A brief overview of the technology that underpins Bitcoin and other cryptocurrencies.
What is blockchain technology?
Blockchain technology is best known as the underpinning technology of Bitcoin and other decentralized digital currencies. The Bitcoin blockchain forms the foundation of how the network functions and performs. It governs the protocol level and can be shaped and deployed to suit various means.
A blockchain is like a ledger that can store information accessible across network operators (i.e. it is distributed). Some liken blockchain technology to a massive digital spreadsheet where every transaction is recorded and shared across users once the network verifies and validates cryptographically secured data.
The technology was first described in 1991 as “a cryptographically secured chain of blocks” by W. Scott Stornetta and Stuart Haber.
Stornetta’s and Haber’s 1991 paper describes timestamping of digital documents and helped form the basis of the industry-defining white paper by pseudonymous Bitcon inventor Satoshi Nakamoto.
Both Stornetta and Haber are widely considered the founding fathers of blockchain technology.
Blockchain in the mainstream
The advent of Bitcoin catapulted blockchain technology into mainstream conversations. The latest in database technology, blockchains are capable of revolutionizing the world’s data management and data tracking systems.
Blockchain technology allows for automated networks where parties can transact without any trusted middleman. It removes the need for trusted third-party intermediaries in financial transactions. This positioned blockchain technology, and cryptocurrencies, as disruptors to legacy banking infrastructure and other financial technologies.
The venture deal (angel, seed, convertible notes, Series A, Series B and so on) and dollar volume for blockchain and blockchain-adjacent companies, globally, pushed to over a billion dollars (US $1.20 billion-plus) in 2018.
That figure doubled the previous year’s estimated amount of $600 million. And this accounts for venture deals only, not ICO-based fundraises.
Blockchain technology continues to grow. With it, further mainstream adoption of the asset class has led to another proliferation of cryptocurrency investors and users.
Blockchain investment and institutional money
According to Simon Chandler, a London technology journalist writing for CryptoVantage this past October, new data from Chainalysis shows institutional investors are increasingly dominating the cryptocurrency market in North America once again.
“Around 90% of North America’s cryptocurrency transfer volume in June [2020] came from transfers worth $10,000 or more, indicating that professional and institutional investors account for the lion’s share of trades,” Chandler reports.
This resurgent trend has spurred further blockchain investment.
Grayscale, a cryptocurrency investment fund owned by Digital Currency Group, revealed a doubling of the amount invested into its fund in the second quarter of 2020.
An estimated $905.8 million poured into Grayscale in the second half of 2020 whereby $503.7 million was the tallied investment figure for Q2 2019. Evidently, blockchain investment is on an upward trend once again.
