While traditional relationships between financial entities, such as banks, are strictly controlled and highly regulated, innovative software (called blockchain and bitcoin) offers a scalable and cost-effective way to group similar transactions across a network. First, familiarize yourself with the evolution of bitcoin and blockchain in the last decade. Then, learn about these innovations that will engender more efficient relationships in the finance industry. Read here if you are wondering about how Bitcoin grow up and become big money.
What are bitcoin and blockchain?
A bitcoin represents a value (e.g., a certain amount of goods or services) kept on a virtual record. It is kept on the blockchain to track exchanges between two parties. Transactions in the form of bitcoins and their addresses are treated as public information. Therefore, they are visible for all to see when connected to this record.
Like stock exchanges allow investors to buy, sell and trade securities, traders can trade bitcoins. Still, the digital money will not be stored by users in wallets like money held by banks or credit cards today. Instead, they will be held electronically on exchanges overseen by digital-wallet management companies.
Evolution of bitcoin as a payment method
Global bitcoin transactions have exploded since the introduction of bitcoin in 2009, reaching an all-time high of more than $10 billion in November 2013. At the same time, regulation and compliance costs associated with accepting bitcoin as a means of payment have also been steadily rising.
As illustrated in the charts created by experts, most bitcoins are being exchanged within the country where they were first mined and used as an alternative currency, like Japan. Bitcoin uses are currently limited, and there are still many challenges to solve before mass adoption can occur; these issues include volatility. It has been blamed for being too volatile for use as a currency, but businesses can benefit from the volatility. The majority of bitcoin transactions in 2017 were related to the purchase of goods, services and investments from merchants.
In 2017, Bitcoin was used by users to buy goods and services worth more than $100 billion. According to the blockchain, a significant portion of these purchases was made in the U.S., representing 6% of the value spent on goods and services in 2018. In addition, another notable spike in bitcoin spending was observed by consumers during the first week of December 2017, as witnessed by a dramatic increase in online sales tax payments during that week.
Later on, the price of bitcoin crashed in 2018, and it struggled to bounce back till the pandemic. In 2020, bitcoin displayed some exponential surges and continued to rock the financial market space. Bitcoin in no time was named the greatest profitable virtual asset or commodity of all time. However, the spot value of bitcoin has been struggling again as the market conditions are not good, and bitcoin whales sold most of their holding when it touched an all-time high of $65000 last year.
How did blockchain adoption roll out last decade?
After bitcoin was introduced in 2009, it became evident that users could apply its innovative features to a wide range of applications. At the same time, the exponential growth of the Internet and smartphones in the last decade gave rise to new business models, especially for cross-border transactions. As a result, in 2017, the transaction volume on global currency exchanges increased tenfold from $2 billion in 2014 to $20 billion in 2017.
As we advance, blockchain technology has the potential to disrupt handling money and trade across borders and cut transactional costs because of blockchain’s ability to create more efficient relationships for computerized transactions. Before ethereum, the blockchain’s use case was merely confined to the cryptocurrency space. However, when ethereum brought some jaw-dropping features like smart contracts to its platform, industries went crazy as blockchain was now disruptive for almost every gigantic industry like health care.
The blockchain has been chiefly used to develop transactions and accounting ledger applications. Today, it is being used by many industries to automate transactions and distributed record-keeping.
There are three flavours of blockchain: Public blockchains have no restrictions and are open to everyone. They offer transparency and trust but could be susceptible to malware, denial of service attacks or other forms of hacking. Private blockchains are open only to selected entities, such as partners in a supply chain or club members.
Because they’re smaller in scope and more tightly controlled, private blockchains can be more secure than public ones, but they require their users to take extra-careful steps to keep secrets from leaking out. Consortium blockchains are platforms that allow multiple parties to cooperate and share information. These may be best suited for businesses where transparency is particularly critical and security-critical.
How did blockchain disrupt industries?
In 2017, healthcare was the largest sector for blockchain use-cases globally, costing about $2 billion. Healthcare is an area that has needed innovation for a long time as it focuses on list updates and medical records management, so using blockchain technology presents excellent benefits in terms of efficiency and transparency. Other industries embracing blockchain are financial services, automobile manufacturing, social networks, and government agencies. Private blockchains will be able to benefit the industry by cutting costs by increasing transparency and security.