Blockchains and bitcoins; these are two key topics you will not miss when it comes to investment and cryptocurrency discussions. And now more than ever, blockchains are dominating the world of cryptocurrency and defining the future of all finance teams.
In fact, according to a survey conducted by the PwC team source: 84% of the 600 executives interviewed had already integrated some forms of blockchain technologies within their businesses. The great popularity of blockchains can be attributed to their ability to improve data security, as well as the efficiency of record keeping.
However, while most people have heard about blockchains and bitcoins, not many understand what these are or how they work. In this article, you will learn what blockchains entail, how these impact cryptocurrencies and what the future holds for them. Read on!
What are Cryptocurrencies Real-World Examples?
In simple terms, a cryptocurrency is digital (or virtual) money in the form of ‘coins’ or tokens. However, while most cryptocurrencies are intangible, there are some that are used in the physical world as tangible credit cards and similar projects.
One of the best-known cryptocurrencies in the world is the Bitcoin. A Bitcoin can be described as an online version of cash, which can be easily transferred to and from your digital wallet. Bitcoin has been in existence for the last decade or so, and it still holds the first rank in cryptocurrencies in terms of popularity, user base and market capitalization.
Other real-world examples of cryptocurrency include:
- Binance coin
- Bitcoin cash
What are Blockchains?
A blockchain is a type of database used to record and distribute digital information. The system records information in such a way that it cannot be hacked, changed or even cheated into the system.
Essentially, a blockchain is a digital ledger of transactions that stores all financial information in ‘blocks.’ Each new transaction made is first verified, then recorded as a new ‘block’ consisting of its own unique code. The unique codes make the transactions easily identifiable, so that they can be added and spread across the whole network of computer systems on the blockchains.
However, the contents of blockchains are usually not private; rather, any person can see them. This is because, when a person uses their computer to log into the blockchain network, the computer holds a live copy of this blockchain.
Then, this copy updates automatically as other blockchains are added, leading to millions of identical blockchain copies across all the connected computers. It is due to this attribute that blockchains are also termed as distributed ledgers.
How Do Blockchains Help Cryptocurrency?
It is no secret that the blockchain technology can be quite expensive to implement. Yet, the numerous benefits that this technology offers make it worth all the investment costs and expenses incurred. Consider three major benefits that blockchains have on cryptocurrencies:
A. Enhance Privacy and Security
The ability to ensure privacy and data security is one of the key benefits of blockchains. But you may wonder: If blockchain shares its data among millions of other users, how can it be safe and secure?
Well, this system uses digital signatures which keeps all users anonymous. More so, the thousands, or even millions of identical copies distributed make it harder to manipulate the data, hence ensuring security of all copies.
B. Increase Accuracy
The blockchain technology ensures immediate and automatic recording of data. And with less human involvement in these processes, the record and distribution of data becomes even more accurate, reliable and valid.
C. Improve Efficiency
Blockchains make ledger maintenance, payments and reconciliation processes much faster and efficient. In turn, this helps to boost the overall productivity of the finance team(s). Also, by encouraging faster payment activities, blockchains help to reduce time wasted when collecting and reconciling data.
Who are Crypto Miners and How Do They Earn?
Crypto mining refers to the process of gaining cryptocurrencies. Crypto miners, the people who engage in this transactional process, do this by trying to solve cryptographic equations using computers. They also carry out validation of data blocks and add the transaction records to the blockchain database; activities which eventually earn them cryptocurrencies.
With crypto mining, you earn cryptocurrencies even without putting down money for them. The rewards are usually given to those miners who discover solutions for any complex hashing puzzles. For example, when a Bitcoin miner completes ‘blocks’ of verified transactions, they get a Bitcoin as their reward.
To carry out successful crypto mining, you will need either an ASIC (Application-Specific Integrated Circuit) or a GPU (Graphics Processing Unit). Also, you will need to put in extra effort, and have luck on your side. Remember, only crypto miners who get the exact correct answer, or arrive at the closest answer get their rewards.
What Does the Future Hold for Cryptocurrencies?
Over the next few months, even years, we may not really know the direction that stocks will take. However, for the next decade or so, we can trust that cryptocurrencies will be a major part of the future world.
Ivory Johnson, the founder of Delancey Wealth Management and a certified financial planner, comments that cryptocurrencies will disrupt the traditional finance in the next 50 years. He backs up this statement by claiming that cryptocurrencies can transfer payments across borders efficiently; an advantage that will give these ‘coins’ great popularity in the future world.
Also, Frederick Kaufman, a well-known author and CBNS expert, says that, “Way before 2071, the dollar will have more in common with a crypto than with silver or gold, so there is no need to doubt the longevity of encrypted algorithms as stores of value and media of exchange.”
Indeed, cryptocurrencies will prove even more popular and beneficial in the future world. It is no wonder, then, that most central banks are now developing regulations on these ‘coins’, as they expect them to become mainstream in the near future.
Indeed, blockchains have had a significant, positive impact on finance. These distributed ledgers help to enhance the quality of data, make process of payments faster and prevent any data breaches or delay of information. So if you are a business leader looking to make more profits, you would do well to start including blockchain technologies in your operations today!