Last updated on November 10th, 2022 at 09:40 am
Some of the most popular terms used in the world of finance and technology right now are Bitcoin and Cryptocurrency.
A cryptocurrency is a form of digital currency that can be used to buy goods and services online. And Bitcoin is one of the most popular forms of cryptocurrency that is available right now.
However, it is not the only cryptocurrency as there are many others like Ethereum, Dogecoin, Binance Coin, etc.
All of this is created using a revolutionary new tech, founded by Satoshi Nakamoto in 2008, called Blockchain technology.
One important thing to keep in mind is, Cryptocurrency and Blockchain are not the same.
What Is Blockchain?
Simply put, Blockchain is a secure peer-to-peer distributed ledger that is used to record transactions across a large number of computers.
Only by adding another block connected to the preceding block can the contents of the ledger be updated. It’s also possible to think of it as a peer-to-peer network that operates using the internet.
What Are Its Features?
There are a few distinct features of Blockchain technology that make it unique from other similar technologies. They are:
In Blockchain, every block has the necessary information of the digital ledger or database. So, when a new block is connected to the previous block, it first needs to verify its validity.
Once the majority of the blockchain nodes ensure the validity of the previous block by checking the ledger, the transaction goes through. This removes any chance of data manipulation or corruption.
Blockchain technology is completely decentralized, meaning there is no single entity that can control or manipulate it.
That means nobody can dictate the output of this technology. Instead, a complex structure of nodes maintains the network.
As Blockchain operates using a peer-to-peer connection, it is possible to make transactions very quickly.
Since there is no intermediary, making transactions is as simple as sending the funds to your desired location.
So, if you are living abroad and want to send money back home, Blockchain and Cryptocurrency can make that happen in an instant.
Transactions made using Blockchain are a lot more secure as no third-party entity can get involved and change the characteristics of the network to benefit them.
Plus, you can further improve security by using encryption. However, this can also be a double-edged sword as transactions are not reversible. That means once you send the fund, it is not possible to get it back.
Blockchain maintains ledgers that are accessible to the public. So, any transaction that happens using Blockchain is transparent and can be viewed by the public. This also ensures that the information provided is legitimate.
As great and revolutionary as Blockchain is, there are still many challenges to Blockchain that need to be addressed before it can be properly adopted as a means of transaction. These challenges are:
Consumes a lot of energy and resources:
Mining cryptocurrency requires a lot of energy and electricity, which means a lot of raw materials are being used up.
Since the technology runs using very complex mathematical algorithms, a lot of computing power is needed to properly run these operations.
That means miners need to spend a lot of time and money to solve these complex problems. Additionally, a lot of space is needed to set up these mining facilities.
Transactions are irreversible:
Crypto transactions made using Blockchain are irreversible. That means if you get scammed or you send money to someone with ill intentions, then there is nothing you can do to get it back.
This is a major problem of using cryptocurrency. On top of that, given the nature of cryptocurrency, it is also not possible to track down the perpetrator either because of anonymity.
There are many privacy concerns regarding cryptocurrency. Since the ledgers are free for the public to see, that means you can access the private information of individuals like seeing how much money they have in their digital wallets.
This is one of the primary reasons why people are still very hesitant about using cryptocurrency.
The EU aspires to be a global leader in blockchain technology, as well as a home to important platforms, apps, and businesses related to Blockchain.
In order to address some of the challenges of Cryptocurrency, the European Commission has set some objectives.
1) Blockchain should be sustainable and require low energy.
2) Data protection and privacy legislation in Europe should be compliant with and integrated with Blockchain technology.
3) Europe’s growing digital identity system should be respected and enhanced by Blockchain technology. This involves being compliant with e-signature standards such as eIDAS and providing a decentralized, self-sovereign identity framework that is logical and practical.
4) Cybersecurity needs to be integrated into Blockchain technology.
5) Interoperability between blockchains and traditional systems in the outside world is essential.
Europe strongly supports the Blockchain revolution and wants to integrate it into its rules & regulations, policy, and funding.
Creating a public service Blockchain:
By developing its own Blockchain infrastructure, the European public sector is leading the way in Blockchain.
Interoperability with private sector systems will be added over time. This ambition is being realized through the European Blockchain Partnership.
It is the result of a collaboration between all 27 EU member states, Norway, Liechtenstein, and the European Commission.
As a result, The European Blockchain Services Infrastructure (EBSI) went live on February 12, 2021.
Integrating Blockchain into the legal system:
“The Commission strongly supports a pan-European framework and hopes to avoid legal and regulatory fragmentation.
“It recently released a proposal for regulating crypto assets, updating the anti-money laundering rules for crypto assets, and creating a pan-European regulatory sandbox for innovative blockchain solutions.
“This was done with a view to increase investments and to ensure consumer and investor protection,” according to thinkerseek.com
Increasing funding for Blockchain research:
The EU is supporting Blockchain technology by funding its research through grants and investments.
Grants are delegated by the EU via the Horizon program. In the period of 2016-2019, 180 million euros were provided as a grant by The Commission through this program.
It is expected that there will be further budget increments in the upcoming grants which will be featured in the next Horizon program – Horizon Europe.
Using Blockchain in a sustainable way:
The EU recognizes Blockchain’s potential and encourages its use in promoting sustainable economic development, combating climate change, and advancing the European Green New Deal.
The Commission is a strong believer in the value of standardization in the development of blockchain technology.
In regards to Blockchain, it is participating in the work of ISO TC 307, ETSI ISG PDL, CEN-CENELEC JTC19, IEEE, and ITU-T, as well as looking to interact with all relevant organizations internationally, such as INATBA.
Blockchain Skill Development:
The Commission is taking initiatives to focus on developing the necessary skills required to implement Blockchain technology.
By now it should be obvious that the European Commission is very invested in developing and implementing Blockchain technology.
The Commission wants to standardize this new technology and pave the way for future innovation in this field.
However, given the infancy of this technology, there is still a long way to go. The challenges relating to Blockchain technology are still a major roadblock to widespread adoption.
But the European Commission is determined to find the solution to these problems and help foster the use of Blockchain by being the front-runner of this technology.