The birth of digital currency was realized in 2008 with the first ever creation of a crypto currency entering the market. Since then, several other digital currencies have been created as they take advantage of the rise of digital currency popularity. In its broad definition, digital currency is an alternate currency that functions like other currencies but takes the form of electronic money. Digital currency is abbreviated as DIGICCY. The use of digital currency cannot be limited to virtual space as it is being used in the purchase of real goods and services. The use of digital currency outside the virtual space signifies the acceptance of the public in the use and exchange of the electronic money for goods and service which has had a significant impact on the popularity of digital currency.
The digital currency market has experienced a major upward trend since its inception in 2008 and this is expected to continue in the coming years. Though, there have been some challenges experienced on the way, the overall market outlook is that of bullish. The concept of internet finance is gaining popularity among the public as more people become aware of the digital currencies, their use and their benefits. The characteristics of digital currency that makes them borderless, anonymous, fair, decentralized and equitable currency has led to significant support which has been enabled by the large amount of funds. The rise of digital currencies has been on an upward trend in which Bitcoin is leading with an estimated value of $7.2 billion.
The analysis of the virtual currency market capitalization indicates an explosive growth according to the various sources that track the market. The market leader Bitcoin, has experienced extensive growth from the previous years of its performance. This is also witnessed in Ethereum that is gaining as much momentum like Bitcoin and recording anomalous growth. The trend is replicated in all other virtual currencies whose upward trend is an indication of the growth of virtual currency on a global scale.
Several other market indicators are experiencing the growth of virtual currencies. In a 24-hr period of virtual currencies trading, the volume once surpassed $26 billion which was higher than what was achieved in a 5-day average trading volume of US stock exchange. All these market indicators predict a bright future for the performance of virtual currencies in the trading market. The upward trend in the market is expected to continue as the popularity of virtual currencies increase with time.
Being a decentralized currency, digital currency does not require any involvement of central authority, thus the popularity of the digital currency will ultimately change the status quo. The framework of the currency is based on a number of technical features that have been incorporated to eliminate the need of central authority. The use of encrypted algorithms which are based on SCRYPT operations are combined with a distributed timestamp along with PoW and public key. These operations are crucial in the revolution of e-commerce transactions and they are the indicators of the future financial industry environment. The use of currency is not only applicable in the finance expression but is also used in the embodiment of wealth. Currency plays a significant role in the world whether in size or quantity as it defines the wealth of mankind. Therefore, a reform in currency will definitely create a higher proportion of people with wealth. Financial and market experts have indicated the development and adoption of the digital currency in the next couple of decades to a level where it will be holding a large portion of the wealth.
The Bitcoin expected movement in future
Several other market indicators are experiencing the growth of virtual currencies. In a 24-hr period of virtual currencies trading, the volume once surpassed US$26 billion which was higher than what was achieved in a 5-day average trading volume of US stock exchange. All these market indicators predict a bright future for the performance of virtual currencies in the trading market. The upward trend in the market is expected to continue as the popularity of virtual currencies increase with time.
The first layer is the underlying technology, the blockchain. The blockchain is a decentralized, open and transparent transaction record ledger whose database is shared by all network nodes, updated by miners, and supervised by the whole people, but no one actually owns and controls the database. It's like a huge interactive spreadsheet that everyone can access and update, and confirm that the digital transactions that transfer funds are unique.
The middle layer of the stack is the protocol—a protocol (software system) that runs on top of the underlying blockchain technology, which describes how assets are transferred across the blockchain.
Then, the top layer is the currency itself. At present, there are more than 2,400 digital currencies in circulation, of which bitcoin is the first and largest. The key point is that the three levels of blockchain, protocol, and currency are a common structure for many modern encrypted digital currencies. Usually each currency represents a currency and a protocol, and it may have its own separate blockchain or bitcoin-based blockchain.
