For the past several weeks, you’ve likely heard some of the following terms if you’ve paid attention to the world of finance: Cryptocurrency, Blockchain, Bitcoin, Bitcoin Cash, and Ethereum. But what do they mean? And why is cryptocurrency suddenly so hot?
First, we’ll explain the blockchain basics.
As society become increasingly digital, financial services providers are looking to offer customers the same services to which they’re accustomed, but in a more efficient, secure, and cost effective way.
Enter blockchain technology.
The origins of blockchain are a bit nebulous. A person or group of people known by the pseudonym Satoshi Nakomoto invented and released the tech in 2009 as a way to digitally and anonymously send payments between two parties without needing a third party to verify the transaction. It was initially designed to facilitate, authorize, and log the transfer of bitcoins and other cryptocurrencies.
How does blockchain technology work?
Blockchain tech is actually rather easy to understand at its core. Essentially, it’s a shared database populated with entries that must be confirmed and encrypted. Think of it as a kind of highly encrypted and verified shared Google Document, in which each entry in the sheet depends on a logical relationship to all its predecessors. Blockchain tech offers a way to securely and efficiently create a tamper-proof log of sensitive activity (anything from international money transfers to shareholder records).
Blockchain’s conceptual framework and underlying code is useful for a variety of financial processes because of the potential it has to give companies a secure, digital alternative to banking processes that are typically bureaucratic, time-consuming, paper-heavy, and expensive.
