Most people can agree on the fact that technology innovation has accelerated in the last two decades. Technology makes all of our lives simpler and easier – we can get our food delivered, order a taxi to come to our door in minutes, hold meetings online, and access a wealth of information on any conceivable topic, all at the click of a button. Now very few of us could imagine life without technology.
Blockchain technology, in particular, could be the wave of the future.
What is blockchain and why is it important?
The whole point of using a blockchain is to let people — in particular, people who don’t trust one another — share valuable data in a secure, tamperproof way. MIT Technology Review
A digital asset, using blockchain technology, can hold a record or ledger of every transaction ever made. This information is stored across a vast number of computers. This ‘decentralization’ of the blockchain is what provides speed and security, as it is very difficult to hack. It is still possible, however, to share that data in a reliable and easy to access way. So, you get the best of both worlds: maximum latency with the highest security.
In a nutshell:
- Digital assets are distributed instead of copied or transferred.
- The asset is decentralized, allowing full real-time access.
- A transparent ledger of changes preserves the integrity of the document, which creates indisputable trust in the asset.
This security and transparency make blockchains extremely valuable across all types of industries, from banking & finance to GP surgeries and hospitals, who want to securely store patient data.
Why invest in cryptocurrencies, if you believe in blockchain?
There is a direct value connection between the blockchain technology and its crypto asset. Most public blockchain projects rely on their native crypto asset as a reward or control mechanism to maintain the sustainability of the ledger.
‘’Blockchain is the tech. Bitcoin is merely the first mainstream manifestation of its potential’’, Marc Kenigsberg.
Bitcoin may be the first, but it is certainly not the only player.
Ethereum, for example, has the native token Ether (ETH) but also has a pseudo token GAS which is used to process transactions on the network. ETH is a unit of value tied to the success of Ethereum projects, GAS is a unit of cost to run the network.
The two are connected but still separate. The prices of each type of token can fluctuate without affecting the real price of the other. The price of ETH could still increase based on adoption (real or speculative) of the Ethereum system, even if GAS went down.
As an investor, belief in a blockchain project requires a belief in its respective assets. If you believe in a company, you buy equity in that company (or in a diversified portfolio of companies). The principle is the same with cryptocurrencies. In the same way that a prudent investor would not buy shares in a company without understanding that company’s value proposition and future prospects, before investing in a cryptocurrency, you should have a belief in the value that the blockchain project can deliver.
Blockchain – here to stay?
In 1995, Newsweek predicted that that ‘internet thing’ wouldn’t catch on. How wrong could they have been? Now imagine you could have invested into the internet protocol (as an infrastructure) back in the 1990’s, before mass adoption.
That is exactly what you can do now if you believe in blockchain technology. These infrastructures have their own native tokens, like ETH, which makes them investable.
If you’re convinced that blockchain technology is one of the most impactful developments that will take place over the next decade, then the question becomes, why aren’t you invested in cryptocurrencies yet?
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This article is strictly for educational purposes and isn’t to be construed as financial advice.
