Bitcoin, the currency of the future?

In 2009 Bitcoin was valued at a few cents. Today a bitcoin is currently $2,400 USD and is worth more than double the price of gold. When the price dropped to less than $1,000 in mid-February, there was some sideways movement, then more than doubled, three months later. The digital currency is highly volatile and not an investment for everyone. Anyone who wants to invest in Bitcoin should first understand the underlying technology, the blockchain.

Blockchain

The blockchain is a steadily growing database consisting of newly created blocks that ensure the integrity of the previous blocks. These blocks are stored in a decentralised and distributed fashion on all participating computers. If a transaction is executed, it is stored in a data block whose validity is verified by the following block, and which simultaneously confirms the validity of the previous blocks. A new block is generated every ten minutes.

This system guarantees the security of all transactions through high transparency: every participant in the system sees all transactions carried out. At the same time, the anonymity of all transactions is guaranteed; Everyone knows about the timing and amount of transactions, but not who has done them.

Application of blockchain

A further advantage of the blockchain is that no or irrelevant transaction costs are incurred: the fees are only a few cents or fractions of these, and are not dependent on the amount of the transaction, as in the case of conventional transfers, which can be very expensive.

However, the core point of the blockchain and virtual currencies such as Bitcoin, Ethereum, Litecoin, or similar, lies in decentralisation. No bank or other institution and no individual can intervene and gain control over the system or perform any manipulations.

In essence, any transaction is possible without a third party. Intermediaries are made obsolete. Additionally, the source code and transaction is publicly visible to anyone to prevent fraud and provide maximum transparency.

The system is secured by the art of cryptography which is the highest level of encryption and security ever devised in present technology. What this means that even if users don’t trust anyone, they can still participate with the knowledge and security that they are protected. This is because an attacker or group would have to take at least 51% of the entire blockchain’s computing power to manipulate the blockchain. Currently this is practically impossible as there are thousands of decentralised nodes spread across the world and are cryptographically secured.

In order to avoid large currency fluctuations or deflation, the number of bitcoins is limited to a maximum of 21 million units. Each newly created block currently generates 12.5 bitcoins to create an incentive for so-called miners to create new blocks. In next week’s blog, we’ll go over in more detail the latest developments in Bitcoin, blockchain and cryptocurrencies. Stay tuned!

 

 

Disclaimer

The views and content expressed above are the views of the author and do not reflect the views of ayondo markets. This service is for information only and should not be interpreted as investment advice or any recommendation to enter into a financial transaction.

 

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