The role of crypto exchanges in funding blockchain as the catalyst for a true digital economy — AAX Academy
From working remotely to teaching classes virtually, online shopping and digital socializing, if anything, adjustments we’ve had to make during the Covid-19 pandemic has shown that most of us are more than ready to live in a digital world.
Granted, both companies and people operate with varying levels of preparedness to do so, but the point is that we are capable of living our lives in a series of digital interactions — and this will only increase as time goes on.
One of the most important technologies that will elevate the capabilities of the digital world to support the real-world is blockchain technology. In simple terms, blockchain adds a layer of reality and reliability to digital interactions. It is the catalyst of the digital age, paving the way for a true digital economy.
How blockchain works
Blockchain was pioneered by anonymous cryptographer Satoshi Nakamoto in 2008, with the whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. In the whitepaper, Satoshi describes a distributed ledger technology that records all data transactions — or anything of value — in a public network without requiring trust.
Instead of central authorities validating transactions, the distributed ledger stores all information simultaneously on every node in the network using a consensus-driven approach so that every participant has the exact same up-to-date record of data.
All confirmed and validated information is stored in blocks of data. The blocks are then linked to the preceding blocks by including the hashed metadata of the entire chain leading up to that point. The blockchain which is formed in this process is incredibly difficult to corrupt or compromise, as a bad actor would have to tamper with all the blocks in the chain across a distributed network of nodes at the same time.
That is the system which gave rise to Bitcoin, the world’s first cryptocurrency. In what was a true revolution of the mind, anyone could now transact value between individuals in a way that was direct and without intermediaries having to validate those transactions.
The power of blockchain beyond finance
Blockchain is what makes digital payments using crypto possible, as it voids the ‘double-spend’ problem. When someone sends a digital document to someone else, both sender and receiver will have a copy of the file after the transaction. While that’s fine for sending files, it becomes a problem when sending money — it’s critical that the sender of a coin doesn’t have a copy of the same coin after the transaction. On the blockchain, tamper-proof records show that the sender of a coin is no longer in possession of that coin after a transaction.
But that’s only the beginning. We are now seeing an growing array of applications using blockchain technology that extend far beyond financial use cases.
Looking back, we now know that blockchain is much bigger than cryptocurrencies. It is in fact the latest chapter in the ongoing information revolution.
By capitalizing on the rapidly decreasing cost of storage, it now serves to give digital information and assets the same permanence as real-world assets. Blockchain is changing the very nature of the digital world, moving from the internet of information to the internet of value.
That’s the reason why many entrepreneurs, start-ups and major institutions have taken interest in the technology. The possibilities extend far beyond finance from applications across verifiable supply chain documentation, to health records owned by patients, digital identities that pave the way for robust digital voting systems, to verifiable ownership of real-world assets and to self-executing contracts as the backbone of the vast DeFi movement.
The power of blockchain across all those domains, is the same fundamental breakthrough: the permanence of digital assets.
Without blockchain, there is no guarantee in the virtual world that a string of data is indeed the original as opposed to a copy which may have been corrupted.
Creative minds in tech have long embraced the technology and put forward countless new projects, applications, cryptocurrencies and indeed we now have several blockchain protocols each with slightly different capabilities such as enhanced privacy features or transaction speeds.
The role of crypto exchanges
Crypto exchanges play a critical role in powering the engine of the blockchain-enabled economy. Anyone is able to run with blockchain and cryptocurrencies to create entirely new applications and innovative solutions to decade-old challenges. Crypto exchanges provide access to this new economy, and by doing so help funnel capital to projects that hold the most promise.
Buying and selling crypto on an exchange is about much more than just making trades and seizing profitable opportunities. It’s about price discovery for cryptocurrencies and their associated projects and companies. When the market is bullish on a specific coin, it validates that the project fueled by that coin has merit, and the market believes in its potential. Market caps serve as an indication of how the market evaluates the project in question.
As such, a crypto exchange is an important meeting point for investors and entrepreneurs building the next generation of the digital economy. But that only holds water if the crypto exchange can meet the needs of the digital world.
That means high-grade technological capabilities for a 24/7 market which never sleeps. True price discovery and funding a democratized economy accessible to anyone anywhere in the world requires bleeding-edge transaction speeds, ample liquidity, orderbook depth, reliable uptime, resilience and scalable matching engines to support new markets and asset classes — which are developing novel applications non-stop.
About AAX
AAX is the world’s first digital asset exchange to be powered by LSEG Technology. Offering OTC, spot, and futures, it provides a highly secure, deeply liquid and ultra-low latency trading environment; and a meeting point between crypto and global finance.
Open an account with AAX, or download the app, and experience the next generation crypto exchange.
Originally published at https://academy.aax.com on April 15, 2020.
