If you have been following the finance world lately, you must have heard the following terms very frequently: Blockchain, Cryptocurrency, Bitcoin. But what are these buzzwords? And why have they gained so much popularity?

Here, we explain the basics of these terminologies

Blockchain Technology

Source: SmartDataCollective
Source: SmartDataCollective

The origin of blockchain is rather ambiguous; this technology was invented in 2009 by a person or group of people that are called by the pseudonym Satoshi Nakomoto. The aim was to develop a technology that could help two parties to send payments digitally and anonymously without a third party to verify the transaction. It was initially developed to assist the transfer of cryptocurrencies i.e. digital money.

Blockchain is essentially a shared database populated with entries that must be confirmed and encrypted. It is like a highly advanced Google Document, in which each entry depends on a logical relationship to all its predecessors.

The bitcoin database is distributed across a peer-to-peer network and does not have a central authority.

Before transactions can be recorded, the network participants must agree on the validity of transactions. This agreement, which is also known as “consensus” is achieved through a process called “mining“. Bitcoin mining is decentralized; hence anyone with an internet connection and the proper hardware can participate. After a person uses Bitcoins, miners engage in complex computational equations to verify the legitimacy of the transfer. Because of the way the blockchain technology is designed, transaction records cannot be tampered with or changed after they have been added to the blockchain; hence, this design makes it difficult to hack the system.

Blockchain is an alternative to the typically administrative, time-consuming, expensive, and paper heavy banking processes.


Probably the most talked about the application of blockchain technology is the virtual currency Bitcoin. However, there are over 2000 other currencies floating out in the market that are based on distributed cryptographical technology. Collectively, they are called crypto coins or cryptocurrency. Cryptocurrencies are essentially digital money. Bitcoin is one popular example; it has been the trendsetter in this wave of cryptocurrencies and has also become the de facto standard for cryptocurrencies. The currencies inspired by Bitcoin are collectively called altcoins and they present themselves as being modified or improved versions of Bitcoin.

Let’s take a look at the most popular examples:

1. Litecoin (LTC)

Source: CNN Money
Source: CNN Money

Litecoin was launched in 2011 and was among the initial cryptocurrencies following bitcoin and was also often referred to as the “silver to Bitcoin’s gold”. Litecoin is quite similar to Bitcoin, however, it has a faster block generation rate and hence offers faster confirmation of transactions. Litecoin’s future is expected to be similar to that of Bitcoin. However, due to its lesser name-recognition and controversy in the community, Litecoin is comparatively less volatile and has a more steady trend.

2. Ethereum (ETH)


Ethereum was launched in 2015. The applications on Ethereum are run on its platform-specific cryptographic token, ether. In 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $41.4 billion, second after Bitcoin among all cryptocurrencies. The difference between Ethereum and Bitcoin is that Bitcoin is nothing more than a cryptocurrency, while Ethereum is also a ledger technology which can be used to build new programs by companies. Ethereum’s technology is more robust than that of bitcoin.

3. Ripple (XRP)

Source: Coindesk
Source: Coindesk

Ripple, released in 2012, is a real time global settlement network that enables banks to settle cross-border payments in real time with transparency and lower costs. Ripple is designed in a way that it doesn’t require “mining” which is a feature that deviates from bitcoins and altcoins. Because of this feature, it reduces the usage of computing power.

People inadvertently use bitcoin and blockchain as substitutes. However, they are different things. The below video outlines the difference between the two:

Mining Cryptocurrency

The founder of Bitcoin (Satoshi Nakamoto) ensured that the cap of Bitcoins is 21 million. This figure was reached based on complex calculations. All the cryptocurrencies do not just come into existence. Like any other form of money, it takes work to produce them and that work is in the form of “mining“.

Bitcoin mining actually means adding more bitcoins to the digital currency ecosystem. The additional bitcoins are generated through a computational process called mining where you let your computer hardware calculate complex mathematical equations, which can be done at any time of the day. This enables you to become a vital part of the bitcoin network; by securing the network through the dedicated hardware and by generating more bitcoins for circulation. Every four years, the number of Bitcoins released in relation to the previous cycle gets reduced by 50% and the reward to miners also decreases. At the moment the reward is 12.5 Bitcoins. Therefore, the total number of Bitcoins in circulation will approach 21 million but will never actually reach that figure.

Bitcoin Price Trends

Source: Coindesk
This graph shows the trend of Bitcoin prices over the last 3 months
Source: Coindesk

Since inception, Bitcoin prices were always volatile but gradually increased. However, bitcoin came into the limelight recently due to its sudden rise in prices in 2017. The price reached its peak of around $20,000 on Dec 16, 2017, after which it started decreasing. On Friday, Dec 22, 2017, bitcoin lost a quarter of its value in one day’s trading. The volatility of the prices is a source of confusion for individual investors as to where the cryptocurrency market is headed and people have mixed views about it.

Is Bitcoin simply a 21st-century version of gold? Or is it just a short-lived famous fad that may soon develop into something rather different? Only time will tell.



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