When the ordinary book data has the above three characteristics, the ordinary book data has the characteristics of the encrypted digital currency. In the blockchain technology, the value environment foundation formed by the consensus mechanism and value circulation can form an encrypted digital currency (exactly, a distributed shared ledger that can carry value). When the form of the number is encrypted by a cryptographic hash function, a hash chain structure, and an asymmetric key, it will initially have the prototype of digital assets (currency), but such digital assets require a network of flows and follow a certain consensus mechanisms to ensure the security and effectiveness of assets, and then build value networks.
The application of the blockchain technology has gained popularity due to the large amount of data that is required in carrying out various operations over the internet. In its broad definition, blockchain has been identified as a technological application that integrates several computer technologies including consensus mechanism, peer-to-peer transmission, distributed data storage, and encryption algorithm. The application of the consensus mechanism allows building of trust and acquiring rights between the various nodes in the blockchain system which are executed through a mathematical algorithm.
Therefore, the development of blockchain technology has had an impact on various industries in regard to the operating concepts. The new technology has enabled development of new ideas and processes that are having an impact on a variety of industries. Economic and social activities are highly promoted by the blockchain technology. The continued use and development of blockchain technology is expected to cause different industry phenomena which are meant to benefit all industries and the stakeholders involved.
The emergence of blockchain has been identified as one of the revolutionary technologies in the field of information technology. The ability of the technology to arrange the data in a chronological order through the simultaneous accounting between the various network nodes thus forming records of transactions that are chronologically traceable and are not vulnerable to interference.
The principal value of the blockchain technology is the development of a distributed accounting system that is secure and reliable. In its implementation, blockchain technology has been able to achieve low-cost, low-latency of information exchange and through this transaction processing and circulation of digital values is realized. Blockchain technology relies on its technological applications of peer-peer network communication, smart contracts, distributed consensus protocols and cryptography to achieve its efficient performance as a big data technology.
The transparency aspect is of importance in digital transactions as it helps the involved parties in the transaction to follow the activity performed. The data for the transaction is made available to all the involved participants through the use of the peer to peer network. Each participant is identified by a hash algorithm which ensures that the users actual identify is protected and secure. The verification process enhances the security of the system by recording the scheduled transactions between the parties but does not share the personal information of the parties involved in the transaction.
Protecting a system from interferences guarantees security and safety of the various operations involved. In the functioning of the blockchain technology, the data is divided into various blocks that are interconnected with one another. Blockchain does automatic updates after every 10 minutes to check itself. The continuous checking allows the system to reconcile with the previous stored information. The information checked is referred to as a block. The blocks exist in an interconnected framework thus any change in a single block affects all other blocks. Therefore, a change cannot be implemented in a single block without simultaneously modifying all the blocks at the same instance, to record the changes. Therefore, based on the fact that there are always new transactions made, it becomes almost impossible to make changes to any of the existing blocks.
Blockchain technology is decentralized in its functioning as it stores the information in it as a unit of the whole system. Therefore, the information stored under blockchain does not have a centralized location as it gets shared with various computers. The network controls the data as opposed to a central authority. The whole network functions under the principle of peer to peer basis. This allows the information to be made public and enhances data investigation. This is ideally the most attractive feature of the blockchain technology as all the participants in the network are given similar priority as they share the same information and operate under the same consensus protocol.
On October 31, 2008 a white paper was published in a cryptography forum by Satoshi Nakamoto explaining how double-spending could be avoided in crypto currency which was by then a major problem. The same concept was used in the creation of bitcoin which is deeply based on the development of blockchain technology. Though in the whitepaper, Nakamoto did not mention blockchain technology, but he described its framework as that of a chain of hashed timestamps. This approach was however refined in the creation of Bitcoin as the concept was laid out: an interconnected framework of blocks, each linked cryptographically to the previous by the use of hash digest. From this framework, blockchain was simply described as a sequence of records, each hashed and interconnected to the previous block. In the white paper, Nakamoto only described Bitcoin as a decentralized peer to peer payment system, but the use of blockchain technology has surpassed the exceeded scope of its usage.
