In a deeper glance into the specifics of cryptocurrency, we begin to see that there is much more to unravel and explain than originally meets the eye. In our last cryptocurrency related post, we briefly discussed the current relevance of cryptocurrency and why it has been gaining so much ground recently, but what information is out there to support this recent jump? And additionally, how do all these smaller pieces relate to one another to ultimately create a reliable global network of high-speed, untraceable payments and transactions?
NFTs and the “service” side of the industry
As described last time, NFTs or non-fungible tokens, are tokens that represent a wide range of tangible and intangible items but cannot be directly exchanged with one another. These NFTs incorporate the “service” side of the industry, illustrating what services or utilities a certain token/coin can have, without having a specific dollar value associated to it as an asset. A current example or relation of this would be similar to Apple’s new Face ID password system on their iPhones and iPads. Although the Face ID itself doesn’t have a specific dollar value associated with it, the platform that it’s on (iPhone and iOS) does, and Face ID therefore creates a stronger and (in some ways) more legitimate use for Apple’s operating system and platform. This also ties the two together intellectually, meaning that people often associate Face ID with Apple’s iPhone, and therefore the intellectual rights and the public’s intellectual perception of the two are closely correlated. In the crypto world, this specifically can be seen with coins like Hedera Hashgraph (HBAR), where Hedera allows services to run on its platform (sneaker authenticators discussed in our last post), but the reliability and overall operation of the service can end up having an influence on Hedera’s intrinsic value. This is beneficial in many ways, because it allows coins to have more than one primary use. What I mean by this is not that the coin itself has multiple uses, but because it allows different programs and services to run on its platform, the coin has a multi-purpose functionality that can service many different sectors. NFTs often don’t receive the recognition they deserve and could end up serving a more “daily-purpose” in our lives than coins like Bitcoin that are specifically used as a transactional asset.
Security and Encryption
Following the service aspect, another main benefit provided by cryptocurrencies to its users is its commitment to security and structured encryption. Cryptocurrencies provide the user with multiple layers of encryption when having data processed or verified during a specific transaction, making the data more secure, and therefore less likely to be tampered with. Although security isn’t necessarily the first thing that is thought of when we consider our current financial system, it plays a significant role in how cryptocurrencies operate. Hedera, for example, depicts a way in which cryptocurrencies can mitigate fraud more effectively than our current financial system. Since applications and transactions today are controlled by centralized authorities (our government and various banks like Bank of America and Wells Fargo), they have the potential to be more susceptible to fraud due to the infrastructure of the system’s backend. With this comes a higher possibility of infiltration and data tampering by both external and internal parties, and it’s almost impossible to guarantee 100% security, considering users, auditors and administrators are being added everyday and have access to transactional information in real-time. In order to alleviate this issue, Hedera requires that its identifiers “adhere to the W3C Decentralized Identifier (DID) standards, which ensures all participants are trusted and associated systems have a real-time view of transactions used for predictive analysis and detection of fraudulent activities” (Hedera). Standards like these are put in place for the same reasons that acts like the Sarbanes-Oxley Act of 2002 was; partially to take corrective action due to fraud that has already occurred, but mainly to take preventative measures to hinder the action from occurring [again] in the future. Almost all cryptocurrencies have procedures like this in place, but more importantly the decentralization of coins and platforms adds an additional layer of separation between the entity and the bank or government organization, meaning that decentralized cryptocurrencies in their base form are already, in some ways, more secure than the financial system we currently know and utilize.
Trying to spend the time to list all the benefits cryptocurrencies offer would take days, if not weeks, but we can see that service and security are two large components in what makes cryptocurrencies as reliable and functional as they are. As time continues, the hope is that these security protocols will take action and be able to present a track record of potential mishaps that have since been prevented. Since cryptocurrencies have a ledger that records all transactions, the data can subsequently be stored, and improvements can then be made on the system that is already there.
- World Wide Web Consortium: the main international standards organization for the World Wide Web. The consortium is made up of member organizations that maintain full-time staff working together in development of standards for the World Wide Web.