Never before in history has there been such a wide range of public opinion on a single technology. I dug much deeper to discover why there is such a wide disparity in people’s views on cryptocurrencies. Guess what I did found the answer. It is Knowing v/s beliving. Didn’t get it?
Well, When people know something then their opinions are always aligned. And if they don’t know something then they believe. Belief is the real problem why there is so much difference in the opinions of people. Because knowing is one and belief can be different. Think about it there will never be a debate about 1+1 because everyone knows it equals 2, no debate about whether communicating on the phone is possible or not? Because everyone knows that how to make a phone call. Hence opinions aligned.
But opinions vastly differ on a question like do aliens exist? Nobody knows for sure hence they believe something or the other and therefore opinion differs. How about, is teleportation possible? Again no knowing leads to belief, which leads to disagreements.
The same is true for cryptocurrencies. Is it a gamble or an inevitable success? Most people have no idea what crypto currencies are or how they work. And how much potential do they have? As a result, people believe one thing or the other, and the future of cryptocurrency is a never-ending debate. People debate cryptocurrencies on social media, many of whom have no or very little knowledge of them. They’re all just trying to be the smartest person in the room or pretend to be smart in front of the rest of the world.
Well, I’m writing this article not to brag about how smart I am, but to help you understand what cryptocurrencies are in layman’s terms. I am not an expert, but I am a student, and I am constantly learning new things about the crypto space. So whatever I’m sharing is based on what I’ve learned so far about the cryptocurrency space.
First thing first: Blockchain technology.
Any cryptocurrency you hear about nowadays is backed by blockchain technology. So, what exactly is blockchain technology? Blockchain technology is not a new concept. It is made up of three previously tested technologies, which are as follows:
2. Distributed Network with a shared ledger
3. Incentive mechanisms to service(mining/forging)
1. Cryptography: Cryptography is a method of protecting information or data by encrypting it in such form that it gives no meaningful result to anyone accessing it except for the intended person.
2. Distributed Network with a shared ledger: It means sharing the copy of the updated information to every person connected to the network. I.e, if 100 people are connected to the network then all the 100 people will have the original copy of the data/information.
This means even if you manage to decipher the original copy of data somehow in your system and make changes in it, it won’t be fruitful because the remaining 99 people will on the network will still have the original copy of that data. This means for a successful hack you will need to change the data/information of at least 51% of the people connected to the network.
3. Incentive mechanisms to service (mining/forging): This means the 100 people connected to the network are incentivized for participating in the network and helping it sustain.
A typical blockchain looks something like this:
Now each block in the above blockchain contains some information that is protected by cryptography.
Suppose Ram transferred 10 bitcoin to Shyam. Now block 1 will contain this information “Ram t/f 10 bitcoin to Shyam.” Similar to how banks keep a record of transactions of their customers. Now this transaction will have a unique id known as a hash. This hash is present in the L1 layer of the block.
Now since blockchain is a chain of blocks means block 1 and block 2 will join each other to form a chain. This meaning The L1 layer of Block 1 will join the L2 layer of block 2.
Meaning the L1 layer of block 1 will be the same as the L2 layer of block 2 i.e., the Hash of the L1 layer of block 1 will also become the hash of L2 layer of block 2. Similarly hash of the L1 layer of block 2 will be the hash of the L2 layer of block 3 and so on. Hence subsequent block contains the hash of the previous block and also its own unique hash.
Now whenever a change happens in a block then the unique hash of that block automatically changes. And since hash one block is also the next block previous hash means hash of the next block and all the block that succeed should also change to successfully change any information in a particular block otherwise there will be a hash mismatch and the system will reject information change.
Suppose you want to change the above information to “ Ram t/f 25 bitcoin to Shyam.” Now for this change to successfully happen you will have to not only make changes in block 1 but to all the blocks that succeed block 1. This means the longer the blockchain more it is difficult to change the data of a block.
Also even if you manage to change all the succeeding blocks then you will have to repeat the same process to at least 51% of the system connected to the blockchain holding the original copy. Now you see why blockchain is practically unhackable.
Now I don’t want to go on to explain the entire working process of blockchain. It can be an article of its own. In short, I have explained that why blockchain is the most secure form of database technology this world has seen to date.
What are cryptocurrencies?
Blockchain technology provides a platform that any cryptocurrency can use to create a digital asset. Like most people think cryptocurrencies are not merely a digital currency. Using blockchain platform to create a digital currency is just one of its uses. Blockchain can be used in a variety of ways.
Here are few prominent ways in which blockchain technology can be used:
· Secure sharing of medical data
· NFT marketplaces
· Music royalties tracking
· Cross-border payments
· Real-time IoT operating systems
· Personal identity security
· Anti-money laundering tracking system
· Supply chain and logistics monitoring
· Voting mechanism
· Advertising insights
· Original content creation
· Cryptocurrency exchange
· Real estate processing platform
Bitcoin was created as a digital currency. But crypto like Ethereum was not created to be a digital currency. Ethereum blockchain uses smart contracts to create business, financial services, and entertainment applications. The NFT (Non-fungible token) which is used to represent unique ownership of a digital asset and have lead to the creation of a revolutionary digital auction platform, uses Ethereum blockchain.
Another crypto Polkadot aims to connect all different blockchains and allowing them to work together by enhancing interoperability and security.
This is just one of many examples of how different cryptocurrencies employ the same blockchain technology in a variety of ways.
Also, since the entire system is decentralized, or at least what every cryptocurrency strives to be, this makes them immune to regulation and government intervention.
