back then, no one could have guessed that it would become the biggest peer to peer electronic cash system. However, over the years bitcoin has now become one of the fastest-growing cryptocurrencies in the world.

Effects on the Economy

Many people say that blockchain is the future, and they have a good reason for their claims. Over the years, the popularity of blockchain has only continued to grow. In fact, many large industries have completely moved towards blockchain and bitcoin for their financial management. One of the main reasons blockchain is so preferred is because it uses a peer-to-peer transaction. In other words, it does not require the involvement of any intermediary (or banks), so the overall cost of each transaction is lowered.

Due to the convenience cryptocurrency offers, some theorists even claim that in the upcoming years, bitcoin is completely going to replace hard currency. So, it is safe to say that bitcoin can completely transform the economics paradigm in the future.

Global Adoption of Blockchain and Bitcoin

hand holding the world, effect of technology

Every day more and more people have started to realize the importance of blockchain and bitcoins. This especially applies to Asian countries as they have emerged as the leaders of the cryptocurrency space. You can have an idea of the impact Asian countries have on cryptocurrency by observing how 3 of the top 5 cryptocurrency exchanges in the world registered in China and Hong Kong. Countless people have started purchasing and mining bitcoins all over the world and on a rough estimate, there are around 5.8 million users of bitcoin in the world as of 2020.

Looking at the numbers above, it is safe to say that bitcoin and blockchain are being globally adopted at a rapid pace, and it is only going to grow from here.

Misconceptions of Blockchain Technology and Bitcoin

Blockchain technology and bitcoin are still relatively new for most people. This is why misconceptions are common. So, below we will address some of the most common misconceptions regarding this technology:

1)  Bitcoin is a part of Cryptocurrency

The majority of the people think that cryptocurrency is bitcoin. However, it is actually the opposite. Every bitcoin is a cryptocurrency, but not every cryptocurrency is a bitcoin. There are other popular cryptocurrencies as well such as Ethereum, XRP, and Tether to name a few.

2)  Links to the Dark web

There are chances that you may have often heard bitcoin being linked to the dark web as well. However, to say that bitcoin is the hub of criminality is a false belief. Cryptocurrency may be used on the dark web, but in no way, it is immoral or unethical to invest in it, as it is just there to make purchases similar to regular currency.

3)  Blockchain is Bitcoin

Another common misconception is people think that blockchain is bitcoin. However, similar to what we mentioned above, bitcoin is just a cryptocurrency, which is implemented via blockchain technology.

These were some of the most common misconceptions people have regarding bitcoin and blockchain technology, so we hope they are clear to you now.

Future of Cryptocurrency

man in suit holding bitcoin,business

Many people still feel skeptical to invest in cryptocurrency, especially those who live in third world countries due to a lack of knowledge and resources. However, every day the demand for cryptocurrency continues to rise. At this time, 1 bitcoin is equivalent to a whopping 11,047 USD. Some say that now is the best time to get started with cryptocurrency as it is still growing. One of the biggest arguments that is brought up in the support of cryptocurrency is its decentralization as there is no government involved to regulate it.

Some economists do claim that cryptocurrency is the future, while others deny that and say it is starting to die out. In terms of monetary value, cryptocurrency may have declined as compared to 2017-18 when bitcoin peaked at around 22,000 USD and now in 2020, it is half of that. Regardless of what happens, cryptocurrency completely disappearing from the world certainly seems to be out of the question. Looking at how digitized things have started to become, it would certainly be a step in the wrong direction.

Can it Replace Hard Currency?

Coming to one of the most popularly asked questions – Can cryptocurrency replace hard currency? There is always a chance when you look at the current circumstances. During the pandemic, more and more people have started to realize the importance of cryptocurrency due to contactless transactions it enables you to perform. This is why it is safe to assume that if the demand for cryptocurrency continues to rise and at one point it outpaces regular currency in usage, then it may completely replace hard currency. However, you do not have to worry because that is still far away. After all, a whole new infrastructure would have to be introduced to help the world adapt to this huge change.

Conclusion

Judging by how quickly cryptocurrency and blockchain technology is growing, if not well-versed, then it is at least important to be familiarised with it. Although we just touched the tip of the iceberg, the knowledge you gained from this article may just be enough to pique your interest and help you get started. So we hope after reading this article, you are now aware of how blockchain technology works, what is cryptocurrency, its origins and what the future holds for it.

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