Today’s society is one of constant change and technological adaptation. In a world where every new product is the “next big thing,” it’s difficult to pinpoint exactly who will become the next giant in an industry. I, however, believe that the next technological revolution is right under our noses. The next sleeping giant in the tech sector is already upon us, and it won’t be sleeping for long.
Bitcoin and Satoshi Nakamoto
Like many innovations, Bitcoin and other cryptocurrencies didn’t originate out of desire, but rather out of necessity. 2008 not only brought us Lil Wayne’s “Lollipop,” but also the largest recession since the Great Depression of the 1930’s. This recession is widely regarded to be the fault of excessive risk-taking by banks and large financial institutions such as the now defunct Lehman Brothers. When the US housing bubble burst at the end of 2016, large financial institutions were hit hard. Overinvestment in securities tied to the US housing market damaged financial institutions globally. On September 29, 2008 the Dow Jones plummeted 774 points (6.98%), the largest point drop in history.
This is where Satoshi Nakamoto comes in. Satoshi dreamed of a world in which there is no longer a reliance on banks as the middleman, or anybody as the middleman for that matter. Bitcoin protocol allows just that. For instance, if Bob wanted to send $20 to Carol, but Bob didn’t yet have an established trust network with Carol, it would be impossible to send the payment without going through an intermediary such as a bank to establish trust. Going through the bank as an intermediary not only takes additional time, but also incurs unnecessary charges and fees.
Utilizing Bitcoin, Satoshi made it possible to send digital payments free of intermediaries. These payments are sent to a cryptocurrency wallet via a private wallet address. Bitcoin establishes a network of trust by recording every transaction on a blockchain. A blockchain is a decentralized ledger in which transactions are recorded once being validated by several (in Bitcoin’s case 10,263) nodes in a voting process known as consensus. Once a transaction is listed on the blockchain, it can not be altered or manipulated in anyway without 51% consensus of all the nodes, making it very secure and largely impenetrable.
Aside from blockchain’s ability to revolutionize the payment industry, its security measures and inalterability are allowing it to be applied to a variety of fields, such as allowing the unbanked to transfer money internationally, increasing credibility in voting systems, and the creation of smart contracts, contracts written into the blockchain programmed to process transactions once certain parameters are met.
Top 3 Cryptocurrencies in Terms of Market Cap
Bitcoin (BTC): The world’s first cryptocurrency. Created under the alias Satoshi Nakamoto in 2009. Used as a peer-to-peer payments system to avoid intermediaries such as banks. Compared to many newer cryptocurrencies Bitcoin transactions can be quite slow, taking up to one hour. Accounts for almost 60% of the entire cryptocurrency market. Widely considered to be “digital gold,” price fluctuation of Bitcoin widely affects the market as a whole.
Ethereum (ETH): The second largest cryptocurrency in terms of market cap. Created by Vitalik Buterin in 2015. Used as a platform to develop smart contracts and DAPPs (decentralized apps). Widely used as a payment currency due to its quick transaction time of one to two minutes.
Ripple (XRP): The third largest cryptocurrency in terms of market cap. Created by Chris Larsen and Jed McCaleb in 2012. Ripple aims to disrupt the cross-border payments industry by offering nearly instant, virtually feeless cross border payment processing. Currently to send money across borders, intermediaries such as Western Union must be involved. Like any other intermediary, unnecessary fees are applied. Ripple protocol is not only 60%-70% cheaper than the current SWIFT protocol, but it also takes a fraction of time to process payments. SWIFT transactions take 3-5 days. Ripple however takes just 3-5 seconds.
2017 Bull Run and Subsequent Crash
In late 2017 cryptocurrency went mainstream. Unprecedented growth caused worldwide attention by hobbyists and investors alike. In January of 2017 the price of Bitcoin reached $1,150 USD, breaking $1000 for the first time ever. This was just the start. Later in the same year Bitcoin continued to pick up steam reaching an unbelievable all time high of $19,703.06 per coin. To put this insane growth into perspective, if you purchased $100 of Bitcoin in January of 2011, you would have received 333.3 Bitcoin. At all-time high, that same $100 of Bitcoin would have been valued at a whopping $6,567,009.90. The bull run was not exclusive to Bitcoin, however. Most other cryptocurrencies welcomed growth parallel to that of Bitcoin’s, resulting in hundreds of other all-time highs.
Unfortunately, like any other market, growth cannot continue forever. The fortunate cashed out their earnings and left humbled with their cryptocurrency experience. Those who held on to their cryptocurrency didn’t meet the same fate. Just as quickly as Bitcoin ventured up to its all-time high, it came down just as fast in a monumental collapse. From January 6 to February 6, 2018, Bitcoin experienced a 65% drop from its all-time high and rested at a sobering $5,920. Throughout this year Bitcoin has fluctuated back up to as far as $7,400 but after a recent crash sits at a quiet $4,593.
So, What Now?
The world of cryptocurrency is not for the faint of heart. When the market is strong, there is tons of profit to be made; however, that profit is not without risk. The market can collapse as quickly as it skyrockets, often when you least expect it. Fortunately for those entering the market, Bitcoin is at its lowest level of the year and most coins are experiencing all-time lows. I believe this is the perfect time to start buying cryptocurrency. Much like any other market, you want to accumulate assets while there is blood in the water and the crypto market is seeing red.
Nobody knows when the next crypto bull run is going to appear, but I’ll tell you what – you’ll regret abstaining from the market when it does. I’ll be ready, will you?
