The blockchain is the first native digital medium for peer-to-peer value exchange. Cryptocurrency is a type of digital money – a blockchain DApp (decentralized application), created for anonymity and security reasons. Virtual cash is a way to make payments without the need for central banks, long processing and bureaucracy.
The short, long story about the first cryptocurrency – Bitcoin
Cryptocurrencies started with the fake nickname Satoshi Nakamoto in 2007. To this day, we don’t know who he (or she/they) is. According to the legend, Satoshi started working on Bitcoin in 2007. There was speculation that Satoshi could also be a group of people. Nakamoto said that writing the base of Bitcoin took him about a year.
In 2008, three developers: Neal Kin, Vladimir Oksman and Charles Bry submitted an exciting encryption patent application which looks and works the same as Bitcoin. Three days later, the bitcoin.org domain is registered by anonymousspeech.com.
31.10.2008 Satoshi publishes his white paper – Bitcoin P2P ecash which provided a solution for some issues with cryptocurrency.
On 2 January 2009, the first block was created. It was called the “Genesis block”. A week later Bitcoin v0.1. was revealed.
One of the first breakthrough moments was the first Bitcoin transaction after three days from the unveiling of Bitcoin v0.1. Nakamoto transferred bitcoin from block 170 to Hal Finney – a PGP Corporation employee. It was the beginning of Bitcoin as we know it. In October 2009, New Liberty published the first exchange rate. A couple of weeks later, Bitcoin v0.2 was distributed.
The first exchange office, Bitcoin market, appeared at the beginning of 2010. In July, Slashdot published an article about bitcoin. As a result, the value of bitcoin rose tenfold. In the months following February 2010, new exchange markets were opened, and it is now possible to exchange bitcoin for many world currencies.
The most exciting and essential information bitcoin provides is that value depends only on demand. It is independent of speculation.
Blockchain – FinTech future?
Cryptocurrency mining is all about the blockchain and cryptology. It consists of solving cryptographic signatures on powerful machines and with a particular program that helps miners compete with their peers. It is an electronic and shared ledger between users (miners).
The ledger consists of time and value transactions without any personal data about the consignor and consignee.
At regular intervals, miners would attempt to solve a block containing transaction data using cryptographic hash functions. A hash is a numeric value of fixed length that uniquely identifies data.
Blockchain could have a DApp (decentralised blockchain application), and for now, cryptocurrency is the only “dAPP” which is available.
The future of FinTech belongs to the blockchain. Why? It will make it possible to create automatic and intelligent contract generation when the project/agreement will have finished without any human interference.
As a result, the EU / USA banking sector can save from $3 billion to $11 billion per year. In the motor vehicle insurance industry, a blockchain could reduce the cost of processing data by about $21 billion per year.
A few words about mining difficulty
There are 1315 cryptocurrencies registered on coinmarketcap.com. Their number is increasing rapidly. Bitcoin, Ethereum, Ripple and Litecoin are the most valuable. What is most interesting is that the newest cryptocurrencies are easiest to mine. Why is this happening? Mining difficulty is due to a couple of reasons. First of all, there is block difficulty, which forces valid blocks to have a hash below this level. The second reason is the factor of how many miners are mining on the network.
With bitcoin, the mining difficulty adjusts every 2,016 blocks. Depending on how many miners were mining, their combined hash power, and the time it took to find those 2,016 blocks, the difficulty is higher or lower.
Why are GPUs so expensive right now?
Depending on which cryptocurrency you would like to mine, you have to choose a type of machine that will be more or less effective. ASICs are better for Bitcoins, CPUs for Monero and GPUs for Ethereum.
Nowadays, Ethereum is one of the most popular and cost-effective cryptocurrencies.
Miners buy a lot of GPUs designed primarily for gamers (because of GPU performance). Demand is higher than supply. The GPU market is empty, and prices are getting higher.
Existing GPUs aren’t powerful enough, so now miners are flocking to application-specific integrated circuits or ASICs. The most significant players on the GPU market, NVIDIA and AMD, are working on GPUs that could be used correctly for this purpose.
In 2017, eight States have worked out legislation on the use of Bitcoin and blockchain technology. Several pieces of such legislation were passed into law.
The most important developments for blockchain regulation and implementation in the U.S. are recognition of smart contracts in Arizona, blockchain as evidence in Vermont, real estate records in Chicago, and a pending initiative authorising the registration of shares of Delaware companies in blockchain technology in Delaware.
Bitcoin is getting safeguards as a traditional asset. The U.S. Commodity Futures Trading Commission granted LedgerX, a cryptocurrency trading platform operator, approval to be the first regulated digital currency options exchange.
In 2017, the European Union government revealed that they are working on a blockchain to support distributed ledger-based projects. According to this information, the EU is considering expanding its efforts on supporting projects related to the ledger technology.
The EU is monitoring the DLT and Blockchain situation and is working out DLT benefits and challenges for applications in FinTech.
The official information explains that the European Commission would like to “pilot projects to foster decentralised innovation ecosystems and help reshape interactions between consumers, producers, creators and among citizens, businesses and administrations to the end benefit of society.”
One European country, Switzerland, is becoming one of the leading European hubs for cryptocurrency and blockchain technology. This initiative is headed by the Swiss non-profit blockchain and cryptographic technology association. They have started developing an ICO Code of Conduct.
What is next?
Blockchain technology is a viable alternative to the traditional banking model and a perfect match for FinTech industry issues and challenges. It reduces costs and provides anonymous, transparent, fast and safe payments processing.