Cryptocurrency has dominated news cycles intermittently since the launch of Bitcoin in 2009, often focusing on the volatility of the cryptocurrency markets, the risks associated with owning cryptocurrencies, and the scandals and schemes that have – unfortunately – painted the industry with an ugly brush.
But there is more to cryptocurrencies than scandalous headlines. With a market cap of nearly $3 trillion dollars and expectations that cryptocurrencies will disrupt $867 trillion in traditional assets (World Economic Forum), there’s no debate: cryptocurrencies are here to stay.
Simply put, a cryptocurrency is a form of digital money. Before trying to understand cryptocurrency, it’s important to understand the basics of blockchain.
Blockchain – an immutable ledger for all types of transactions
Blockchain is the technology behind cryptocurrencies. At its core is a sequence of blocks – or groups of transactions – that are chained together and distributed among users.
Financial institutions use ledgers — essentially databases — to keep track of transactions; deposits and withdrawals are tracked and assigned to the right accounts. Financial institutions own that ledger and control access to it.
Blockchain is a digital ledger of transactions. That ledger is decentralized, meaning no one person or institution owns it. The blockchains on which cryptocurrencies are built are public, providing transparency and confidence in the transactions they record.
Once data is recorded in a blockchain, it’s almost impossible to change or remove it, making hacking and fraud nearly impossible. In simple terms, it is not possible to modify any block without changing the entire chain. The blockchain works as an unalterable digital ledger.
Blockchain technology is changing many facets of society beyond cryptocurrencies. The blockchain has given rise to smart contracts, which automate the execution, control, and documentation of legally relevant actions as defined in an agreement. Institutions and organizations are increasingly seeing the value of smart contracts, and even the Government of Canada has adopted the technology to improve transparency in government funding.
The takeaway: Blockchain technology is essentially an unchangeable ledger of activity and transactions and has applications beyond cryptocurrencies.
What is cryptocurrency, anyway?
As cryptocurrencies become mainstream, more people are using them for electronic payments, much like you do with traditional currencies, and as an investment opportunity.
With traditional currencies – like the Canadian dollar, for example – there are some serious challenges, including:
Cryptocurrencies can solve some of these problems.
With opportunity comes risk, and it’s not different for the world of digital assets. Real risks associated with cryptocurrencies include:
That’s where Brane comes in.
We work with financial institutions to keep digital assets safe and secure. Our cutting-edge, blockchain-native technology is purpose-built to manage risks, ensure no single point of failure, and comply with regulatory requirements. Brane’s commitment to security, assurance, and trust means that everyone can benefit from the transformational opportunities of blockchain with confidence.
Disclaimer: Brane does not provide investment advice or endorse any specific cryptocurrencies.