Blockchain is a Chain of Blocks Containing Information. Image Courtesy Pixabay.
Blockchain and Cryptocurrency 101
What’s in a name? Bitcoin, blockchain, cryptocurrency – are they all the same or just different names for the same technology? You’ll hear these terms used interchangeably but they are referring to three different assets.
Cryptocurrency is a type of digital asset. You can think of it as a type of virtual money in the form tokens. Bitcoin is just one type of token. Blockchain is the technology, or the platform, that keeps track of digital transactions involving cryptocurrency. So, no, bitcoin, blockchain and cryptocurrency are not the same!
Cryptocurrency and blockchain at a glance:
- Secure blockchain platform
- Decentralized monetary ecosystem
- Doesn’t rely on traditional banks
- Allows for peer-to-peer transactions
- Blockchain is a global ledger of transactions
- Trade assets anywhere, anytime – individuals or businesses
- Conduct transactions and store the data digitally
Cryptocurrency vs Paper Money. Image Courtesy Pexels.com
Pros and Cons of Virtual Money
One of the main pros of cryptocurrency is that the blockchain networks are promoted as being almost immune to fraudulent activity. What makes blockchain so secure is that the digital documents are timestamped, making them tamperproof.
This security level is in stark contrast to recent stories of hackers breaking into corporate databases and stealing sensitive personal information including social security numbers. Identity theft can lead to unauthorized transactions and other fraudulent financial activities.
However; on September 14, 2018 a Japanese cryptocurrency exchange was robbed of $60 million worth of digital coins. Hackers found their way through the exchange’s server and stole “coins” from their online wallet over a two-hour period. Although this technology is thought to be immune to tampering, a lack of proper security measures can lead to vulnerability.
Blockchain Technology. Image Courtesy Pixabay.com
Digital Assess
Blockchain technology is the platform that runs Bitcoin, and other types of digital, cryptocurrency transactions. Besides Bitcoin, common types of cryptocurrency tokens include:
- ADA = Cardano
- ETH = Ether
- XRP = Ripple
- LIT = Litecoin
- XMR = Monero
- XVG = Verge
- ZEC = Zcash
A search on public and private blockchain technology turns up page after page of platform-based blockchains such as:
- Domus Tower
- Ethereum
- Hyperledger
- IBM Bluemix
- IOTA
- Quorum
Certain blockchains are better suited to specific industries. For example, Domus Tower was launched specifically for the accounting field.
Top Industries Using Blockchain Technology
Cryptocurrencies require blockchain to help them run smoothly however; there are many more uses for blockchain technology. It can drive digital transactions of different industries, not just those built around cryptocurrency.
Really, anyone, from large corporations to private investors, can benefit from the security and convenience of cryptocurrency.
- Healthcare
- Insurance
- Real estate
- Banking
- Supply Chain Management
Artists are even starting to investigate the technology behind cryptocurrency. A recent story published in the NY Times focuses on conceptual artist Kevin Abosch. His Yellow Lambo, a neon sculpture of a blockchain address that symbolizes Lamborghinis, sold to a collector for $400,000.
Bitcoin and Other Forms of Cryptocurrency. Image Courtesy Pexels.com
Cha-Cha Slide of Digital Currency
The valuation of Bitcoin, and other cryptocurrency, is a very volatile market. Quickly rising in value, only to plummet dangerously low a few weeks later, and then back up again. It makes you wonder if the crypto coin market will ever stabilize.
It plays out like the Cha-Cha Slide song (using a bit of artistic license here):
- Everybody clap your hands
- Slide to the left
- Slide to the right
- Take it back now y’all
- Cha Cha real smooth
- Reverse – reverse!
- Slide to the left
- Slide to the right
- How low can you go?
A bull market is a good thing, it’s characterized by rising prices, compared to a bear market characterized by falling prices. Bull markets are met with enthusiasm, investor confidence is high and there is a positive demand for investment opportunities.
Potential investors in this technology need to buy early while prices are still relatively low. When the crypto market gets a lot of attention in the media, prices rapidly increase. This almost sets off a snowball effect with more and more people, some with little to no prior investment experience, wanting to get in on a good thing. It’s never a good idea to buy high, you should always wait to see what the valuation of the cryptocurrency is over several days, weeks, or months.
No one can predict with certainty when the crypto market will fall out. If you are interested in selling some, or all of your cryptocurrency assets, it’s to your advantage to sell while prices are still rising.
However; we recommend that you look at the market as a long-term investment without worrying about a sudden decline in value. It is almost certain that Bitcoins, and other cryptocurrency tokens, will become less volatile and their value will start to rise again.
The problem many investors face is when they buy high and then the market falls out suddenly. You’re faced with a drastic reduction in your cryptocurrency value – all that “money” has simply evaporated into the digital atmosphere. As long as your portfolio is vested in different types of cryptocurrency, and other types of financial assets, you should be able to survive a sudden dip in the market.
Help with Your Investment Strategy
So, where is all this “money” we promised to show you at the beginning of the article? Well, since all these transactions are done digitally, there really is no money to show you – sorry! Would you be interested in a virtual wallet made of pleather to hold all your digital coins?
Do you think cryptocurrency and blockchain technology can totally replace paper money and even credit cards? It would be nice if you could predict if this is a fad that will die out or, if cryptocurrency will eventually stand on the top of the financial transaction world.
Reach out to your investment advisor if you would like to learn more about the cryptocurrency industry.
References
Ervin, Eric. What’s the Difference Between Blockchain, Bitcoin and Cryptocurrency? Retrieved 9/18/18 from https://seekingalpha.com/article/4151046-difference-blockchain-bitcoin-cryptocurrency.
Liao, Shannon. Japanese Bitcoin Exchange is Robbed of $60 Million Worth of Cryptocurrency. Retrieved 9/20/18 from https://www.theverge.com/2018/9/20/17882636/zaif-japanese-bitcoin-exchange-cryptocurrency-digital-wallet-60-million.
Haigney, Sophie. When Crypto Meets Conceptual Art, Things Get Weird. Retrieved 8/20/18 from https://www.nytimes.com/2018/06/05/arts/design/cryptocurrency-blockchain-art-kevin-abosch.html.
Kramer, Leslie. Digging Deeper into Bull and Bear Markets. Retrieved 9/17/18 from https://www.investopedia.com/insights/digging-deeper-bull-and-bear-markets/.
Bajpai, Prableen. The 10 Most Important Cryptocurrencies Other Than Bitcoin. Retrieved 9/17/18 from https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/.
Take care,
Lynn Smythe
Founder and Chief Blogger
The Creative Cottage
Sloth Athletica
© 2018, The Creative Cottage. All rights reserved. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.
Disclosure: This post may contain affiliate links, which means we may receive a commission if you click a link and purchase something that we have recommended. While clicking these links won’t cost you any extra money, they will help us keep this site up and running! Please check out our disclosure policy for more details. Thank you for your support!
+ There are no comments
Add yours