Cryptocurrency and blockchain are two of the hottest topics of the 21st century. Some experts predict these technologies will revolutionize the future, putting an end to central banking systems, traditional modes of exchange, and the very nature of government and financial control. Others have more modest expectations, suggesting cryptocurrency and blockchain will integrate into our current political and economic frameworks. Even so, these new forms of finance look set to change the way we think about and use money.
But what exactly are cryptocurrency and the blockchain? How do they work? And, most importantly, why do you need to know about them?
So with all that in mind, here's what you need to know on crypto and blockchain.
What are blockchain and cryptocurrency?
Cryptocurrency, or ‘crypto’, is a digital asset designed to work as a medium of exchange. In other words, it's digital money. It’s not issued by a central bank or government, nor is it attached to any state-backed fiat money such as the Pound or Dollar.
Each digital coin is basically a computer file which is stored in a digital wallet. Users then send coins, or a part of one, to each other's wallets in exchange for services or products. The transactions are stored on a public ledger called the blockchain. Each transaction, or block, is verified by other users and timestamped. This peer-to-peer network verifies every transaction and creates a permanent record which cannot be copied or altered.
Like any form of currency, crypto value rests on two things: exchange value and confidence. Just think about the money you use every day. Despite having a queen's or a president's face printed on it, the paper in your hand is essentially worthless. Value comes from what it represents. You know it can be exchanged for things you want or need, or stored away for a rainy day. You also have the (unconscious) confidence that this will always be the case. To put this into context, the Aztecs used cocoa beans as ‘money’, while other cultures have traded in shells, stones, and even lumps of cheese.
Many users are attracted to crypto because it remains pretty much unregulated and completely decentralized. The world's first digital currency, Bitcoin, emerged in 2008 shortly after the Wall Street crash. There were widespread suggestions that the banks had severely mismanaged people’s money, committed widespread fraud, and were then protected by the government. People felt disillusioned, and many still do. Bitcoin offered an alternative form of finance that could not be controlled or manipulated by a central power. Others are attracted to its anonymity. Users details remain encrypted, and most digital coins can be sent anywhere in the world without a third-party intermediary.
There are now thousands of digital currencies and ongoing speculation as to whether they will remain unregulated. Some countries have already banned Bitcoin. On the other hand, emerging economies around the world are providing millions of people with access to the digital world through crypto, and with major players like Facebook getting involved, it looks like crypto and blockchain are about to go mainstream (if they haven't already).
Blockchain revolutionizes financial markets
Blockchain is likely to be one of the most disruptive technologies of this century, especially in the world of finance and banking. A recent PwC survey of financial executives from all over the world found 24% are familiar with blockchain technology, while a Global Fintech survey from 2017 reported 77% of banking and financial institutes will have adopted the blockchain as part of their systems or process by 2020.
And while the integration of blockchain into the financial system negates some of its revolutionary potential, it's important to point out that banks are using the technology to provide better services to their customers. Blockchain is safe, secure, decentralized, and reduces the chances of human error or malicious fraud. Some IT specialists believe future blockchains will become practically un-hackable, making it a very attractive option for financial institutions, which must keep customers' money and personal information safe. Fewer data breaches boosts customer confidence and also keeps banks in line with their regulators, who have become much more willing to impose hefty fines following the economic crash of 2008. In 2016, Tesco Bank was hit with a fine of £16.4 million ($21.2 million) by UK regulators after a fraudster hacked over 9,000 customer accounts.
As well as securing people's money and data, blockchain can also ensure faster global payments. In many cases. money can be sent across the world and arrive in the recipient's account almost instantly. This reduces frustrating waiting times for international payments, many of the associated costs, and removes anxieties relating to other issues, such as a volatile exchange rate. Moreover, it encourages more global trade, both big and small. With blockchain technology, a small sole trader in China can do business with a UK or US company just as easily as an international conglomerate.
Investment giant Goldman Sachs already has a cryptocurrency for international trades, while Ripple, yet another form of digital money, was designed for secure, instant, and free global financial transactions. Bank of America has also realized the benefits of blockchain. They recently filed a patent for a blockchain technology that integrates all their existing systems, as well as providing a safe and compliant authentication process for online customers and new applicants.
Can I study these fields at university?
Crypto and blockchain are still in their infancy. The technology is only around a decade old, and there's still plenty of uncertainty about what a future with digital currency will look like. As such, the subjects are still gaining traction in academia, but courses, including online courses, and degrees in the subjects exist -- and are increasing in number -- in small colleges all the way up to Ivy League schools.
Alternatively, you can choose more established degrees like computing, IT, or even business studies. Such courses may not focus on the blockchain directly, but students in these subjects will learn all about the industries where this new technology is likely to have the most radical impact.
And remember, there's plenty of chances to learn about crypto outside of the classroom. There are thousands of websites, digital magazines, trading platforms, and YouTube channels dedicated to all things crypto. This gives you plenty of opportunities to learn the basics, as well as keeping yourself up to date with the latest news. And if you don't know where to start, try exploring the work of people like Vitalik Buterin, Gavin Wood, Hal Finney, and Nick Szabo. They explain the principle behind the technology, while also conceptualizing its underlying philosophy and revolutionary potential.
Is Crypto and Blockchain here to stay?
Crypto has received criticism from some quarters, mainly due to its market volatility. Bitcoin has been as high as $15,000 per coin, and as low as $3,000, and can often lose vast amounts of value over a few days. Secondly, because Bitcoin users remain anonymous, it's commonly been used on the dark web to source contraband, such as illegal drugs or firearms, and fund criminal and terrorist activity. This has led to calls for stricter regulation, and the US government has made moves toward addressing the links between Bitcoin and the criminal use of it.
But Bitcoin is only one of many digital currencies, and others have some very credible backers. As previously mentioned, Facebook has announced the release of Libra in 2020, which will give 1.7 billion people who don't have bank accounts the ability to transfer or receive digital currency from anywhere in the world. Ethereum, a cryptocurrency and decentralized computing platform, has also received major interest from Microsoft and Google. In short, it looks like we are on the verge of the crypto revolution!
Predicting the future is always tough, but predicting what the future of blockchain and digital money will look like is almost impossible. But we can say this for sure, those of you who get to get to grips with this technology today will be in a much better position to make the most of it when tomorrow finally arrives. So perhaps a course or degree in these exciting fields is in your future...