Blockchain and Cryptocurrency
The potential of Blockchain as a new distributed ledger system is emerging as a more efficient innovation, particularly with crypto assets such as Bitcoin and Ethereum. In the following lines, a brief explanation will be provided of how this new technology works and its impact on the markets.
Is it possible to create a new system where the role of financial institutions as Intermediaries is no longer necessary? In other words, Banks, as financial intermediaries, would be set aside, as they currently centralize operations and are the only ones responsible for validating and recording transactions on their respective ledgers. That was the ideal envisioned by the creator of Blockchain, Satoshi Nakamoto, in 2008, when the Bitcoin whitepaper was published. Then, Bitcoin was introduced as a cryptocurrency for the first time in 2009. The creator of Bitcoin is a mystery, as nobody knows the real name yet.
Blockchain is a new system, known as a Distributed Ledger System (DLS). It was designed to offer a new way to conduct money transactions between two individuals without the need for any intermediary. In other words, it is intended to permit peer-to-peer money transactions using digital cryptography technology and a global network of computer users.
Blockchain technology, as it was initially developed, is a decentralized ledger system where all transactions, condensed into blocks, are distributed simultaneously to every member of the network. To ensure an organized conduction of this process, every individual who wants to create a new block, the miners, must wait until the last block is accepted in the ledger and then proceed with a protocol of proof of work. It implies the use of digital crypto technology to convert information into codes. To make it possible, algorithms are used. This protocol ensures data immutability, as it is nearly impossible to decipher the encrypted information, thereby ensuring the safety of system users. At the same time, it provides an organized ledger as it avoids the simultaneous creation of blocks or duplicated information.
Transparency is another important aspect of Blockchain, as the information is distributed simultaneously to all nodes, a term that refers to the computer terminals that participate in the network. For this reason, all the participants share the same information, making the process transparent. It is one of the most important contributions to decentralize the ledger system, as it is not necessary for the intervention of a central authority that has exclusive access to the ledger, as the traditional financial system is.
All this new technology provides a more efficient way to do digital transactions between peers. As participation by a financial intermediary is not necessary, the process of recording and processing is time efficient. At the same time, it reduces the costs of commissions and other administrative expenses that traditional banks must cover.
Bitcoin, a digital asset that utilizes blockchain technology, was introduced to the market as a digital asset in 2009. Since then, this crypto asset has been increasing its volume and value every year. In 2024, the market capitalization reached $ 1.9 trillion. Additionally, other cryptocurrencies have arisen, such as Ethereum, Dogecoin, and others. It is estimated that there are over 80 million Bitcoin users worldwide.
It is essential to note that Blockchain technology is being applied in various industries beyond finance. For example, the distributed ledger system could be handy for providing a more efficient process in the validation of identity KYC protocols, in the insurance industry, for carbon emission bonds, and for ESG information from companies, among others. This new advanced innovation has tremendous potential to impact the way businesses and processes are centralized through a unique intermediary. The possibilities are endless, and we will be envisioning new solutions to make industries more efficient and profitable.