4 Blockchain & Cryptocurrency
Blockchain is a record keeping technology that can be used to record information about any number of things such as: voting records, supply chains and item histories, medical data, and perhaps is best known as the technology behind cryptocurrency.
Let’s compare a cryptocurrency transaction to traditional electronic transfer of funds. Assume Person 1 wants to send Person 2 some money.
| Traditional eTransfer | Cryptocurrency Transfer | |
|---|---|---|
| Who knows about the transfer? | Person 1 and their bank.
Person 2 and their bank. |
Person 1 and Person 2 and the cryptocurrency (e.g. bitcoin) “blockchain”. |
| Are the true identities of Person 1 and 2 known? | Yes, by the banks involved. | Not necessarily, they could be anonymous. |
| Who keeps the records of the transaction? | The banks involved. | The “blockchain”. |
| Are these records private or public? | Private | Public (certain details). |
| Are there fees to transfer the funds? | Sometimes there are bank fees, especially for international transactions. | Yes, fees vary, but are roughly comparable to traditional bank fees. |
| How fast does the transfer happen? | Within your home country the transfer is usually fast; however, if crossing international borders the transfer usually takes a number of days. | Currently, averaging 30-60 minutes regardless of whether the transaction is domestic or international. In some cases, transactions can take days. |
In blockchain, the records are referred to as blocks, and the blocks are chained (or linked) together using cryptographic methods which are designed to ensure the record keeping is secure, verifiable and permanent. Additionally, the record keeping is decentralized and distributed across a number of different computer systems (nodes) to achieve these goals.
Each transaction has a “private” and “public” component to it. In broad terms, comparing this to a traditional bank transaction, the “private” portion would be like your banking password, and the public portion would be an email address.
Cryptocurrency is digital money, which means there’s no physical coin or bill – it’s all online. Bitcoin is one of the best known cryptocurrencies, but there are many others, and new cryptocurrencies (or coins) are being created regularly.
One of the big advantages of a cryptocurrency is you can transfer it to someone online without a go-between (such as a bank), so it can be a much faster (potentially instantaneous) transaction.
Issues with Cryptocurrencies
Unfortunately, cryptocurrencies such as Bitcoin are still in their infancy and have some substantial issues facing them:
Reputation
Due to the fact Bitcoin transactions provide a level of anonymity for the buyer and seller, it is a popular choice for illegal activity (money laundering, purchase and sale of illegal drugs, ransomware, etc.). Possession or trading in Bitcoin is currently illegal in a number of countries throughout the world, and it is too early to tell if thi