Today, the crypto market is buzzing with new opportunities, innovations, and new cryptocurrencies. It's hard to imagine that just a couple of years ago, cryptocurrencies were considered a 'scam,' and most people weren't aware of what the term 'blockchain' meant. Fast forward to 2020, everyone is frantically buying crypto, businesses are accepting crypto payments, and the market is booming.
By 2023, there will be over 22,000 cryptocurrencies and a market capitalization of around $1.1 trillion. Blockchain technology is no longer associated with obscure cryptocurrencies, but tech giants like IBM invest in developing blockchain-based solutions, set to revolutionize other facets of society.
Although many people use crypto and blockchain interchangeably, the reason why the crypto market exists is the development of the blockchain network.
Blockchain Technology – How Does It Work?
Blockchain technology is the technology that powers the crypto market and is the reason why we can use cryptocurrencies to transfer funds in the first place. It was designed by an anonymous innovator or innovators that go by the pseudonym– Satoshi Nakamoto - in the wake of the financial crisis back in 2008. It is created as a distributed database or a digital ledger that is available to the public, where the crypto transactions are added to a block of transactions.
Nakamoto's intention was to create a peer-to-peer-based decentralized payment system that is shared among a computer network's nodes and it's able to function smoothly without any supervision or meddling of any traditional financial institution. Another key component of blockchain technology is that it is able to make the data – immutable.
Since it's a fully decentralized payment system, and it relies on the work of its participants instead of a single authoritative body, the data added to the blockchain is impossible to be altered by anyone.
The blockchain network for Bitcoin was based on the work of the miners, using a proof-of-work system to verify any incoming transactions and maintain the security of the network. Since the transactions are linked via cryptography, and this is a hash link data structure, it is impossible for a blockchain network to be hacked.
The Consensus Mechanism
Proof of work was the consensus mechanism developed for the first blockchain network of Bitcoin. As we said, it's extremely important for the security of the network, and it's also important for mitigating the double spending problem in crypto. There are hundreds of miners around the world that work on computer systems that have the same copy of the blockchain network and are required to solve complex math puzzles.
Afterward, they are set to receive a block reward, which motivates them to keep working on the network. The main drawback of the proof-of-work system is that it is costly, energy-consuming, and time-consuming. The first alternative to proof-of-work is proof-of-stake.
With proof-of-stake, the processing of the crypto transactions is faster since the transactions aren't verified by crypto miners but are verified by online users on the blockchain network that are involved in crypto staking.
Applications of Crypto and Blockchain
As one can imagine, blockchain technology offers many benefits to cryptocurrencies and crypto transactions. Crypto payments are generally processed faster than fiat currencies, with minimum transaction fees regardless of your location, and offer a degree of anonymity. Not to mention that they are based on an extremely safe payment system. So, it comes as no surprise that an increasing number of brands decided to accept crypto payments, like AT&T, OKCupid, Overstock, Home Depot, Subway, and many others.
Actually, online casinos represent platforms that quickly adapted to the trends in the business sector by integrating crypto payment methods on their platforms. As a result, there are major cryptocurrencies to choose from on certain casino sites allowing you to try your luck with crypto slots, live casino games, table games like poker, blackjack, craps, and many other options.
As we said, blockchain technology and crypto are not only limited to innovations for online payments. Blockchain technology can offer many benefits when applied to certain business processes.
For example, IBM has devised a blockchain-based application that would be used to track the shipments in the supply chain, offering up-to-date, accurate information on their whereabouts. Also, since blockchain technology offers total transparency, it can also minimize errors and fraud in the network and reduce paperwork.
Other applications, so far, are in the public sector since their high-end security would protect the personal and sensitive details of the citizens. It can be used in the healthcare sector to guard information about patients and offer safe transfer of data.
There are other applications in retail, again for tracking the products and smooth communication between the parties.
Blockchain technology can also be integrated into traditional financial institutions like banks. It shortens the transaction processing times from minutes to seconds, and it offers a safe channel for communication between the parties quickly and securely.
The Crypto Market
The crypto market is totally decentralized due to the nature of blockchain. There are different trading sites that allow you to invest in cryptocurrencies and exchange them for fiat currencies. Since there are many crypto exchange sites, online users can pick and choose before finding one that suits their preferences and financial goals.
It also entails the development of DeFi, which encompasses decentralized finance applications. DApps are the development of decentralized apps, which would be apps connected to a blockchain network. In the future, we expect the crypto market to grow in size since there is no limit to the number of cryptocurrencies that can be created, and also to host many other innovative applications.
The bottom line is that although the crypto market is still in its infancy, it offers countless opportunities for new tech that can be applied to every aspect of our modern society. We are yet to discover how blockchain technology can impact the development of crypto and its new applications in the business and public sectors. But, what we can all agree is that without the blockchain network, there wouldn't have been a crypto market or any of the new tech innovations based on blockchain technology.