Why now is a good time to learn about blockchain and crypto

In recent years, there has been an exponential increase in the use of blockchain technology. Since 2016, the number of people who have cryptocurrencies on stock exchanges and wallets has risen from five million to over 200 million.

However, there is a huge difference between those who have used blockchain technology and those who understand it. If you are reading this, you are still out early and it is good time to move on with your crypto knowledge. There is even evidence to prove it.

Studies suggest that as many as 98 percent of crypto users do not understand basic crypto concepts. When surveyed, a majority of users have claimed that “blockchain” and “Bitcoin” are synonymous terms or admitted to being ignorant. And yes, there are definitely two different things.

This becomes especially clear in times of market decline, such as what we are witnessing now. For those who are constantly chasing the hype surrounding the latest memecoins, the bear market may have little to offer. On the other hand, some may realize that leaving the market may be the best time to educate themselves and ultimately actually understand what they are investing in.

Learning about the blockchain can really be daunting for a beginner. There is a lot of technical jargon floating around, and it is difficult to separate the essential details from the fluff.

This is why we have put together this explanation with Luno’s crypto education hub – Luno Discover, which breaks down everything you need to know about blockchain and its relationship to the crypto ecosystem, in a simple way, to help your understanding.

The birth of blockchain

Before you enter what blockchain is, it’s important to put some context around Why it came into being.

Between 2008 and 2010, the major financial crisis led to the failure of over 300 banks. This led to consumers losing confidence in the banking industry’s ability to manage money.

It became clear that the banks had considerable power to mismanage funds and could do so without the investors’ knowledge.

During this time, blockchain technology – although theorized in the 1990s – saw its first practical use as a system for facilitating transactions without the need for an intermediary (ie a bank). This way, people could keep control of their money at all times and still be able to trade easily.

Bitcoin was the first form of electronic cash, also known as digital currency, to use blockchain technology. With Bitcoin, people will be able to exchange value directly with each other over the internet, without the need for an “intermediary”.

How does blockchain technology work?

A blockchain maintains an overview of transactions, much like a bank would do, but it eliminates any risk of discrepancies or human error. This is because each transaction is verified by multiple nodes (read: computers) as opposed to one intermediary.

For example, when it comes to Bitcoin, it is estimated that there are over 40,000 Bitcoin nodes today.

Transactions are only registered on the blockchain if a majority of these nodes accept that they are legitimate. This ensures that the record cannot be forged.

Once a transaction is registered on a blockchain, it cannot be changed or deleted. It is also impossible to make a crypto transaction without it being registered on a blockchain.

So for every Bitcoin that exists, there is an overview of all the transactions it has been used in. This record is publicly available and cannot be manipulated by any individuals.

This blockchain technology is also used as a basis for creating other cryptocurrencies that you may know as Ethereum.

Why is this a big deal?

By ensuring that transactions are irreversible once they are registered, blockchain technology eliminates the need to mediate any disputes and ensures transparency in money transactions

Banks have to deal with problems such as chargebacks and accounting errors, sometimes due to human error, which lead to increased operating costs. Ultimately, these costs also flow to consumers in the form of fees, which can be extremely high – especially when sending money across national borders.

With blockchain technology, users consistently enjoy low transaction fees and much faster processing times as well. While international bank transfers can take up to five days, cryptocurrencies can usually be processed in minutes.

Crypto apps today allow seamless transfer of funds, and some have even introduced debit cards that can be used to make real-world purchases.

For businesses, accepting cryptocurrencies means offering a cheaper payment option to avoid credit card processing fees, which can be as high as five percent per transaction. In Singapore, restaurants and bars such as Maison Ikkoku and Joo Bar now allow customers to pay with crypto.

Blockchain beyond finance

Although it is primarily known for its financial aids, blockchain technology offers much more than that.

Any type of transaction can be registered on a blockchain, not just money. This opens up a whole range of possibilities in areas such as collectibles, supply chain management and voice systems.

Non-fungible tokens (NFTs) use blockchain technology to verify the authenticity of digital files and their historical transactions – who created them, who were previous owners, and who currently owns them. These can range from artwork and videos, to diplomas and medical prescriptions.

As NFT art has become popular, scammers have tried to sell counterfeit copies of popular works. It is up to buyers to do their own research and ensure that their purchases are legitimate. They can do so by tracing historical transactions all the way back to the NFT creator’s wallet.

Blockchain technology can also prove useful in the management of complex supply chains.

For example, Walmart sends out thousands of shipments a day while working with a variety of transportation providers.

Usually the company has to manually keep track of shipments and process payments. This process was not only expensive and time consuming, but it would also lead to delays. Using blockchain technology, Walmart is able to synchronize all logistics and implement an automated payment system instead.

Finally, the use of the blockchain to vote is another use case that has become popular.

From reality TV shows to global elections, rigging voice scandals are popping up all the time. Blockchain can help avoid this by ensuring transparency. Each vote is registered as a transaction and can be seen and verified by anyone.

The emergence of Web3

All these uses, when put together, contribute to the emergence of Web3. While crypto is changing the financial world, Web3 uses blockchain technology to do the same with the internet.

Currently, in the Web2 world, websites are hosted on a single server. The owners of these servers have access to user data and are allowed to control which users are allowed to use their services.

In contrast, Web3 involves the storage of data across a network of computers (think nodes in the case of Bitcoin). No individual has the power to restrict access to these apps.

Take social media, for example. While Instagram and Twitter are able to moderate the content posted on their platforms, there will be no such censorship controlled by a centralized authority in the Web3 world.

It remains to be seen whether Web3 is here to replace Web2, or whether the two will exist in harmony. One thing is for sure, though: the Internet will never be the same again.

This is just the beginning of a six-part series that will help you navigate the world of crypto, NFTs and blockchain with ease. While you wait for the next issue, you can head over to Luno Discover to learn a little jargon, and if you enjoy bite-sized educational pieces, subscribing to the Luno Telegram channel may better suit your needs.

This article was written in collaboration with Luno.

This partnership between Vulcan Post and Luno is for educational purposes only. Luno Singapore has been granted approval in principle by MAS under the Payment Services Act 2019. Cryptocurrency is a high-risk investment. The value of cryptocurrency can fluctuate significantly and you can lose the capital you invest. Before investing, we encourage you to learn about cryptocurrencies and familiarize yourself with the risks involved, which are detailed in Luno’s risk warning.

Selected image credit: Deloitte via Quartz