Demystifying Cryptocurrencies, Blockchain, and ICOs

Written by Ryan Green
3 mins, 18 secs Read
Updated On December 22, 2023

While powerful central banks and governing bodies may be able to manage the flow of capital in a tightly controlled grid, cryptos promise something different: a whole new world ruled by decentralized transactions coded in the blockchain. If you want to start bitcoin trading in only three steps, read a beginner’s guide to initial coin offering; here, you will get the best liquidity, and the platform is immune to volatility risk. The guide below will help demystify cryptocurrencies, blockchain, and ICOs so your business can stay ahead of this changing landscape.

Blockchain is the ledger where all these cryptocurrency transactions are logged; they’re powered by “miners” who use their computers to power the network. Here is a detailed guide to cryptocurrencies, blockchain, and ICOs and how they relate. 

Blockchain: The Upcoming Disruption

Companies are looking for ways to optimize their systems and improve their processes to keep up with the competitive environment. Blockchain-based solutions can be applied by users in businesses enabling companies to react quickly and efficiently to changes in the market. 

They can also remove the need for manual reconciliation of transactions as data is stored on a distributed ledger platform built on the blockchain. The value-added business process is involved when information from different sources is linked and combined with other information through a digital identification process. 

Even if one node fails or one block of data is corrupted, the ecosystem continues to run. Blockchain changes business processes and makes businesses think about data security in a new way. Some believe blockchain will do the financial system the internet did to media and information: it will open it up for competition and drive innovation. Others consider it a dangerous bubble created by hype instead of reality.

Initial Coin Offering

An initial coin offering is a means of crowdfunding in which a company gives investors cryptocurrency in exchange for legal tender or other established cryptocurrencies such as Bitcoin, Ether, Zcash, Monero, Dash, and others. An ICO can be seen as an unregulated form of crowdfunding where one member bank or country issues the corresponding currency/token to sell.

Initial coin offerings (ICOs) have emerged to raise funds for blockchain startups in recent years. Blockchain startups are complicated projects that are impossible to fund through traditional venture capital (VC) funding channels and have looked at ICOs as an alternative source of capital. Probably the most significant source of controversy surrounding ICOs has arisen from this unregulated nature; 

Just as in the case of any initial public offering (IPO), ICOs can be viewed as a legitimate way to sell stock or invest in a company and as securities under existing SEC guidelines. Blockchain technology is an essential infrastructure in the distributed economy expected to transform traditional business models and reshape entire industries. Blockchain technology enables transactions to be executed without intermediaries such as banks, payment processors, and remittance providers, making transactions faster and cheaper.

Establishing a digital currency based on blockchain technology is an opportunity many banks can embrace while meeting the changing technology needs of their customers. Furthermore, establishing a digital currency in cooperation with central banks can make these digital currencies viable alternatives to cash or other payment options in the real economy. In a nutshell, an ICO is used to raise funds for developing a new blockchain network, while a token acts as the currency of this blockchain network and can be traded by users freely globally.

Cryptocurrencies: A deflationary ecosystem

By contrast, a deflationary economic ecosystem; like the one described by Satoshi Nakamoto in his white paper on Bitcoin in 2008; is one where there is no central issuer, participants can transact directly with each other, there are no intermediaries, and (preferably) the system has a fixed upper limit on total circulation. Moreover, the lack of a central entity to manage the system means less need for complex regulations. 

The low cost of transactions allows for a universal currency quickly adopted by the masses. Cryptocurrencies have the potential to change how people pay for goods and services in much the same way as the internet did years ago, with merchants, suppliers, and recipients all free to accept payments in their preferred currency, barter if they so wish, or not take part at all.

Can cryptocurrency overtake fiat currencies?

The advent of cryptocurrency in 2008 was a very new idea, but it has become one of the most talked-about things in 2022. However, the question remains: Can cryptocurrencies overtake fiat currencies? Many people believe that with blockchain technology, it is much easier to send payments than before and that it will be easier for merchants to accept coins as payment. Once the blockchain infrastructure is built, we can see a massive reduction in transaction fees and costs. In contrast, we’ll see an increase in the number and size of transactions made possible through blockchain technology. In short, for a cryptocurrency to take over fiat currencies requires proper infrastructure and technological advancements.

Author: Ryan Green