May 5, 2022 - Read 5 -10 min
By now you are already familiar with words like Bitcoin, Blockchain, digital economy, financial developments, cryptoassets, cryptocurrencies, cryptocurrencies, decentralization, etc.
And it is not for less since due to the pandemic caused by Covid-19, we have witnessed an extreme digital transformation that has led IT and its innovations to position itself as a fundamental pillar, if not the main one, of our society.
As a result of this technological boom, which has been transversal to all human activities, a new milestone has been generated as far as economy and finance are concerned: Cryptoassets and the software developments around these.
Before continuing, it should be clarified that the cryptocurrency market was already quite popular before the pandemic, but it was because of this global crisis that propelled its growth by 300% in 2020, according to Statista.
Although there are still quite a few grey areas and gaps regarding the adoption of cryptocurrencies, we want to dig, for practical purposes, into the essential aspects of this emerging market in order to understand the new IT approaches and challenges that fintechs have and what their role is in the transformation of the business world.
Leaving history and its protagonists aside, the foundation on which cryptocurrencies and platforms around them are based is called Blockchain.
The blockchain is a technological solution capable of link and secure series of electronic data, which must be previously validated by several sources, and then chained by cryptographic sequences ordered in time. Just like adding links to a chain and numbering, taking note of the instant of time at which each one is added.
Thus, the structured way in which data blocks are created in this data system, along with the cryptographic identifier or hash, also known as fingerprint or digital signature, are the key properties that keep the data in the chain protected against manipulation or alteration.
In detail, to add new transactions or blocks to the chain, there must be a verification consensus among all the members or nodes (anonymous computers completely unknown to each other) that are active within the network.
The new block is then compared with each of the existing copies of the chain, and if the necessary conditions are met, it is approved and designated as the last link in the chain. And **this democratic participation of the network members that avoids centralization or the need for a validating entity as an intermediary in the process.
As a result, all the blocks belong to the public domain and are available for consultation and review, as if they were a ledger or master book open to all. Moreover, these records can’t be modified or deleted thanks to its digital signature and this is what makes any development in the blockchain a transparent and democratic creation by derivation.
According to the World Bank, this technology could generate important advances in the financial world. The adoption of the Blockchain, given its decentralized and highly reliable character, would promote development, inclusion and innovation in financial circuits. A compelling reason to keep an eye on this promising technology.
Bitcoin is the quintessential cryptocurrency, it is the definitive and irrefutable argument that it is possible to perform peer-to-peer (P2P) monetary transactions without intermediaries, using blockchain technology as a support.
In 2008, under the pseudonym of Satoshi Nakamoto, a completely unknown man at the time and today, published a whitepaper in which he detailed in depth a P2P payment system using a digital currency called "Bitcoin".
Months later, this same man registered the first block of this currency, thus giving rise to the first blockchain network and the world's first cryptocurrency, the Bitcoin.
According to our global structure, each country has its own form of government and in turn they have their own monetary system which is responsible for regulating the amount of fiat money in circulation. This printed money is what allows us to acquire goods and services as we need after having received it in exchange for selling goods or providing a service within society.
With bitcoin the situation is fundamentally different and that is what makes it revolutionary, because although it is a (crypto) currency with which we can acquire goods and services, it is not part of the monetary system of any government and therefore cannot be issued or controlled by any of them, thanks to the decentralization of the blockchain.
Therefore, in order to create new bitcoins, a digital process known as mining is applied, in which network participants solve highly complex mathematical calculations to obtain new coins of the cryptocurrency in exchange. And although it sounds simple, it is not since it requires very powerful machines technologically speaking as well as a condition of participation called proof of work (POW) which avoids the falsification of the tran by requiring the unanimous approval of all active nodes in the network.
Vitalik Buterin is the mastermind behind the world's most important blockchain platform after bitcoin, Ethereum. This young Russian-born developer and writer, once a member of the bitcoin community, proposed to use the network to generate and manage various collaborative and decentralized applications (dApps) but his requests were unsuccessful.
He then formed a team of developers to launch his projects and in 2015 they gave life to Ethereum, a digital platform of blockchain technology along with its own cryptocurrency known as Ether.
Vitalik along with his team and his platform launched one of the most attractive functionalities within Ethereum, Smart Contracts. These are, as he had dreamed for bitcoin, a collaborative solution which allows to create traditional contracts but written in computer language under predefined requirements that execute it.
In simpler terms, a traditional contract, for example a purchase and sale contract, requires a third party to validate and execute it once the parties have agreed upon. A smart contract is programmed in conjunction by the parties and is automatically executed once the stipulated conditions are met.
Ethereum has positioned itself as the most promising blockchain-based platform for the business world due to its ability to provide significant value in sectors such as real estate thanks to its transparency, efficiency and low cost. According to the consulting firm Deloitte.
The blockchain is a technology that is still under development and its uses and applications are still being discovered due to the potential seen by the private sector, which is gradually taking part on this transformation of the economy.
This has triggered business initiatives, especially in the hotel sector, which ones are basing their operations on platforms such as Ethereum to create their own currency (token) and thus be able to give it value, utility or access capacity within their ecosystem.
Similarly, financial companies such as R3 and JP Morgan have developed new types of blockchain applications to limit the use of public networks by being able to create their own networks in situations that require a high level of trust in all participants to process their private transactions.
For this reason, the consulting firm Gartner predicts that by the end of this year around 25% of global companies will have said yes to the adoption of Smart Contracts within their operations.
In conclusion, this technology, although disruptive, is still very young and has a long way to go before becoming the new business trend. Although we must not forget that these platforms are evolving by leaps and bounds and it could be a strategic mistake for companies and their CIO's to leave them off their radars.
From DreamCode we understand the great challenge that means for many companies the adoption of new processes, yet it is imperative to be at the vanguard of the technological transformation we are living. For this reason, we provide consulting services and guidance focused on the integration of business technology tools in order to increase the level of competitiveness that has very high standards today.
Our developments have allowed several companies in the continent to optimize many of their processes. So if you need a solution in your high-level technological structure, the time to meet us has come. enter to.