The World of Blockchain

The World of Blockchain

The popularity of cryptocurrencies has surged in the past few years, as more large businesses and investors are intrigued by the new opportunities and benefits associated with these digital "currencies." Cryptocurrencies, or cryptos, are designed to work as a medium of exchange and exist completely online. Backed by blockchain technology, cryptos operate without the requirement of a central authority, and eliminate certain processing and transaction fees. As these digital assets are not backed by a bank or other traditional lending institutions, transactions made using cryptocurrency are highly encrypted, subsequently keeping an individual's personal information private.

One of the key benefits of investing in cryptocurrency is the ability to access a wide range of investment opportunities, as well as the elimination of banking fees and low transaction fees for international payments. With the advent of digital coins, consumers have been presented with new investment possibilities other than those offered by traditional banking products. It is estimated that the global cryptocurrency market will record a double-digit CAGR up to 2027.

However, cryptocurrencies are also limited by certain drawbacks, including lack of regulation and supervision in most countries, cybersecurity issues, volatile value, limited usage, and infrastructure stability problems due to fast growth.

Bitcoin is considered to be the first decentralized digital currency sent from user to user on a peer-to-peer network. It was developed with an intent to cut out any sort of middleman in a transaction. Unlike traditional fiat currencies, which get devalued over time due to their unlimited supply, bitcoin is deflationary as they are limited in number. According to reports, currently there are only 21 million bitcoins available in the market. With its demand growing at an exponential level, the price of bitcoin may continue to grow in the ensuing years, but subject to certain volatility attributed to external factors. The overall cryptocurrency industry was influenced to a large extent with the rising awareness about bitcoin and inspired alternatives.

It is prudent to mention that bitcoin mining still stands as an energy-intensive process. Analysts at the International Energy Agency (IEA) state that power utilized for bitcoin mining has risen constantly from 2016, accelerating sharply in 2020 by hitting a current all-time high level of 149 terawatt-hours (TWh). Comparing to these figures, Google's entire energy usage stands at 12.2 TWh, while approximately 200 TWh of power is used by all data centers in the world, apart from those that mine bitcoin.

However, as a solution, many companies are now seeking ways to mine bitcoin using renewable energy, thereby looking to mitigate its impact on the environment. Recently, American financial services & digital payments company, Square, Inc. announced its partnership with blockchain technology firm Blockstream Mining to develop an open-source, solar-backed bitcoin mining facility in the U.S., with an aim to drive adoption and efficiency of renewables within the bitcoin ecosystem. Similar efforts globally will create a better outlook towards the cryptocurrency industry among commercial users.

Contrary to traditional fiat currencies, cryptocurrencies are not issued by a central bank and aren't impacted by inflation rates, monetary policy, and economic growth initiatives that typically influence the value of a normal currency. However, the worth of cryptocurrencies can be influenced by some other factors like its supply and market demand, cost of producing digital currencies (like for bitcoin through mining process), emergence of more competitive options, trade and exchange platforms, regulations on its sale, and internal governance.

For example, recently Bitcoin made it to the headlines after its value dropped drastically when Tesla CEO Elon Musk raised concerns regarding the currency having a severe impact on the environment, given to the amount of electricity required in its mining process. Instances like China's crackdown on mining and trading of the cryptocurrency have also significantly influenced the price of Bitcoin, eventually spreading panic and uncertainty among crypto traders and investors towards its acceptance.

The increasing popularity and adoption of cryptocurrencies are leading to a paradigm shift in the financial world. As more people and businesses become interested in this new form of currency, there is an increasing need for governments and regulatory bodies to come up with effective policies that will guide the market.

In conclusion, the cryptocurrency market is rapidly evolving, and it offers new opportunities and challenges for businesses and investors. The adoption of blockchain technology has revolutionized the way we conduct transactions, and cryptocurrencies are poised to become a major player in the financial world. While there are challenges such as volatility, regulation, and environmental impact, the benefits of cryptocurrencies far outweigh the drawbacks. With the increasing number of investors and businesses adopting cryptocurrencies, it is clear that this trend is here to stay, and it will continue to shape the future of finance.

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