Today’s topic is the disruption of the current banking system. Within the current model, banks are involved in every transaction made. As a middle man, they have control over the process and usually charge a fee to carry out the transaction. Wouldn’t it be great to carry out a transaction between you and the other side of the world instantly and without transaction costs? With the introduction of the cryptocurrency, this has become a possibility. Let’s focus on two of the most popular cryptocurrencies and their underlying technology; the blockchain.
The Blockchain
The blockchain is a database that maintains an ever-growing list of records. These records are so called blocks. What is unique about the blockchain concept is that the database is distributed among every user of the blockchain. All these users have a copy of the same database, which is automatically updated around every 10 minutes. There is no user which has more information about the blocks than one another, therefore the blockchain has information symmetry.
Cryptocurrencies use this blockchain technology as an open and secure ledger of all transactions ever made. The blocks then contain information about the transactions, which will be authorized by miners. These miners are rewarded a small fee for their work.
Bitcoin
Let’s illustrate how Bitcoin works. Every user of the Bitcoin has an own wallet, which exists out of 26-35 alphanumeric characters. When a transaction is made, the Bitcoins are transferred instantly to the other’s wallet, without the interference of a middle man. The transaction is verified by miners.
More about mining: (Bitcoinmining.com)
Ethereum
Ether is another cryptocurrency based on the blockchain. Its decentralized system, known as Ethereum, can execute peer-to-peer contracts using the cryptocurrency ether. Currently, there has been interest in Ethereum from large firms like IBM, Microsoft and JPMorgan Chase to solve issues in various industries. The value of Ethereum is rising from 1 tot 12 dollars in 1 year. This relatively new currency is therefore a serious contender for a dominant cryptocurrency.
Bitcoin vs. Ethereum
Pros
Cons
Prediction
If we compare the pros and cons we see that the two cryptocurrencies both serve different purposes. Nonetheless, the question whether these cryptocurrencies will ultimately replace traditional money remains. Experts believe that the price of Bitcoin and Ethereum will only go up as it attracts more interest. This will also lead to a higher acceptance by (offline) merchants. However, the blockchain technology itself is the real innovation. Banks are gaining an interest in the technology for their own activities. So even if cryptocurrencies ultimately cease to exist, the blockchain will continue to thrive.
Thanks for reading. (Group 76)
Also please check out our video!
More information at:
https://www.bitcoinmining.com/
http://www.npo.nl/vpro-tegenlicht/01-11-2015/VPWON_1232890
