Bitcoin to Blockchain
Inside the Crypto Craze
by Oak Chandlee, 2023
In 2010, a type of currency no one had seen before was created: Bitcoin.
Bitcoin was different from other currencies as it wasn’t owned by any single entity, like a government. Bitcoin used new technology to securely record transactions. The era of cryptocurrency has begun.
At the time of its creation, Bitcoin was worth a mere $0.0008 per coin. The niche community mostly utilized it for small transactions among one another or for small items. Bitcoin slowly rose in popularity and value and is now the most used cryptocurrency.
Bitcoin is one of the cryptocurrencies revolutionizing the world because it can be used by anyone, anywhere.
For a crypto such as Bitcoin to be used and stored (much like in a bank), there must be a way to track and validate its value. Enter blockchain technology.
The blockchain is simply a ledger of transactions or contracts that have been confirmed to be authentic. The blockchain, as the name implies, is built out of blocks of information that link transactions between buyers and sellers. The blockchain cannot be changed, thus providing a secure record of information.
The blockchain takes a lot of computing power to run and maintain. A person must use powerful computers to run the crypto blockchain to “mine” more coins.
A network of “mining” computers must solve a mathematical puzzle to verify that a cryptocurrency transaction is authentic. These mining computers must have giant processors to complete the puzzles quickly and profitably as every time a miner’s computer solves a block, they get a reward in the form of a small amount of the cryptocurrency they mine.
Not only can the blockchain be used for verifying cryptocurrency transactions, but it can be used to verify contracts without using a human executor. For example, “the blockchain could be used to streamline the mortgage industry by removing the human factor which would reduce fees and maximize efficiency,” said Turner Budd, a blockchain analyst.
Unfortunately, people are slow to adopt the blockchain because most don’t have the technological literacy to fully understand how it could be adopted.
The false idea that cryptocurrency is a scam has caused setbacks in the widespread adoption of crypto.
“There are a lot of bad actors in the crypto space as the technology gains popularity without regulation,” Budd said. These bad actors create a stigma around the blockchain and crypto in general.
A recent example was the collapse of FTX, a crypto exchange. In early November 2022, Binance, another major crypto exchange, announced they would be selling their holdings of nearly $530 million worth of FTX’s currency. Investors sprang to remove their assets from FTX after this sell-off, which resulted in a loss of over $6 billion in assets. FTX simply couldn’t fund this so they closed withdrawals, which meant many people lost their investments.
FTX had to file for bankruptcy which caused numerous internal scandals to surface. The owner of FTX was hit with numerous class-action lawsuits because of the massive losses suffered.
In addition to the concerns about the stability of cryptocurrency, there exists controversy around the process of mining due to the large amount of power required.
The process of cryptocurrency mining has spawned controversy over the years because of the energy required to run powerful mining computers. The opposing side argues that the power generation required for mining will push the world even faster to global warming. The side vouching for crypto mining says that most large “mining farms” use renewable energy which drastically reduces the carbon footprint of the operations.
Despite the stiff competition from giant farms, small-scale crypto-mining operations still exist. In order to give everyone a fair chance at mining, pools were created. Mining pools are a group of small-scale investors that harness their processing power together to mine blocks faster. Profits are divided up among the participants based on how much processing power each rig contributes to the pool.
Darren Jones, a Sora Schools expert, was the owner of a small mining operation that was run on his Antminer S9. The low profitability of his rig in the Louisiana heat was what caused Jones to stop mining. Even the Antminer, which is a high-quality machine, couldn’t compete with the heat.
Jones admitted, “[his] operation was too costly to be worth running.” This is a common issue among smaller mining setups, especially in hot areas with expensive energy costs.
Jones was also an avid trader at one time. He traded mostly mainstream cryptos which he used like fiat currency (USD, EUR, etc) for small transactions. His trading career started around 2012 when Bitcoin was rising in popularity. In the beginning, he simply used it as fiat currency, but he soon started to dabble in trading and mining which he learned could make him even more money.
Jones’s trading career came to an end during the pandemic because of the sharp crash the crypto market took. When Bitcoin dropped to nearly $3,000 per coin, Jones wanted to get out while he still could, so he sold his Bitcoin which made up the majority of his stock portfolio.
Jone’s story of defeat is one of many in the extremely volatile market of crypto. Unlike stocks, the crypto market has sharp peaks and valleys that reflect movements in popular culture.
Dogecoin, a “meme” coin, is a prime example of popular culture influencing a crypto. The crypto originally started as a play on the “Doge” meme but quickly people began to trade it. This caused it to rise from just $.017 to $.064 over 3 years; the major spike occurred in April of 2021 when Elon Musk began endorsing the currency on Twitter.
Like any other currency, the price of crypto can also be influenced by major world events. China’s heavy restrictions on cryptocurrency made it extremely difficult to trade in East Asia. This caused billions of dollars worth of crypto to leave Chinese markets, thus causing a dip in the market.
Cryptocurrencies are complex and they are influencing the world along with blockchain technology. In the future people will be able to utilize crypto and blockchain technologies to their fullest in order to create currencies that aren’t controlled by one single entity.