A common term when speaking of cryptocurrencies, but what is it?
Blockchain, also known as Distributed Ledger Technology (DLT), uses decentralization and cryptographic hashing to make the history of any digital asset unalterable and transparent.
A Google Doc is a simple analogy for understanding blockchain technology. When we make a document and share it with a group of people, it is distributed rather than copied or transferred.
This creates a decentralized distribution chain in which everyone has simultaneous access to the document. No one is locked out while waiting for changes from another party, and all changes to the document are recorded in real time, making changes completely transparent.
Of course, blockchain is more complicated than a Google Doc, but the analogy is appropriate because it highlights three key concepts in the technology:
Blockchain is an especially promising and revolutionary technology because it reduces risk, eliminates fraud, and increases transparency in a scalable manner for a wide range of applications.
The most well-known application of blockchain is in cryptocurrencies. Cryptocurrencies are digital currencies that can be used to purchase goods and services, such as Bitcoin, Ethereum, or Litecoin.
Crypto, like a digital form of cash, can be used to purchase anything from your lunch to your next home. Unlike cash, cryptocurrency employs blockchain to serve as both a public ledger and an enhanced cryptographic security system, ensuring that online transactions are always recorded and secure.
To date, there are approximately 6,700 cryptocurrencies in the world, with a total market cap of around $1.6 trillion, with Bitcoin accounting for the vast majority of the value. These tokens have grown in popularity in recent years, with one Bitcoin equaling $60,000.
There are, of course, many valid arguments against blockchain-based digital currencies. To begin with, cryptocurrency is not a highly regulated market. Many governments were quick to embrace cryptocurrency, but few have enacted strict crypto-related legislation.
Furthermore, due to the aforementioned speculators, cryptocurrency is extremely volatile. Bitcoin was valued at around $450 per token in 2016. It then increased to around $16,000 per token in 2018, dropped to around $3,100, and has since risen to more than $60,000. Because of the lack of stability, some people have become extremely wealthy, while the majority have lost thousands of dollars.
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