The story of blockchain rising to prominence and Bitcoin becoming one of the most sought after assets of the 21st century is a marvellous one. Bitcoin, the most influential and well known implementations of blockchain technology was created in the basement belonging to Satoshi Nakamoto who is epitome of blockchain lore.
Blockchain was actually conceptualised well before Bitcoin was developed but Bitcoin highlighted its potential.
How Does it Work?
Blockchain and particularly Bitcoin was created with the sole purpose of eliminating the need for central authority in order to manage records and specifically financial records. The same way the banks manage your money now by keeping records of your debts and credits, Bitcoin was made to do a similar thing but in a decentralised way. How we would we know who owns what without someone keeping track? The answer is algorithms.
Much of the world now runs on algorithms and complex computations and Bitcoin was no different. Employing a decentralised ledger of accounts available to everyone on the network, Bitcoin allowed transactions to be authenticated, accounts and assets to be tracked digitally and autonomously using cryptography. Not to get into the nitty and gritty that I actually do not know well anyways, each transaction is housed in a block and both the block and transactions have ids recognisable to the entire network. They are also time marked meaning anybody can view a transaction and the time it happened from anywhere in the world. This very underrated feature often goes overlooked because you could never see transactions that did not belong to you prior to this especially with traditional banking.
This transparency and ease of transferability of assets without naming made Bitcoin and other implementations of blockchain highly attractive initially, and it is still the main reason why decentralized cryptocurrencies continue to revolutionize financial systems and challenge traditional norms.
The growth of blockchain and applications
Bitcoin and blockchain has come long way from being the high-risk asset that every day time trader, futurist or even undiagnosed gambler loves to throw their money in. Blockchain is now a respected “alternative” asset. Here are some facts about its growth:
- The global blockchain technology market size was estimated at USD 4.8 billion in 2022 and is extending to around $2.3 Trillion by 2032, poised to grow at a compound annual growth rate (CAGR) of 85.7% during the forecast period 2023 to 2032. – Precedence Research
- In total, approximately 460 million Bitcoin wallets have been created. However, around 90% of these wallets are inactive or hold minimal value. – Exploding Topics
- An impressive 81% of the world’s top 100 public companies by market capitalization use blockchain technology – Blockdata
Microsoft, Amazon, J.P. Morgan, Walmart, Alibaba, PayPal, Samsung and the Bank of China are among the 27 companies with a fully functioning live blockchain product.
A Promising Alternative Asset in the 2020s
Currency destabilisation, financial uncertainties and related have kept Bitcoin and other cryptocurrencies attractive to those looking hold their assets in more controlled ways. Nigeria for example has seen record levels of inflation reaching 33.2% in March 2024.
This has coincided with record levels of blockchain adoption with the number of wallets and accounts being on crypto exchanges in Nigeria skyrocketing. Authorities were even concerned and went onto to blame Binance for playing a role in destabilising their currency. I am not sure how the government came to that conclusion but I guess it is a rational consideration? The point is that alternative assets like Bitcoin and Ethereum are being used as hedge assets against highly volatile currencies as a store of value.
Cryptocurrencies like Bitcoin are highly volatile themselves being prone to 5%-10% swings on a weekly basis. This is a traders paradise as catching the right side of the trading direction could see you make serious money but alternatively you could see your portfolio go down a stomach turning amount otherwise.
The Institutionalisation of Bitcoin and Crypto
Massive financial institutions sat on the side-lines mainly during the bull runs of the late 2010s. Issuing scepticisms and criticisms of the digital assets but they have started the 2020s on a different standing. I mean Bitcoin has the highest return of any asset in the last 10 years and that was something they could not ignore.
For that reason, the Bitcoin ETF (Exchange Traded Fund) was established as a way for more traditional investors to have risk-adjusted exposure to the asset. This was well received by the wider blockchain community but there were some negative opinions with most being related to the fact that these institutions will now have a massive stake in a asset that was mainly left to retail investors during its uprising.
Nevertheless, the ETF marked a turning point for blockchain and alternative assets as the world has and is seeing it in a much more positive light.
Another important thing to note is that institutions have had control of most of crypto for a while now. Most asset holders use a third-party exchange to hold their Bitcoin or Ethereum meaning they don’t actually own their Bitcoin but on paper they do. I call it “Banking 2.0”. It’s not necessarily an issue as you can withdraw the assets to your wallet at anytime but exchanges have be known for being unreliable and we HAVE seen issues occur with withdrawals and management of assets numerous times.
Does Anyone Actually Use it Though?
You will notice that the actual use of blockchain has not been talked about much. That’s because it’s hard to find actual use cases of blockchain outside of cryptocurrency . They definitely exist they are just hard to find!
With that said, there are use cases that I found that were quite interesting.
Parcl – Blockchain-Enabled Real Estate Stock Market
Parcl is a decentralized platform that lets you invest in real estate markets without owning physical property. It offers city indexes representing median prices in various cities. You can trade these indexes, take long or short positions, and start with just $1. Parcl’s transparency and accessibility make real estate trading easier for everyone through blockchain technology.
Helium Network– Crypto Incentivised Wireless Networks
The Helium Network incentivizes the creation of decentralized wireless networks. It achieves this by rewarding participants who contribute to network coverage.
The network operates on a novel consensus protocol called Proof-of-Coverage. Essentially, users deploy hotspots that validate wireless coverage in specific areas. So your I-O-T devices can provide WiFi and you can earn tokens as result which is really interesting way to drive transactions on your network.
Interesting fact about Helium and HNT is that despite the great things they are doing, it currently trades at around $4 which is miles off its all time high of $50. Cryptocurrencies move up and down in price and Heliums all time high happened to occur during the late 2010s early 2020s bull run but it’s not an indicator of their viability as an asset and a solution. Trading in cryptocurrency is often isolated from value and it seems to be more about speculation on price.
While there are companies and individuals building solutions with blockchain, a lot of the hype around it comes from price speculation like I mentioned which often clouds over the actual work being done.
What Does the Future Look Like?
I think Bitcoin will see higher highs as people embrace the idea of storing money in currencies other than government nominated ones. Bull and bear runs will see crypto sway onwards but also upwards which has been its trajectory since its inception.
It’s been difficult to measure the actual impact of blockchain on digital solutions and computational problems but there is proof of companies trying to use the decentralised technology to create privacy-secure systems. Perhaps system like this will be our future but people building these blockchain systems will have to do a lot of convincing for people skeptical about what it actually does! As of yet, I am have not seen a even moderately accepted and used application of blockchain aside from cryptocurrency but I believe that can change.
I believe there needs to be a stimulus and people need to come to the realisation that central authorities being able to view your data and manage is not ideal. Right now, it seems like people are happy to delegate the authority to governments and financial institutions but how long will that last. When there is a need, people will make that change but it’s hard to say when that need will arise?
Overall, blockchain is an exciting technology, the way it operates and how it effectively manages data without a central authority is even more exciting and applications like cryptocurrency are signs of what it can be used for. I think for it grow into more than an alternative asset to invest in the real world applications need to increase drastically. Companies are working on it but the scale is just not there.
