As business people, we look for every possible advantage to get ahead. As entrepreneurs, it is imperative that we stay current with every new software, app, or piece of technology — whatever will help us get over the hurdle. We need to learn it and maximize its use because it’s in our nature to innovate.
But what if the latest technology comes in the form of digital currency?
While not everyone is up to date on the latest cryptocurrencies, everyone’s heard of Bitcoin. It’s the most popular form of cryptocurrency, defined as “a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.”
After the financial banking crisis of 2008, many saw the need to create a decentralized, yet organized system that could conduct transactions without middle men – meaning no banks! However, while many have heard about bitcoins, we still don’t have a full understanding of what this all means for us, our businesses and the economy.
Is this the future of technology or just the latest shiny object?
Worldwide, there are currently only 180 recognized paper currencies, but a staggering 1,500-plus cryptocurrencies have emerged, with Bitcoin being the largest in market capitalization. These coins’ value is up over 470 percent, year-to-date. And, as of last month, Bitcoin’s market capitalization hit $96.7 billion according to Coinmarketcap.com; that was a larger market cap than Goldman Sachs’ and Morgan Stanley’s. Pretty impressive!
Still, if you’re like me, you’ll want to first gain a level of understanding of how this technology works. Here is an introduction to the world of cryptocurrencies.
How does Bitcoin work?
Since cryptocurrencies digitally enable transactions between two parties without a middle man, every transaction is digitally recorded in blocks that work as ledgers; these are called blockchain. A blockchain is a massive, decentralized ledger generated by transactions that use a specific cryptocurrency. No entries or data can be logged to the blockchain without using cryptocurrencies.
Having every transaction recorded creates a high level of security; however, the information of the parties involved in the exchange is not revealed.
Here’s an example: Person A buys a car from Person B using Bitcoin. In order to ensure the legitimacy of the transaction, “miners” begin to verify the transaction. But, what does “mining” mean here? […]