Cryptocurrency? The possibilities are endless!
Cryptocurrencies arrived into the world in 2009 with the creation of the ever famous bitcoin. The mysterious inventor by the name Satoshi Nakamoto (who has since vanished) solved the practical problems of a digital currency, which had been attempted in various forms and did not succeed.
This article is not about the technical complexities but the effects on society. Roll forward to today, and a plethora of new currencies and blockchain-enabled projects have taken off.
Although the last few years have been tricky, many new developments have made significant progress. Cryptocurrencies have had such an impact that even countries like China are planning to create their own national cryptocurrency.
What is blockchain?
In simple terms, it is the backbone of the technology: a ledger (like Excel) which is distributed over many computers which does away with the need to have a trusted third party middleman, such as a bank or broker, to facilitate a deal between two parties who do not know each other.
dAPPs - often referred to as decentralised applications/smart contracts.
The next innovation came in with the second cryptocurrency to be invented which was Ethereum.
It can use computer programs triggered from within the blockchain, called dAPPs (decentralised applications) or “smart contracts”.
Let’s imagine a kind of blockchain-based eBay-type bid site. You want to buy a smartphone; when you win the bid, the device is delivered. When you sign for it, payment in cryptocurrency is automatically sent from a wallet of cryptocoins you hold. A seamless, automated transaction benefits all parties.
What practical application can any of this have in the business world?
The potential is huge. Almost any type of business may well have some or pretty much all of its functions automated, particularly if combined with other technologies like artificial intelligence and robotics.
One area where cryptocurrencies are starting to make an impact is in foreign exchange transactions because the costs are minimal and transmission very quick. This is such an advantage over the antiquated bank process that it is already having an effect globally.
Likewise, sending manufactured goods worldwide involves a tremendous amount of paperwork: bills of lading, customs declarations, and suchlike, and items go missing in transit. Combining bar-coding and blockchain will enable the receiver of the goods to track them from the factory door to their arrival in a transparent and regulation-friendly way.
ID registration is another potential area. It could mean that personal data are stored on the blockchain and released by you depending on what is required — it would simplify applying for anything that involves ID because this would only be uploaded once then cannot be tampered with. From this follows electronic voting, error-proof and with immediate results.
Land registration could be simplified and made accessible from any computer. This is complex in the UK, with its established systems, but even more tricky in the developing world, where there are no records; this could all benefit from a new, fraud-resistant form of database.
DeFi — Decentralised Finance
One of the most crucial business cases is Defi. Instead of banks, insurance brokers and the like, the system will lend money and pay interest or deliver financial services. The money hitherto accrued by middlemen goes to the service provider or user. Most of this can be automated anyway, so even if DeFi only takes over a few per cent of the global financial marketplace, that is still a great deal of finance capital.
Non-Fungible Tokens ensure that artists receive some payment for their work. At the same time, also “tokenizing” them, or making them into a kind of currency, only instead of each pound or dollar note being interchangeable (fungible), each artwork is unique. We are yet to see if this will be a fad or a permanent part of the art world. There has been a lot of hype, and some artists have made a truckload of money, but the jury’s out on this one.
As cryptocurrency technologies reach more people, some strange things have started happening. Since Elon Musk started tweeting about Dogecoin, it has skyrocketed in popularity. More recently, another dog-based coin, Shiba Inu, went on a price spiral. These alt-coins do not have a purpose. Perhaps it is better to think of them as a youth fad, such as hula hoops or Tamagotchis. People wanted to own these as a lifestyle statement for a short time rather than anything more profound. Undoubtedly other “meme coins” will tickle the fancy of some of the population.
Blockchain-based Gaming and other Entertainment
There are a lot of very popular online games withWorld of Warcraft being one of the largest. By creating a cryptocurrency based game, people can earn real-life money while playing fantasy games. For example, Zed Run is a horse racing game where you can race your stable and breed new horses. And of course, you can receive winnings.
Axie Infinity has recently made $2 billion in NFT sales for their cute creatures, which are somewhat Pokemon-like. They can fight, search for treasure and build things. With backing from game giant Ubisoft and Samsung, this cartoony game is looking to be a winner.
Overall, cryptocurrencies will become as much a part of our lives as smartphones and the internet. As a society, we are not there yet, and may not be for a few years, but that time will come.