The present/future outlook
Cryptocurrencies have already achieved a lot in their respective fields. Here are some accomplishments listed below:
1.De-fi (decentralized finance) has become a reality thanks to the creation of a comprehensive infrastructure by several cryptocurrencies. In the real world, people use such apps for money lending, liquidity provisioning, and insurance. (For example, YFI, AAVE).
2. Some cryptocurrencies have created decentralized exchanges like UNI.
3. The NFT (Non-fungible token) which is used to represent unique ownership of a digital asset and has lead to the creation of a revolutionary digital auction platform, uses Ethereum blockchain. It has already gained lots of trust and popularity.
4. Bitcoin has already proven its worth as digital gold. As it is limited to only 21million coins.
5. In Venezuela, Dash cryptocurrency has proven its use as digital money and has shown how easily it could replace cash.
Although the aforementioned accomplishments are not flawless, neither is blockchain technology at this time, but it is constantly improving. There are communities working day in and out to make their cryptocurrencies infrastructure more efficient and effective. All over the world, everyday people are joining such communities dedicating their lives to build a robust, decentralised system for the future.
The acceptance of cryptocurrencies has also increased over the years. Just look at crypto space since 2015 and now. More and more people have got aware about this tech and have started familiarising themselves with it. Many have started using the blockchain application in real life.
Here are some real-life examples to show how blockchain technology is slowly going mainstream:
1. Dubai has set sights on becoming the world’s first blockchain-powered state. It is dedicated to investigating opportunities across health records, shipping, business registration, and preventing the spread of conflict diamonds.
2. The Estonian government has partnered with Ericsson on an initiative involving creating a new data center to move public records onto the blockchain.
3. The UK Department of Work and Pensions is investigating using blockchain technology to record and administer benefit payments.
4. El Salvador has made bitcoin a legal tender. Japan in April 2017 passed a law recognizing bitcoin as a legal tender.
5. Samsung is creating blockchain solutions for the South Korean government which will be put to use in public safety and transport applications.
6. Spotify acquired blockchain startup Mediachain Labs to help develop solutions via a decentralized database to better connect artists and licensing agreements with the tracks on Spotify’s service.
7. Accenture builds blockchain solutions for its insurance clients. They translate key insurance industry processes into blockchain-ready procedures that embed trust into the system.
8. Reliance Industries has said that it is developing a blockchain-based supply chain logistics platform along with its own cryptocurrency, Jiocoin.
9. Kodak is developing a blockchain system for tracking intellectual property rights and payments to photographers.
The preceding examples are only the tip of the iceberg. Currently, more than 10000+ projects are being developed on blockchain technology around the world.
What I’m trying to emphasize is to look at how various big/small governments, big/small businesses, and individuals around the world are demonstrating increased receptivity to cryptocurrencies and blockchain, and how serious they are about making it a reality, and how over time more people are associating with this tech.
This does not imply that everyone will be successful. But those who believe that these cryptocurrencies have no fundamentals and that it is all a sham, that the entire system is flawed, should get themselves educated first before commenting.
Now the main question.
A gamble or an inevitable success?
Boom or bubble?
In the early 2000s the dot com bubble burst, the internet company’s stocks lost almost 90–95% of their value. But that burst didn’t mean the end of the internet. Everyone knows how the internet has evolved since then. This very article you are reading is made possible because of it.
Also, great companies like Amazon, Microsoft, Apple, etc stocks fell along with all the other dot com companies. This again did not mean that it was the end for those companies. In fact, these companies are the largest in the world today. But they were also caught in the crossfire of the dot com bubble.
What I am trying to say is that great assets can also enter into a bubble and can fall by a lot if the bubble burst, but if they are great assets they will not end. Likewise, the cryptos solving real-world problems will also stay for the foreseeable future. However, many cryptocurrencies, like dot com companies in the 2000s, may not last long.
Crypto is like the internet of the late 1990s which then many people did not understand it either. When you invest in crypto then you do not only invest in the currency but also the technology that backs it up.
Not all cryptos are worth it, almost 90% of the cryptos are crap. But there are cryptos that are solving the biggest problem of the digital era i.e., data privacy, data interoperability, security, etc. Cryptocurrencies are productive but since most people do not understand how it works, they cannot see the value of it. Sooner or later when this technology will go mainstream people will get it then.
So in short-run crypto is a gamble, in the short run almost everything is, be it stocks, bonds, etc. Also since this blockchain technology is uprooting the established infrastructure(eg, financial services, defence,etc) it will also face heavy resistance in the years to come. Therefore the cryptocurrencies may continue to see heavy volatility in the years to come.
The real question is what will happen in the long run? Well, I won’t speculate on which cryptocurrency will be the next great thing in the future. But, whatever the case may be:
Blockchain technology is here to stay. And, in the long run, we will see it in mainstream technology.
This blockchain technology is still in its infancy and is maturing at a rapid pace. It has already begun to address first-world problems such as data privacy, instant fund transfer (without the need for an intermediary), complete transparency, no centralized control, and many others. Although a fair share of problems still exists but as long as it is solving the first world problems it is here to stay despite its flaws. Look at the internet, for example, the internet has its fair share of problems and disadvantages but since it has solved the biggest problem of, globalized communication on the go, it will stay and so will the blockchain technology and everything that works on it.
I have provided you with enough context on cryptos through this piece. And I urge you all to get yourself more educated about this area before debating upon it. After you do your own research then you will be in a better position to know what this technology holds in the future. Thanks for reading.