15 November 2018
The claim to fame of all cryptocurrencies is the process of verification that makes it impossible to “fake” or delete a transaction after it has been confirmed in the blockchain. The reason transactions are so secure is this blockchain system.
Simply put, after a transaction is agreed, recorders (known as “miners”) confirm the transaction and then add it to a discrete block of data that is attached to a long chain – or virtual ledger. Once this is done, the record is distributed across the network, and another entry is added after it in the same block – locking it into the system. Once a block (for example, 1 megabyte for bitcoin) is full, another block of data is started right after it… locking in the block as well.
This seemingly un-hackable system is enormously important for residents of countries where land deeds or other records can go missing and, in the process, the person’s title to their land or other asset. Once an asset is recorded in the blockchain, it is there forever.
Add to this the value of preventing double-spending, so that the same amount cannot be spent twice, and you have a winning formula.
To perform a virtual currency transaction, you need a digital wallet that can be linked to your account(s), and two “keys”: a private one that only you know, and a public key, used to verify that you are who you say you are and that you have what you say you have. This is the key that is used to verify your transaction and to record it in the system.
Some cryptocurrencies are segregated by user groups and can only be applied to specific categories of acquisitions (non-fungible). Other (fungible) cryptocurrencies can be exchanged and/or used for transactions that include everything from game tokens, real estate or even aid to help buy food for a starving population.
Until recently, a big concern about cryptocurrency was the delay between transaction and confirmation. (No one wants to be left standing at the cashier’s desk for an hour while their purchase is being verified.)
We are now entering the third generation of cryptocurrency, which uses a block-lattice system that reduces transaction cost and time. This new generation also brings with it smart contracts and other exciting developments. The explosion of digital applications is bound to continue now that the unbreakable code has been created.
For business, the story is just beginning.