The concept of digital currency first emerged in the late 1970s. However, the cryptocurrency that we know of today has developed recently. Since the beginning of the COVID-19 pandemic-led lockdowns, the world of cryptocurrency has gained a lot of attention from people worldwide. Industry leaders and global personalities have endorsed cryptocurrency and encouraged people to indulge in mining and trading activities.
However, there remain a lot of questions in the minds of people. Alternative currency or transaction methods are new to us. It is only recently that online payments or internet banking have become a reality among people. To know more about it, let us discuss the technology that powers Bitcoin – Blockchain Technology.
What is Blockchain Technology?
At the epicenter of Bitcoin lies blockchain technology. As suggested by the name, it involves a chain of blocks. These blocks are accessible only to a small number of people who have ownership of the coins. When a Bitcoin miner creates new coins, they get added to the block itself. The blockchain functions in this way.
What is Decentralization, and how is Bitcoin decentralized?
Each Bitcoin owner has ownership and control. Several miners around the globe act as the authenticator for the transactions. Unlike traditional modes of payments such as internet banking or online banking, where the bank and the government have control, crypto doesn’t have a sole controller. The transactions that occur between people do not come under the supervision of a central entity.
What is good about Decentralization?
Now that we understand what Decentralization means, let’s look at the benefits.
a. Smoother transactions – Because of the decentralized nature of cryptocurrency, nobody has sole control. Therefore, the transactions that take place do not need authentication from a single source. This factor makes it easier for the people who are involved in investing and trading in Bitcoin.
b. Ease of cross-border payments – Every country has a different currency with another value. Moreover, financial dealings between various countries are complex and often under heavy governmental scrutiny. Bitcoin’s decentralized nature allows businesses in such conditions. There are platforms such as the crypto genius on which people can quickly log in and start trading with people worldwide.
c. Cost-Effectiveness – Since there is no single authenticator, cryptocurrency transactions do not require additional international payments processing fees. The miners who also act as authenticators do the job of approving transactions, which is why Bitcoin traders don’t have to pay for a payment. This element is a significant advantage for businesses that are starting to go global.
What’s terrible about Decentralization?
Although the decentralized character of Bitcoin is highly beneficial to most people, there are a few cons as well. Let us look at them now –
a. Suspicion regarding Bitcoin – Our world works in a way that everything is constantly under surveillance. That is how we gain the confidence of being safe. But when it comes to cryptocurrency, the matter is entirely different. No institution overlooks the functioning. Therefore, no government or bank will guarantee you anything for dealings in digital currency.
b. Banned in many countries – Many governments, such as the Bolivian government, have banned Bitcoin and other cryptocurrencies. The main reason behind this is the insecurity surrounding the transactions. Everything happens online, and nobody knows who is creating bitcoin or authenticating. Such a condition makes it threatening for governments to keep track of private property and assets.
The decentralized nature of Bitcoin is both a good thing and a bad thing. While it provides traders, miners, and investors freedom from many shenanigans, it also increases the risk of fraudulence. On the other hand, cryptocurrency is revolutionary because, for the first time, we have a currency that doesn’t belong to one nation. Crypto is the way of achieving a truly global society where borders don’t matter, and people can interact and earn from any part of the world.