Cryptocurrency: From Blockchain to Bitcoin
The key to understanding cryptocurrency is to start with basics
The Cryptocurrency Basics
Cryptocurrency, better know as crypto, is a digital currency. It was designed to act as an asset exchangeable through a computer network. Crypto is not reliant on any central authority, such as a government or bank, to uphold or maintain it. Cryptocurrency is aiming to be the digital currency of the future. One that is owned by the people and cannot be manipulated by a single source.
The word cryptocurrency comes from the combination of cryptography (the study of secure communication) and currency. Cryptocurrencies are not currently seen as a currency per se. Instead they are more like an asset of their own. However, many countries are starting to explore their implementation as such. Cryptocurrency also does not exist in physical form. There are no actual “bit” coins – and are not typically issued by a central authority.
A decentralized cryptocurrency relies on the blockchain technology to record every transaction. A blockchain is a secure, shared and decentralized digital ledger. It serves as a public record of every transaction. Blockchain relies on the idea that if data is stored across the network versus one central server, it is safer. By decentralizing the data, in theory it cannot be manipulated.
The modern day Cryptocurrency story began in 2009 when a blockchain technology was released as open-source. The origins of this code are shrouded in mystery. A pseudonym was given to the creator, Satoshi Nakamoto, and their identity is still a mystery.
The first cryptocurrency was launched shortly thereafter: Bitcoin. When the currency was originally launched, only “miners”, who were able to validate the blockchain, even had access to it. Essentially they would trade bitcoin back and forth in an attempt to validate the technology. At this point, Bitcoin had no real value. But that changed soon…
On May 22, 2010, the first “financial” transaction involving bitcoin took place. 10,000 BTC was exchanged for two pizzas from Papa John’s. That same amount of bitcoin is worth nearly $400 million today.
The blockchain begins with a genesis block, formed when transactions (i.e., “blocks”) are created and added to the database. These transactions are usually groups of data that indicate cryptocurrency was transferred from one person to another. Each transaction is public. This allows anyone with access to the blockchain to verify that a certain amount of Bitcoin was transferred from one person or entity to another at a particular time. Tens of thousands of computers work together to maintain the blockchain. They are constantly verifying that each entry is valid and updating the chain whenever a new one occurs.
Bitcoin - The Original Blockchain
The first blockchain to come to popularity was Bitcoin. Launched in 2009 under a cloud of mystery, Bitcoin has since taken the financial world by storm. In congruence with the main concept of all blockchains, Bitcoin does not have a central storage nor does it have a central authority. At its height, Bitcoin had reached a price of $61,374 per BTC. With the rise in popularity came many celebrity crypto investors. Famous owners of BTC include Elon Muck, Snoop Dogg, Mark Cuban and Kayne West, among others.
Interesting facts about Bitcoin:
- About 20% of all bitcoins are believed to be lost
- Amazingly as of March 2018, 0.5% of bitcoin wallets owned 87% of all bitcoins ever mined
- Dish Network, a Fortune 500 subscription TV provider, has been described as the first large company to accept bitcoin, in 2014
- Forbes named bitcoin the best investment of 2013
- Amazingly, in 2014, Bloomberg named bitcoin one of its worst investments of the year
Ethereum - Daddy of Decentralization
After Bitcoin, Ethereum is the most popular and tracked crypto blockchain. Ethereum is more than just its currency – known as Ether (ETH). It enables decentralized apps to be ran by anyone. This is done through the use of smart contracts. This has facilitated the fast expansion of crypto and DeFi, including NFTs, DAO and DaaS. Ethereum was launched in 2015 by Vitalik Buterin. Today, Ethereum is in the process of moving to what most term Ethereum 2.0. Specifically, the goal of the update is to speed up the transaction rate from 15 transactions per second to potentially 10,000+ per second. The update is expected to be completed in 2023.
Web 3.0 - The Evolution Of The Internet
What is Web 3.0? As the name sounds, it’s the third generation of the internet. While the exact definition is in question, there are a few concepts that have been adopted. First, the next evolution will involve decentralized applications built primarily with the use of blockchain technology. Web 2.0 was built mainly on centralized networks. The next generation will push those limits and the ability of the blockchain, and potentially support the rise of crypto currency built on its technology. Secondly, web 3.0 will usher in the expanded use of autonomous and artificial intelligence applications. This is where web 3.0 will separate itself. While web 2.0 enabled collaboration, web 3.0 will enable automation and AI technologies to allow us to work faster. From Facebook (web 2.0) to The Meta Verse (web 3.0).