According to investing.com, the cost of Bitcoin, just one example of a digital currency, has grown by 560% year on year, which is very impressive, until of course you hear that alternative cryptocurrency Ethereum has increased in value by 2600% year on year! Either way, digital currencies are growing, not just in value but in popularity too and that has some very real implications for modern businesses.
There are two key elements to most digital currencies, the coins (ethers etc.) themselves and the blockchain and it is the blockchain that holds the real opportunities for businesses. The blockchain is essentially a chain of related computations that need to be solved in order to create a new coin, and those computations become more challenging every time a new coin is created.
As such, the computations also become more labour intensive as they become more complex and this is one reason why the value of coins increases. As if that wasn’t enough, a computation must gain proof of work, and this requires 51% of the network to agree that the computation works, in order for it to be accepted as valid.
Once valid, the mathematical value of the contents of that block becomes the key for the next block of computations. This relationship between blocks is what creates the links in the chain.
This blockchain and the associated network is what makes faking coins incredibly hard and as the network grows and the computations become more complex, the system becomes more secure. For even
more
information on the blockchain, that check out this article from LinkedIn.
What are the business benefits of blockchain and digital currencies?
Security
This security, is one of the key benefits the blockchain and digital currencies. It can facilitate more secure money transfers. Moreover, the open ledger, which is stored on the blockchain and cryptographically locked, ensures that while transactions remain anonymous until an exchange is cashed out, the transactions all remain traceable.
Speed
Speed is another key benefit of digital currencies. Ethereum especially has fast transaction speeds and very low operating costs. These factors mean opening up businesses in international markets is now much easier, so businesses can grow more effectively if they utilise digital currency.
Control
Control over digital currencies is another very attractive quality for businesses, because no single entity controls the currency. For example, the British Government controls the pound, and as such, the government can influence inflation, circulation, distribution, value and all the other key factors associated with currencies.
However, with digital currencies, the blockchain is controlled by the 51% majority of the network that validates the computations and as the currency grows, the 51% represents a more and more diverse pool of individuals.
Other Applications For Blockchain
Finally, and one thing that is definitely worth noting; the blockchain has far more applications than just financial concerns. The security, scalability and distribution benefits it offers could also be hugely advantageous for other businesses and industries too.
For example, the legal industry could start using the blockchain technology to create smart contracts, reducing the tons and tons of paperwork lawyers are notorious for (and saving a few trees at the same time).
Voting could leverage the blockchain to securely verify a voters identity and not only that but blockchains could also serve as the medium for casting, tracking and counting those votes, so voter fraud, lost data and corruption is significant reduced, if not eliminated. (For even more examples of other uses for blockchain technology,
we recommend this article from Business Insider).
So, whether you’re in the business of banking, or law, or healthcare, or insurance, or just about anything else, it’s time you learned more about the blockchain because digital currencies are growing and blockchain technology is becoming more and more mainstream.