In the year 2008 when the financial crisis was spreading, bitcoin was being developed to deal with problems such as the crisis which was being experienced causing significant loss. In the conceptualization of bitcoin, middlemen were eliminated by the exchangers thus reducing the costs as well have control of funds themselves. Based on this concept, bitcoin was created being the first to apply the blockchain technology. The distribution of bitcoin is based on autonomous system which uses a perfect combination of financial economics and applied mathematics. In its functioning, the system works as a commercial bank, central bank, as well as the currency itself. In solving the problem of ownership in Bitcoin, the creator Satoshi Nakamoto applied the asymmetric cryptography. In the conceptualization of a ‘coin’, Nakamoto used the UTXO model while solving the distribution problem by the use of the blockchain technology. The stability and security of the system is maintained by the use of Proof of Work (PoW). In the solving of the double-spending problem, all miners have to maintain a unified blockchain. Despite its significant success, the processing rate per second of bitcoin is too slow based on the outdated algorithm. Performing an analysis on the technical performance of bitcoin, it is expected to collapse in either a near future or later. The popularity of bitcoin has been based on it being the first application of blockchain technology. The transaction costs associated with bitcoin are also high and the number of people using petty bitcoins is getting lower.
The entrance of Ethereum in the digital currency by developing new algorithms, has had a significant impact on the popularity of blockchain technology as more digital currencies continue to be created. The reference of Bitcoin as a social experiment has been confirmed by the activation of Ethereum SegWit.
By understanding that bitcoin is only one of the applications of the blockchain technology, one gets to see the possibility of the future based on the implementation of blockchain technology in various industries. This realization led the focus to shift from the ‘coin5 to the ‘chain5 aspect of the technology. In its application today, blockchain is used to describe a distributed database. One of the primary features of this database is the ability of contracts and data to be recorded along the time axis, and only the functions of reading and writing are available while modification and deletion are made unavailable.
In the exploration of the technology of blockchain, Bitshares was among the first players but Ethereum’s application of the technology revolutionized the concept. In its application of the blockchain technology, Ethereum did not only possess the benefits of bitcoins but also introduced a variety of innovations which were aimed to make the virtual currency effective. The Ethereum application of blockchain presents a smart contract platform.
The Ethereum Virtual Machine (EVM) is the most fascinating and complex part of the Ethereum and it is regarded as being quasi-Turing complete. The Turing completeness is used to describe a system of data manipulation rules, which are named after the creator of the Turing machine, Alan Turing. A Turing complete system is known to be capable of performing any possible computer program or calculation. In simple terms, a Turing complete machine is mathematically proven to solve any problem fed into its system. The development of EVM involved numerous technical complexities along with fault-tolerant costs. Despite the technical development and complexities, experts believe that EVM is far from achieving perfection and there are many places that need to be optimized. The explorations of blockchain and smart contracts have a long way to go.
Since the development of digital currency and blockchain technology, focus has mainly shifted from the ‘coin’ to the ‘chain’. This has been able to be accomplished within the eight years of their existence. Based on the possibilities that blockchain offers on a variety of applications, one wonders what the next phase involves.
The development of internet 30 years ago opened up numerous opportunities for a variety of industries and individuals as it revolutionized the world in various aspects. The exploration and the usage of the internet was extensive and the idea of Internet of Things (IoT) was born several years ago being identified as the next network. Technological corporations have spent significant time and funds researching on the development of IoT and how it can be achieved, but up to today only a slight progress has been achieved. This was until the blockchain technology got introduced which have led to some progress in IoT. The problem that faced IoT was the realization of automation by the use of past technology, which was solved by Bitcoin a proven Distributed Autonomous Corporation (DAC). The use of DAC establishes an automated system that can be replicated in the development of IoT thus solving its initial problems. The blockchain is believed to be the next evolutionary network, and the separation of the blockchains from each other will no longer be necessary.