Blockchain, Bitcoin, Cryptocurrencies What are they? – A very, very simple guide.

Blockchain, Bitcoin, Cryptocurrencies What are they? – A very, very simple guide.

  • Posted by Fran Saggers in Uncategorized
  • March 2, 2018
  • No Comments

You can’t attend a meeting or read a newsletter at the start of 2018 without hearing about blockchain and Bitcoin. Here we attempt to demystify these complex topics and predict how they might affect your business in the future.

Simply put, blockchain is like one huge ledger that everyone has access to. It solves the big problem that was created when people first imagined dealing with a digital currency – double spending. What’s to stop people using the same digital credit many times?

Because blockchain provides a ledger of every transaction ever made with a digital currency it is possible to validate every transaction that is going to take place. However this is complex and costly work. As a transaction takes place a number of organisations “miners” will try and solve the puzzle it creates in order to verify it. To solve this puzzle takes a huge amount of knowledge and energy in the form of electricity used to power sophisticated IT Hardware. These “miners” of course need to be paid for their efforts. They are paid in Bitcoin – A currency is born and it can be traded like any other currency.

There are other currencies (Ripple, Monero, Dash, LiteCoin, ZCash, Ethereum) working in a very similar fashion, just like there are different currencies for traditional paper money.

Many experts are likening the emergence of blockchain and cryptocurrencies to the dawn of the internet and rightly so. This is the biggest change in the way we trade since the creation of the very first physical coin. Just like the tech bubble and race in the 90’s some technologies and protocols will get a grip and flourish whilst others will fall by the wayside.

A report published by McKinsey predicts that the real benefits of blockchain will be felt in the early 2020s and right now this seems like a realistic prediction.

Cryptocurrencies have huge potential to streamline the processes of the SME business community. We recommend you keep a very close eye on this rapidly developing trading method. Ask your accountant about how to prepare.

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