As technology continues to grow faster and smarter each and every day, exciting developments continue to reach the market, going from innovative ideas to integral parts of tech culture faster than ever before. Among these technologies, one that seems to have skyrocketed into popularity over the last few years has been the blockchain alongside crypto, and neither seem to be going away anytime soon.
With so many terms like these in the mainstream, it can be easy to get confused and mixed up. What does the blockchain have to do with cryptocurrency, and how does bitcoin get involved in the mix? Let’s take a look!
The blockchain seems to have exploded in popularity relatively recently but, actually, it’s not that new of a concept. The idea goes back decades to 1991 in the research of Stuart Haber and W. Scott Stornetta. Although the word is nearly synonymous with cryptocurrency now, currency of any type was not the original inspiration beyond Haber and Stornetta’s work. In fact, the concept of the blockchain originated as a method for timestamping digital documents.
Timestamping is important for many reasons from privacy to bookkeeping, and while the level of importance can differ from context to context, it’s important to be able to protect a timestamp from one thing: tampering. The ability to tamper with timestamping can spell big problems for many people, as an inaccurate timestamp can have dangerous consequences when it comes to things like security and even safety, depending on the document.
One operation that needs airtight timestamps is, of course, that of the financial transaction. This is why, although it was not the original intent, cryptocurrency quickly became the principal application of the blockchain.
Bitcoin and Crypto
Haber and Stornetta’s work remained an elegant and theoretical proposal for document safety for quite some time. That is, until the famous Bitcoin white paper came into existence. In 2008, an unknown author (or authors) known by the (presumed) pseudonym Satoshi Nakamoto released the Bitcoin white paper, which connected the technology from Haber and Stornetta’s work to the concept of cryptocurrency.
The driving ideas were decentralization and unfalsifiability. The concept behind the technology is as follows. The blockchain, in this context, serves as a ledger. When a transaction is made, a block is added to the ledger as proof of the transaction. Additionally, everybody can look at the ledger and make sure all of the transactions (blocks) up until the most recent ledger add up correctly. This way, there’s no need for a central authority to keep track of transactions in private—decentralization.
Furthermore, faking the ledger is practically impossible. While, technically, somebody could “build” a chain of blocks that add up to a false ledger, since everyone is looking, it’d be tough to get away with. Plus, from a computational standpoint, it would be practically impossible with today’s computing power.
Why it Matters
Bitcoin and other cryptocurrencies are exploding into all corners of the market, which means that, like it or not, it’s time to get on the train. Beyond inevitability, however, there are important benefits to consider when talking crypto in business.
For one, cutting out the transactional middleman (i.e. the banks) offers benefits for both the buyer and the seller. The technology still has a way to go in order to achieve this theoretical benefit but, in principle, the decentralized transactions of crypto would make it quicker, cheaper, and more convenient to perform any transaction. Transfer of value can happen practically instantaneously, and vendors won’t have to worry about tricky contracts with financial institutions.
Additionally, especially for e-commerce businesses, accepting payments through cryptocurrency is just another way to make sure a shopper doesn’t abandon their cart. Many shoppers will simply abandon their cart and your site if their preferred payment option isn’t immediately available, and while credit card and PayPal may have cut it so far, crypto is quickly becoming the new normal.
For these and many other reasons, it’s important to get familiar with the terms and concepts in order to stay ahead of the curve and make sure you’re leading your business down the right path. Check out some of the other blogs here to learn more!
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