Blockchain and Bitcoin
Blockchain

Distinguishing Between Blockchain and Bitcoin

The terms ‘blockchain’ and ‘bitcoin” have become buzzwords across multiple industries beyond IT and finance. The media has used the terms frequently in recent years to report stories on alternative investing as well as the emergence of decentralized digital transactions. Here’s a look at the differences between the two concepts.


Bitcoin Relies on Blockchain Technology

The main difference between blockchain and bitcoin is that blockchain is the underlying technology that facilitates digital transactions with bitcoin. In other words, bitcoin would not exist without blockchain. Typically, when capitalized, Bitcoin refers to the general concept of the technology and network. But when not capitalized, it likely means the specific asset with the U.S. ticker symbol BTC or the exchange in which it trades.

Bitcoin was the first of several cryptocurrencies, which are digital currencies that don’t require transactions through banks. Part of the excitement of all cryptocurrencies is the notion that items can be bought or sold online without going through a third party.

Blockchain technology was ushered in through bitcoin in 2008. Its creator, the mysterious Satoshi Nakamoto, devised a system for direct online transactions between buyers and sellers. Bitcoin was designed to be a finite system with a maximum of 21 million coins, each generated through algorithms that require expensive computing power.

Blockchain technology is a series of locked digital blocks chained together. They contain private data that doesn’t have to involve financial transactions. Users of a blockchain network can only access private data with an encrypted key. So blockchain is considered an emerging robust cybersecurity solution.

Blockchain’s public dimension is that once a block is completed, it’s added to the chain where it’s visible to all network members. This visibility allows for members to verify transactions as part of a public ledger.


Crypto Investment Craze

There’s widespread confusion about crypto, except in the active cryptocurrency community, since it takes a while to explain. The story of bitcoin becoming a popular investment frenzy began in 2011 when the cryptocurrency started trading between buyers and sellers through crypto exchanges. It started out trading for pennies, but surpassed dollar value in 2011. By 2017, the value of one bitcoin surged from $900 to $20,000. It then crashed in 2018 after the big run-up, plunging below $6,000.

A resurgence in bitcoin developed in 2019, and by 2020 it was hitting new highs again. More volatility continued as the value in 2021 has ranged from under $30,000 to over $60,000. During this period, many large organizations announced support for bitcoin transactions. While it’s typically used for online gaming and digital downloads, it can be a convenient solution for making large online private transactions.


The Future of Blockchain and Bitcoin

The growing interest in bitcoin as an investment has stimulated curiosity in blockchain technology as a cybersecurity solution. As an investment, it’s unclear if government will regulate Bitcoin, which is a big reason it’s such a volatile rollercoaster for storing value. If governments let it continue with limited oversight, the value of Bitcoin can skyrocket. But regulations could scare away supporters who like the idea of decentralized currency.

The fact that bitcoin is used by cybercriminals for ransom darkens its appeal with government. Many ransomware attackers have demanded payments in bitcoin to conceal their identities. Early bitcoin activity before it went mainstream was on the black market, specifically Silk Road. Regardless of what happens with bitcoin, it appears blockchain is here to stay as part of the evolution of cybersecurity.

The rise of blockchain and bitcoin has captured the imaginations of tech enthusiasts and traders. It’s clear that both ideas are now woven into mainstream culture and are not just fleeting trends.


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Crypto Investing
Fintech

Risks and Benefits of Investing in Crypto

The term “cryptocurrency” has gained increasing attention in recent years due to its digital convenience and potential for growing assets. One of the first questions an investor should ask is: how safe is a crypto investment? Is it a trend or is it here to stay? Other questions surround how much money it can make in a short time.


Rising Demand for Cryptocurrency

Before diving into crypto, it’s helpful to investigate its short history. If you bought one Bitcoin in 2011 for $1 then forgot about it, today your digital wallet could pay for a downpayment on a home. At one point in 2021, you could’ve bought one Bitcoin for $30,000 then doubled your money by November. Bitcoin’s rapid rise to fortune triggered the rise in other cryptocurrencies such as Etherium.

The popularity of Bitcoin and other cryptocurrencies is driven by:

  • Scarcity, since only 21 million Bitcoins will ever be mined
  • Cost of creating the digital coin that requires massive computing power
  • Diverse utility of its underlying blockchain technology

Cryptocurrency has gained notoriety as a ransom payment to cybercriminals to unlock frozen digital assets. But on its brighter side, cryptocurrency is used as a seamless solution for digital transactions. A growing wave of large national brands, such as PayPal, have started accepting cryptocurrency. A big part of the optimism fueling crypto is that it’s used outside the traditional banking system. That means you can make online transactions directly without the need for a third-party financial institution.


Risk Management Strategies for Crypto

Even though you could have doubled your money in Bitcoin, you could have also lost half your money in the same year. It’s an extremely volatile asset due to daily news about whether or not it needs government regulations. One day it appears to be like a wild west gold rush, and the next there’s a scare that bankers and governments will take control of it.

Some of the forecasts about crypto have been absurd, as even financial professionals have predicted Bitcoin to surpass $100,000 in 2021. Due to crypto’s massive growth in value in recent years, it’s attracting many young investors who may not know about the history of bubbles. The dotcom bubble of the 90s, for example, was a fakeout frenzy in which even seasoned investors fell for the notion that any new website with a good idea was “going to the moon.”

Be aware that despite talk of blockchain technology being more secure than other forms of cybersecurity, hackers can still get into your digital wallet and steal your money. Exchanges that handle crypto transactions such as Coinbase and Gemini don’t have the track records that traditional broker/dealers do to assess online security. Another critical issue to remember is if you lose your private key to your digital wallet, you won’t be able to access your money in it – perhaps ever again.

Professor of Finance Robert R. Johnson, PhD, at Creighton University says no one should think about crypto as an investment for these reasons. Warren Buffett’s partner Charlie Munger, one of the most successful investors of all time, is also against crypto investing. Fans of crypto, however, point to its enthusiastic support from Tesla founder Elon Musk, who has at times been the richest person on earth.


Conclusion

Cryptocurrency is still in its infancy, which means it can grow to become an even more amazing asset in the future. But due to its short history, it’s unclear if crypto has already made its big splash and whether government will continue allowing it to be a decentralized currency. But making a crypto investment that grows exponentially can be the key to expanding investment capital in the future. For now, stay up to date with information on the world of cryptocurrency and how it’s transforming business.


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