Blockchain and Brokerage: What You need

Blockchain and Brokerage: What You need

Blockchain technology can be used in many contexts as a secure, encrypted transaction network and in principle eliminates the bank as an intermediary in arranging payments.

Bitcoins are tied up in a mathematically interconnected peer-to-peer network where the participants are not connected to a central server and it is this network called blockchain. It is a long chain of blocks, all locked together by codes, with each block describing the latest exchanges of bitcoins. The blockchain network can be described as a huge joint account statement or account book, where the history of transactions is visible to all participants and no one can cheat or be in doubt about who has been sent bitcoins by whom. In Neuer Capital  you can have all the options open.

How are new bitcoins created?

All transactions that have been made with bitcoins are thus registered in this blockchain, and everyone who participates in the network with computers can access it. It is also these participating computers that create new bitcoins through so-called “mining”. Like gold diggers digging for gold, the participating computers dig for bitcoins by solving cryptographic puzzles (hence the name cryptocurrency). In this context, gold is a reward with bitcoins triggered by creating new blocks. Whoever first solves the riddle and thus adds a new block (a new one is created every 10 minutes), will receive a reward, which is currently 6.25 bitcoins.

This reward is halved for every 210,000 blocks, and it has now happened three times – most recently in May 2020. Not only is the reward falling, but the puzzles are also becoming more difficult to solve and it requires more computing power. In the beginning of bitcoin’s lifetime, one could join via normal PCs using their CPU, later GPU (graphics processor) and then specialized devices called ASIC.

Today, mining is largely taken over by actual companies

A major criticism of bitcoin and others that rely on the same “proof of work” method is that it requires a lot of electricity and the need only gets bigger. There is therefore debate about several alternatives, including the “Proof of Stake” method, which can reduce energy needs dramatically. One of the major cryptocurrencies, ethereum, is scheduled to move to this during 2020. However, there are divided opinions about the appropriateness of this principle, which in the opinion of some goes beyond security.