Cryptocurrencies, especially this past year, are the hot new topic. The secure organization of addresses with balances all on one big linked list called a blockchain, with hosted copies on thousands of computers around the world, are defining the future of economics, but why are they so important? How have these currencies reached a combined market cap of almost a trillion dollars?
The perhaps overhyped reason these currencies are being developed at such a rapid base are due to two terms: blockchain and decentralization. Originally implemented in Bitcoin’s whitepaper, financial institutions and individuals alike are jumping onto what seems to be the next “big thing.”
There are a lot of advantages to digital currency. In essence, everything is more democratic with all power given to the people. The people host, control, and use the network compared to a centralized server which could be controlled by a company or bank. With Ethereum and other smart contract platforms, developers can stretch the limits of digital currency to run code in a decentralized fashion. This means that once deployed, no one can alter the program. This is important in use cases such as voting, making sure that all votes are counted once and that the application is unable to be changed. Everything is immutable.
In addition to immutability, there’s anonymity, low transaction fees (Stellar), and transparency all at the same time. Take a look Etherscan, where one can see all the transactions taking place on the spot. All digital currencies have these core features that make them so attracting.
But now startups are using this blockchain technology and applying it to every single industry possible, not just money transfers. There are platforms for advertising, computing, storage, music, gaming - the list goes on.
Many people say the amount of money put into ICOs are insane. In fact, many people classify this whole space as one big bubble. But, what isn’t? Once this bubble pops, we’ll see the big winners that truly have some value and will contribute a ton to the future of digital currency just like eBay, Amazon, Priceline did to the internet.
Digital currency is here to stay - and we’ll be learning how to develop the applications that will power the next generation of finance.