Cryptocurrencies like Bitcoin have created a new way to exchange value from A to B. Because of the efficiency and ease of use many digital “wallets” provide, consumers can send coins to any merchant who accepts cryptocurrencies. This can greatly increase the amount of new customers buying products, therefore increasing profits for the company.
First, we’ll explain how cryptocurrencies are safer than bank transfers and credit/debit cards. Second, we’ll explain how and why Blockchain works. And lastly, we will discuss the future of cryptocurrencies in today’s world.
In today’s interconnected world, customers demand quicker and safer ways to access things like videos, music, products, you name it! Anything can be purchased on the internet and shipped right to your door, while other customers may prefer to try out the product before they make a final decision on purchasing it. To purchase the item, a customer is required to exchange a set amount of money whether it be cash or swiping a credit card. Because cash is only good in small amounts and not large transactions, it can get tedious when counting it. Cash can also be stolen fairly easily making unsafe to carry in large amounts. Credit/Debit cards eliminate the need to carry a sizable stack of cash and because of their ease of use, you can make transactions almost anywhere. The biggest problem with Credit/Debit cards in a world where everyone is trying steal each other’s money, making them insecure and generally inefficient if such an occasion occurred. To make sure a Debit card can reach its holder’s account, it uses a routing number that is associated to said account. The problem with a routing number is that it can be stolen if the cardholder purchases an item in an insecure website or if the merchant’s system is vulnerable to attack. But, in 2009, a mysterious figure who called himself Satoshi Nakamoto unveiled something new… Bitcoin. Bitcoin is a decentralized, open source, currency using peer to peer technology. Because it is not regulated by any government or bank, anyone can access it even if they do not have access to a local bank. To make this work, Bitcoin uses Blockchain, a shared ledger that keeps every transaction ever made in a series of blocks. A person might ask, “how is this more secure than a normal credit card or bank transfer?” The answer is simple, because the system generates a hash, a unique digital signature, the computer can make sure that it is validated. To explain this in greater detail, each computer on the Blockchain network keeps a copy of this ledger. Every time a transaction is made, it is written down in the public ledger. To make sure a transaction is validated, each computer takes a look at its ledger and makes sure it has the same information. When the majority of computers have met consensus, the transaction is made and written down in the public ledger. And because the ledger is tamper proof, the system is very secure. Now, Bitcoin mining is a more complicated subject for another article, so keep watch for that.
Because of a world demanding efficiency and security when making payments, Bitcoin may replace many services such as banks and Credit/Debit cards. In fact, many banks are investing in cryptocurrencies. As for the future a Bitcoin, it is hard to say how it will evolve and shape the economy.