One of the terms frequently bandied about in the world’s many business journals, finance magazines and high tech periodicals is the “blockchain.” Its recent popularity is not due to its freshness—the blockchain was first mentioned in Bitcoin’s seminal 2008 whitepaper—but rather to the many companies, creatives and programmers that have finally figured out how to use it to propel their brainchildren forward.
From incorruptible voting systems and communications networks to cryptocurrencies and smart contracts, much of today’s cutting-edge technology utilizes the blockchain as a foundation. Many people and businesses agree that it will spur a revolution rivaling the internet.
While it began with businesses built around the very function of blockchain itself, new ventures have taken the technology in unique directions, and their success has spawned an entirely new cryptocurrency industry. Cryptocurrencies like Bitcoin are still the most popular, but nuances in how the blockchain is used, and what it can be used for, have the potential to disrupt markets far and wide.
An excellent example of this notion is the upcoming release of LAToken – a cryptocurrency that allows those with illiquid resources, like a house or work of art, to sell fractional stakes of these assets to an open marketplace. The idea is that investors can profit from the improving state of the real estate or art markets, reflected in the price of LAT, while enabling the house’s owner to raise cash from the assets they own and enjoy them all the same.
This method of decentralized funding gives people the ability to avoid financial institutions like banks, and unlock the value in their assets immediately. Those who can get ahead of the blockchain adoption curve have a significant opportunity at hand. To grasp it, one must begin with a basic understanding of the blockchain itself.
What is the Blockchain?
Cryptocurrencies Taking Off Thanks to the Blockchain
Bitcoin and other cryptocurrencies that run on blockchain technology, such as Litecoin, Ethereum, and Dogecoin use the chain’s verification capabilities and power requirements to create digital value, which can be traded or spent at will. But how can these “coins” be worth anything without a way for one to demonstrate their ownership? The answer is in the “wallet” – an application for each cryptocurrency that assigns a user their own private signature, or key.
To send and receive coins, both parties must sign the transaction with their randomly-generated private key, mathematically proving that the coins are coming from, and going to, the correct place. These coins can then be stored in an online exchange. A safer method of storage is the “hardware wallet”, which is an offline storage technique involving a long string of keywords that grant their holder exclusive access.
For Bitcoin and cryptocurrencies at large, the network’s peers are called “miners.” Miners running the Bitcoin blockchain use their computer’s graphics processors and central power units to verify, process, and relay transactions on the chain. Their incentive for this is the miniscule amount of the chain’s cryptocurrency that they receive for each processed transaction: Bitcoin, for example. All Bitcoins currently in existence were mined at some point in the past.
As early as 5 years ago, mining a single block would reward the relevant node with multiple Bitcoins, but as the chain grows and more miners join in, every node earns exponentially less for the same amount of work. This is important for Bitcoin’s value relevant to fiat currencies. The algorithm providing the basis for the Bitcoin blockchain sets a maximum of 21 million Bitcoins that can be mined in total, and it is largely this notion of scarcity, as well as the longevity of the network itself, that give Bitcoin and other cryptocurrencies their intrinsic value.
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