Bitcoin & Other Cryptocurrencies
To many people, the term blockchain is synonymous with ‘Bitcoin’. Although the two support each other, they are not the same. Bitcoin is an example of one blockchain; the Bitcoin blockchain. There are thousands of other blockchains, some private and some public, that operate with different cryptocurrencies. As a matter of fact, you can create your own blockchain – something we will be glad to help you with.
The Bitcoin blockchain was the first blockchain ever created, and also the most widely used. It is designed to be ideal for money transfers and has thus been adopted by many financial institutions. Users of this blockchain that secure the network are compensated in Bitcoin, the primary currency of the Bitcoin blockchain. Simply put, the blockchain is like a smartphone, and Bitcoin are like the apps that makes it functional.
A lot of people disagree with the notion that any person connected to the internet can issue their own currency, and argue that it shouldn’t and never will carry any value in the real world. While it is true that anyone can create their own currency – something we also can help do – it doesn’t have any value unless there are people willing to use it. If there are enough users of a currency – any currency for that matter, then there is a market for it and thus it would naturally have value. Think air miles. In a sense air miles function as a currency on its own – it is recognized by institutions in the ecosystem, and the products that can be purchased with them generally have value to most people; flight tickets.
In the same light, cryptocurrencies are designed to perform a specific function. Bitcoin, for instance, serves 2 purposes; compensation for those dedicating computing power to secure the network, and to act as an intermediary currency unrestricted by borders. If Bitcoin were to be ‘worthless’, the ecosystem would not function, since the value the Bitcoin blockchain creates in finance is indeed real. The price of Bitcoin itself is dictated by the value perceived by the users of the ecosystem – in other words, the laws of supply and demand.
As the Bitcoin blockchain developed and grew, unforeseen problems with its structure began to arise. An example would be the speed at which the Bitcoin blockchain can operate – it processes 7 transaction per second, unforgivably slow when compared to Visa, which is capable of doing 8,000 transactions per second. Like any new technology, naturally, competitors began to emerge, all claiming to have the same technology but improved and much better.
The second biggest public blockchain that gained traction, the so called rival of the Bitcoin blockchain, is known as the Ethereum blockchain, and uses ‘Ether’ as its currency to function. This blockchain came with much more flexible programming capabilities, expanding blockchain applications into other industries other than finance. Fast forward to today and these two blockchains are still the 2 largest and most used public blockchains, challenging each other in the likes of iOS and Android.
The acceptance of Ethereum as a reliable blockchain sparked a massive boom in new cryptocurrencies as many different blockchain based companies began to develop. Consequently, the amount of cryptocurrencies that exist today are so numerous they are impossible to follow, and continue to grow on a daily basis. Having so many different cryptocurrencies may seem redundant and unrealistic, but also understand that each serves its own purpose and the ones that don’t create value will die off quickly. Most commonly, new cryptocurrencies are created an issued through a process known as an ‘ICO’.