Risk & Business Magazine Miller Winter 2019 | Page 27

CRYPTOCURRENCY
2) WHY DO WE EVEN NEED
CRYPTOCURRENCY?
Upon wider acceptance, cryptocurrency
could become a more efficient way
to record transactions than central
authorities, argue proponents, with no
middleman to slow things down or with
less chance of being affected by natural
disasters or hackers that can destroy the
data’s integrity.
3) WHAT IS A BLOCKCHAIN?
When a cryptocurrency transaction
is recorded in ledgers maintained by
individuals, these records are formed
into blocks, which are linked into a single
blockchain, all connected and secured
through complicated algorithms. If a
single ledger transaction is incorrect, it
will be harmlessly rejected to ensure
complete accuracy and integrity of the
system throughout the remaining ledgers.
Once data is recorded into a blockchain,
it cannot be altered retroactively.
4) ARE THERE ANY WEAKNESSES
WITH THIS TECHNOLOGY TO BE
CONCERNED ABOUT?
There are a few weaknesses with this
system. The first concerns the sheer
openness of blockchain technology, with
virtually anyone able to participate in
the records maintenance process. As a
result, some companies and government
agencies have chosen private blockchains,
which only accept participation from
approved computers.
The second problem concerns digital
currency thefts, which have resulted
from password or individual key
violations. Because of the blockchain
cryptographic structure, however, it
is easy to discover and nullify any
attempted tampering.
Finally, the sheer number of transactions
may eventually act as a hindrance to the
technology since every transaction must
be processed through the blockchain. As
of today, we have yet to discover when
a blockchain reaches its maximum
processing capability.
5) HOW ARE BLOCKCHAIN
TRANSACTIONS MADE SECURE?
Strength in numbers. When a
transaction occurs using cryptocurrency,
the blockchain records the transaction
between the parties using a peer-to-peer
network that uses an accepted protocol
to validate each new block. If a particular
computer in the network is hacked or
otherwise not in sync with the others,
the rest of the network can continue on
without it.
"IF A PARTICULAR
COMPUTER IN THE
NETWORK IS HACKED
OR OTHERWISE NOT
IN SYNC WITH THE
OTHERS, THE REST
OF THE NETWORK
CAN CONTINUE ON
WITHOUT IT."
6) WHERE DOES BITCOIN FIT IN?
Bitcoin is a form of cryptocurrency—
first introduced to record transactions
in 2009. An open-source technology,
Bitcoin has no individual owner and
its merits are shared. According to the
Bitcoin website, you can currently buy
and sell Bitcoins as well as use them as
a unit of currency to transact business
with approved vendors.
7) ARE PEOPLE REALLY GETTING
RICH FROM CRYPTOCURRENCY
INVESTMENTS?
like any other investment, the value of
these instruments can fluctuate widely.
Ultimately, their fate will be decided
as the technology either matures and
flourishes or eventually falls by the
wayside.
8) IS ANYBODY USING THIS
TECHNOLOGY IN THE REAL WORLD?
Yes! A few big-name companies—
including Microsoft, Overstock, and
Expedia—now allow payments using
Bitcoin, but these opportunities are few
and far between. There’s no real time line
regarding the wide acceptance of these
currencies—or if that will even happen.
For the most part, digital currencies like
Bitcoin are being traded primarily as an
investment vehicle.
9) AS THE OPERATOR OF A SMALL
BUSINESS, DO I REALLY HAVE TO
WORRY ABOUT CRYPTOCURRENCY?
Maybe not today, but possibly
tomorrow. Some analysts believe that
cryptocurrency is the way of the future,
so eventually all buyers and sellers would
need to become familiar with their
operation as a peer-to-peer exchange
mechanism. We are still a long way off
from that reality, so don’t worry—you
have plenty of time to jump in and test
the waters.
10) WHERE CAN I LEARN MORE ABOUT
THIS TECHNOLOGY?
The internet abounds with information
about digital currencies, both through
well-researched news articles and
complete books devoted to the topic.
Amazon lists several simple guidebooks
to get you started, while YouTube has
links to videos devoted to every facet
of the technology. To dive even deeper,
you can register for online courses that
teach the basics about cryptocurrency
investing and more. +
Yes, some people have gotten rich from
Bitcoin and similar investments, but
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