Cryptoassets have become increasingly mainstream in recent years, as exemplified by the growing popularity of bitcoin, ethereum, XRP and others.
Despite this meteoric rise, many experts predict that it is blockchain – the secure, decentralised, distributed digital public ledger that underpins cryptoassets – that will become even more significant than the cryptoassets it supports.
Such use cases are already creating a wider range of cryptoassets that differ in interesting ways from the original bitcoin.
Before going any further, it’s worth taking a step back and reminding ourselves what blockchain is, how it relates to cryptoassets, and why experts are getting excited about its wider use cases.
Blockchain emerged as the backbone of bitcoin when the cryptocurrency launched in 2009. The relationship between blockchain and bitcoin has often been compared to the relationship between the internet and email. Just as email is a service enabled by the internet, bitcoin is just one service enabled by blockchain technology.
Indeed, blockchain has often been described as “the internet of value”.
Using a distributed ledger, all transactions involving cryptoassets on the blockchain are separately verified and protected via a confirmation process, and are then posted publicly and permanently recorded on the ledger. Crucially, this solves the problem of “double-spending” that had plagued early attempts at cryptocurrencies.
Blockchain’s ability to let anyone send value to anyone else around the world in a secure, efficient and affordable manner promises to have the same disruptive impact the internet has had on our world over the past 25 years.
Those in the blockchain space suggest we are now at about 1994 in the development of the internet by comparison. That year the world’s first internet café – Cafe Cyberia in Whitfield Street, London – opened, and the technology was on the cusp of mass-scale adoption.
For a mainstream audience, cryptocurrencies are still the most visible cryptoassets to make use of blockchain, thanks to bitcoin reaching mainstream news. But a number of other variants are beginning to emerge, two of which are utility and security tokens.
Utility tokens, for example, are a novel means of financing, enabling companies to raise money by selling future access to its services. For example, a pet-sitting start-up could raise money by selling a certain number of utility tokens, each of which grants holders a certain amount of dog-sitting time.
Security tokens are another method of raising finance, acting like traditional securities such as equities and bonds. Just as bond and shareholders have a stake in a company’s success or failure, security token holders have an effective interest in the company that issues them.
Such tokens are liable to stricter regulatory oversight, with authorities around the world drawing up guidelines on how such issuances are handled.
These cryptoassets – and others like them including platform tokens and brand tokens – have been the main use of blockchain to date. But just as the internet spawned a vast number of other uses beyond email, so will blockchain technology, according to expert predictions.
In time – and sooner than you might think – blockchain will be used widely in healthcare, finance, travel, insurance, and a raft of other industries. In only 10 years of existence, blockchain is at the level that the internet was after 35 or so years. It is a technology worth watching.
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