The cryptocurrency craze may seem like a fad or a sign of things to come, depending on your world view. But the blockchain concepts that underly Bitcoin and Ethereum are unquestionably going to be world-changing.
To those who haven’t been paying attention, Bitcoin might sound like something only technology-obsessed people use.
Ether might be something mechanics use to start engines or that caused Hunter S. Thompson to hallucinate in Fear and Loathing in Las Vegas.
In reality, both technologies have come a long way since Bitcoin was an obscure term seldom used outside fintech circles. The two dominant cryptocurrencies — and blockchain, the technology that powers them — are changing the world in ways that might not be obvious to the layperson.
From high-profile use cases to behind-the-scenes mechanisms, this post will take a look at where the technology started and where it might be going.
Evolution of Crypto Technology
Let’s get everyone onto the same page with a brief introduction for those who know little about Bitcoin and next-to-nothing about Ether.
Bitcoin introduced the world to blockchain technology. As a result, people often mistake the terms or think they mean the same thing.
Blockchain is actually the technology upon which Bitcoin is built.
While the world’s most famous cryptocurrency operates on a blockchain, it isn’t the blockchain in and of itself. So, what is blockchain?
Put simply, blockchain is a way of chaining together blocks of records using cryptography. This chain of blocks is organized in a way that makes it extraordinarily secure. Each block contains a cryptographic hash (in other words, an encoded copy) of the block that came before it. This makes tampering with a well-constructed blockchain practically impossible.
Everyone has heard of Bitcoin, which uses a blockchain to form the basis of a currency.
People can buy and sell goods using blocks, or sections of blocks, on this blockchain. The use of cryptographic hashes to underpin a currency led to the now ubiquitous term, cryptocurrency (often abbreviated to crypto).
The next major evolution in both blockchain and cryptocurrency technology came with the introduction of Ethereum, or Ether.
This new cryptocurrency expanded the power of the blockchain. It allowed for more data to be stored in its records and for programmable ‘smart contracts’ to control aspects of the transactions.
As we’ll see, these improvements opened up a whole new world of possibilities.
Adoption of the Technology
Adoption of the Technology
Now that we know what we’re talking about, let’s explore how this technology is currently being used.
We’ll start at the start, when Bitcoin rose from obscurity, then try to predict how ingrained it will be in our day-to-day lives in the future.
I’m sure you’ve heard the sorry refrain of some poor individual lamenting not having bought Bitcoin when it only cost a few pennies.
Who could have imagined that a new form of digital-only currency would become the greatest investment that some people would ever make?
With a single Bitcoin now worth tens of thousands of dollars, investors are certainly taking notice. In fact, many Bitcoin owners hold coins as an investment rather than as a currency with which to buy things.
Entering the Mainstream
Technology retailer Newegg was one of the first mainstream businesses to accept payment in Bitcoin, but many others have since followed suit.
You can now pay your phone bill using Bitcoin, book flights, purchase food at nationally recognized chains, or even pay to watch a movie.
A 2020 survey found that a third of small- to medium-sized businesses were accepting payment in Bitcoin.
As businesses find ways to take whatever payment method a customers want to use, that number will continue to climb.
El Salvador: Leading the Way?
Being able to pay your phone bill with Bitcoin certainly solidifies it as a legitimate currency (in the literal sense of the word). But in the legal sense, Bitcoin is generally not considered legal tender.
However, that recently changed when El Salvador became the first country to ignore the naysayers and recognize the cryptocurrency as official legal tender.
If that country’s experiment pans out, other countries will surely follow suit. However, it will likely be a while before they’re joined by any of the world’s economic superpowers.
Ethereum in the Metaverse
The introduction of Ethereum and the advancements it made in blockchain technology meant that developers could now find new and exciting uses for cryptocurrency.
For a few years now, virtual worlds powered by the Ethereum platform have allowed investors to purchase virtual land — with a plot of virtual land commanding over $10,000.
Landowners can build games and other attractions on their land and then charge visitors — in Ethereum — to visit them.
You can even get a job in these metaverses and receive payment in Ether, which unlike other virtual currencies can be converted into real dollars.
With big players such as Meta (formerly Facebook), Epic Games, and Microsoft investing heavily to create these virtual worlds, the way we socialize, play, work, and own property in them is set to become a major economic sector.
NFTs Take the World by Storm
Non-Fungible Tokens (NFTs) are digital property deeds, with ownership recorded on a blockchain, and their popularity has exploded in the last year.
They allow the creator of any form of art to retain and prove ownership rights, something that has become a huge issue since the advent of peer-to-peer file sharing and content streaming over the internet.
Businesses of every shape and size are busy issuing NFTs and testing ways of monetizing the concept.
Celebrities and other influencers made the ‘Bored Ape’ NFT series one of the most recognizable images on the internet.
Whether NFTs as an investment class will stick around or are just the latest fad remains to be seen. One thing’s for sure: they’ve gone a long way towards making transactions stored on the blockchain a mainstream phenomenon.
Distributed Ledger Technology (DLT)
Perhaps the most exciting use of blockchain technology made possible by Ethereum innovations is distributed ledger technology (DLT).
This is like NFTs, but with a more utilitarian and practical use.
Distributed ledger technology lets companies securely record and track payments, shipping, and other transactional information using the blockchain.
The technology has the potential to streamline all manner of business operations and to transform the way we record any type of transaction.
Powering the World With Blockchain
In case this all sounds a bit optimistic, let’s take a look at some real-world applications of blockchain technology.
What will ultimately engrain the technology into our lives will be behind-the-scenes uses that simply make the world run better. The Ethereum blockchain is already silently making its way into nearly every aspect of our lives, improving the world around us without most of us even noticing.
Bank technology notoriously feels like it’s stuck in the Stone Age. If you’ve ever had a bank hold a check hostage for several days while waiting for it to “clear”, you know exactly what I’m talking about.
But it isn’t just personal checks that take a long time to clear. The same is true for commercial transactions of all shapes and sizes.
Technology like DLT can allow banks to speed up their payments while also making them more secure.
The food supply might be our most vital infrastructure, which is why IBM is working to bring the power of blockchain to bear on it.
The technology will allow precise tracking of food products, which will:
- Streamline shipping operations
- Make contaminated food easier to detect and contain
- Prevent fraud
- Verify the origin of ingredients
- Eliminate waste hotspots
- And much more…
The National Institute of Health recognizes two major problems with healthcare in the modern era: digital security and digital ownership.
Within an increasingly digital world, the need to share data between various healthcare providers in a secure way is important to patients’ health outcomes.
At the same time, cybersecurity is becoming increasingly important as more and more cyber attacks occur.
Given the sensitive nature of health data, the blockchain is an obvious choice for building solutions that address both of those problems.
Travel and Transportation
Airlines are also making the switch to blockchain for their transactions.
Using a crypto-powered ticketing system can dramatically reduce the time it takes for an airline to settle transactions with its agents, turning a process that previously took a couple of weeks down to a few days.
Other airlines are sure to follow suit with their own blockchain ticketing systems and cryptocurrency payment options.
Supply Chain Management
An ever-present problem in the supply chain is that it contains multiple links. Unlike the links in a blockchain, the supply chain is full of inefficiencies.
Keeping track of where every item is, reconciling disputes, and recording transactions relies on disparate systems managed by several different parties — and they have to work together efficiently and securely.
Blockchain technology like Ethereum makes tracking shipments, automating transactions, and consensus-building much easier.
We’ve already talked about virtual land investments being built on the Ethereum blockchain but real property also stands to benefit from the technology.
Smart contracts built into Ethereum (and similar technologies) reduce the need for third-party involvement.
Also, the fractional ownership concept made popular by Bitcoin allows property owners to break their property into many smaller investments and realize liquidity from highly-priced properties much more quickly.
What Does the Future Hold
Bitcoin will remain a popular investment vehicle and currency. Meanwhile, Ethereum has supercharged the technology and turned it into a platform that’s already working behind the scenes to power many of our day-to-day activities.
As the world becomes ever more digital, the advantages of fast, secure, and easily tracked transactions will bring blockchain into even more aspects of our life.
The real promise of Ethereum, DLT, and related technologies lies not in what you personally can do with them but in what they can do for you.
Blockchain is a silent, invisible hand, steadily making your life more efficient by powering the infrastructure around you.