Blockchain technology is the bedrock of all cryptocurrencies, due to the immutability of information.
What is Blockchain?
Also called distributed ledger technology, blockchain is a digital database managed by a decentralized system, consisting of thousands of different computers, as opposed to a single centralized server.
How does Blockchain Work?
The independent computers themselves are referred to as nodes, and they are all connected in a randomized way. As new information is entered into the system, these peer-to-peer nodes create a chronological ledger of that information which must be agreed upon by the entire network.
This randomized grouping of computers makes it impossible for one node to be the sole censor of information as the entire network would overrule and bypass any single node.
What Keeps Blockchain Secure?
After a set of information is agreed upon by the whole network, it’s grouped into a block and given a cryptographic signature. This process secures and encrypts the signature, linking it to the previous block.
The more nodes (or miners) in the system, the more secure the blockchain is because they work together to validate the data.
How is Blockchain Mined?
The process of mining is how new crypto coins are created. As a miner’s system competes to be the first to identify and solve the algorithm during the validate and build step, they are rewarded by adding a new block, gaining cryptocurrency and/or payment.
Interestingly, not all cryptocurrencies are minable. Some – like Bitcoin – have limits on how many can be generated.
Is Cryptocurrency Just Digital Money?
When we think of cryptocurrencies many people think of money as digital currency. This is partially correct.
Cryptocurrencies are the applications that sit on top of the Blockchain.
What is Ethereum?
One application that sets itself apart from Bitcoin is called Ethereum, also known by the ticker name ETH. Ethereum is the second-largest crypto that some say will surpass Bitcoin in market capitalization due to its business application opportunities.
Its value has been steadily increasing over the past year, yielding approximately 1,000% year-to-date return at the time of writing.
The crypto ecosystem is broken down into three sub-categories:
- Cryptocurrencies
- Crypto enterprises
- Crypto protocols
What Business Solutions Does Ethereum Power?
Ethereum is a prime example of a crypto enterprise. It’s a marketplace that provides business solutions for data like smart contracts and product traceability as seen in supply chain.
Ethereum also stores personal data for:
- Human resources
- Education
- Retail
- Healthcare
- Financial services
- Real estate
- Games
- Art
Why Isn’t Blockchain More Mainstream?
Blockchain innovation can be used across numerous industries. It’s going through the acceptance stage – a process where people are becoming educated and determining whether to trust the system. This is similar to the adaptation of the cloud and internet when they were first introduced.
What’s All This I Hear About NFTs?
One of the trendier uses of ETH making headlines are non-fungible tokens (NFTs).
A multimillion-dollar niche that has caught on in the art world, an NFT takes a unique piece of digital content stored on the blockchain where an individual can bid/buy and be the sole owner of a one-of-a-kind, certified digital asset.
Most of these pieces are considered and sold as high-dollar items. Some NFT examples include:
- Art
- Music
- Collectibles
Energy Controversy
The press and social media talk about how much electrical energy it takes to create, store, and sell NFTs, bitcoin, and other digital assets.
Because of the wide network of computers required to create, maintain, and ensure the chain stays secure, this high use of energy is not isolated to just NFTs, but applies across all Blockchain applications.
Recovering the Energy
There are solutions in the works on how to recycle and/or recover the energy:
A Canadian miner is experimenting with using the energy from his computer to heat his small fish and vegetable farm.
A Czech businessman has started a company that uses the heat from a mining farm for growing vegetables. He refers to the vegetables in his five-acre greenhouse as cryptomatoes.
Other innovations involve everything from heating chicken houses to plugging reusable energy back into the national or regional grids or even directly into the household.
There are even opportunities to tie in alternate ways of gaining energy to power the nodes using solar power, hydro, wind, and recycled tires.
Blockchain Innovations
The controversy often masks awareness of the business applications currently being adopted by various industries.
In the financial services industry, Ethereum-based applications are giving rise to crypto platforms where a retail consumer can convert their dollars to a cryptocurrency called a stablecoin.
What’s a Stablecoin?
A stablecoin is a cryptocurrency that is pegged to the movement of a traditional currency like the dollar. The consumer then stakes the stablecoins on a platform, whereby agreeing to “rent” the coins to the network.
This process assists the miners and nodes with the Ethereum network to scale-up and free up energy. In consideration for staking their cryptocurrency, the consumer receives approximately 6% to 10% return on their crypto.
The interest can be reinvested or paid out immediately.
Each platform has their own rules of how interest is paid and access to coins. Billions of dollars are being converted to stablecoins and retail consumers are taking advantage of this process every day.
New Financial Landscape
We may be on the cusp of a changing financial landscape where consumers will transfer their savings from a low yielding 0.50% “certificate of depreciation” to high yielding stablecoin that truly keeps pace with inflation.
As this technology continues to grow and be accepted, many innovations in the cryptocurrency and enterprise realm will start to be implemented for business and society use.
Learn More: