Unveiling the power of Bitcoin:
Cryptocurrencies Versatile Applications. Harnessing the Potential of Cryptocurrency.
Hi Folks.
On our last post we had a brief introduction to the blockchain and crypto. To refresh click here.
Today we will have a look at the concepts of bitcoin mining and bitcoin halving and then finish off with just some of the applications of cryptocurrency.
This is a quick overview and I would suggest you doing your own research if this topic interests you.
Bitcoin Mining: The Digital Gold Rush
At it core, Bitcoin is a decentralised cryptocurrency that relies on technology called blockchain. Unlike traditional currencies that are issued by central banks, Bitcoin is created through a process called mining. There’s no dynamite involved but rather miners use powerful computers to solve complex mathematical problems. The first computer to solve the problem receives the next block of Bitcoins.
The first miner to solve it gets to add the block to the blockchain, thereby validating the transactions within. In return, the successful miner is rewarded with newly minted Bitcoins and transaction fees. This process not only secures the network but also ensures the creation of new Bitcoin.
Mining is one way for you to obtain Bitcoin. If you are not tech savvy or unwilling to set up computing power, you could obtain Bitcoin directly from a crypto currency exchange such as Kraken or even withdraw from a Bitcoin ATM. You could also purchase through a traditional broker but it is better to have control over your own digital assets.
Bitcoin Halving: a Scarcity Mechanism
An intriguing aspect of Bitcoin mining is the “halving” event, which occurs every four years. During a halving, the reward that miners receive for adding a new block to the blockchain is cut in half. Initially, when Bitcoin was launched in 2009, miners received 50 Bitcoins for every block they mined. This number halved to 25 in 2012, then to 12.5 in 2016, and so on. The next having due to take place is April 2024.
The reason Bitcoin halves lies in scarcity. Satoshi Nakamoto designed Bitcoin to have a maximum supply of 21 million coins. By reducing the the mining rewards over time, Bitcoin becomes increasingly scarce (like gold for example) this model intends to counteract inflation and maintain the value of Bitcoin.
Use cases for cryptocurrency
Cryptocurrencies have found applications beyond financial transactions. Some include:
Remittances: Cryptocurrencies enable cheaper and quicker cross-border money transfers.
Smart Contracts: Ethereum’s blockchain allows for the creation of self-executing contracts, automating various processes.
Tokenization: Assets like real estate and artwork can be represented as tokens on a blockchain, making them more accessible for investment.
Decentralised Finance (DeFi): DeFi platforms use blockchain technology to recreate traditional financial services such as lending, borrowing and trading without intermediaries.
Some examples of Crypto applications:
Ethereum (ETH): Ethereum introduced smart contracts, enabling decentralised applications (DApps) and solving problems in various industries like finance, supply chain and gaming.
Ripple (XRP): Ripple focuses on solving cross-border payment inefficiencies, providing faster and cheaper remittance services.
Chainlink (LINK): Chainlink bridges the gap between smart contracts and real-world data, addressing the issue of trust in decentralised applications by providing tamper proof data.
Cardano (ADA): Cardano aims to create a secure and scalable blockchain and smart contract platform, addressing scalability and sustainability issues.
Basic Attention Token (BAT) : BAT is designed to improve the digital advertising industry by providing a more equitable system for users, publishers and advertisers.
TA (MIOTA) : IOTA focuses in the Internet of Things (IoT) and aims to solve scalability and transaction fee issues for connected devices.
Filecoin (FIL) : Filecoin offers decentralized storage solutions, addressing the problem of data storage and retrieval in a secure and distributed manner.
Aave (AAVE) : Aave is a decentralized lending platform that allows users to earn interest on their cryptocurrency holdings and provides access to instant loans without intermediaries.
Theta (THETA): Theta is working on improving the video streaming industry by enhancing content delivery and reducing the cost of bandwidth.
Bitcoin has had a profound impact on the financial world, inspiring the creation of thousands of other cryptocurrencies and blockchain projects. It introduced the concept of decentralised ledger technology and the potential for a borderless, digital store of value.
As a relatively new technology, cryptocurrency markets remain highly volatile and are still largely unregulated. Always exercise caution and consider your risk tolerance before investing in crypto. This article is merely informative and by no means meant as financial advice.
If you enjoyed this series and would like me to delve into the difference between crypto coins and crypto tokens let me know, otherwise we will jump to our final article in this series and discover how a meme became a coin of value.
Read Fall of the Cryptoqueen here