Cryptocurrency: Redefining the Future of Finance
Cryptocurrency is a thriving ecosystem, quietly encroaching on conventional finance’s territory.
Over the last five years, Bitcoin users and transactions have averaged a growth rate of nearly 60% per year. Similarly, private and public investors have deepened their commitment to cryptocurrencies including Ethereum, Ripple (XRP), and Stellar—and a number of others across the industry.
Today’s infographic unpacks a cross-section of cryptocurrencies, stakeholders, and core applications across a sector that’s continuing to grow in importance.
The Evolution of Cryptocurrency
Cryptocurrency has erupted into a $200 billion industry, sparking a wave of global disruption.
At the heart of cryptocurrency is a rich history of innovation. It extends back to the 1980s with advances in the field of cryptography—eventually leading to the technology that forms encryption techniques designed to protect the network.
Since then, a series of key events have continued to shape the sector.
|2009||Satoshi Nakamoto mines the first Bitcoin on a decentralized network|
|2012||Ripple is founded
|2013||The price of a single Bitcoin reaches $1,000
|2015||Ethereum launches, introducing smart contracts into the crypto ecosystem|
|2017||Over 1,000 cryptocurrencies listed
|2017||Bitcoin's price rockets past $10,000, reaching a peak just shy of $20,000|
|2018||EOS offers a blockchain-based infrastructure for decentralized apps (DApps)|
Now, there are over 5,000 cryptocurrencies in circulation, with many built on innovative applications and use-cases as the ecosystem rapidly evolves.
The Value of Cryptocurrencies
Today, crypto offers cutting-edge advances that are diverse and transformative. In addition, it could also be considered an investment in tomorrow’s financial system—decentralized finance (DeFi).
DeFi is an emerging alternative financial system that is built on a public blockchain, which enables greater accessibility because anyone has the ability to connect to it. Additionally, transactions are publicly visible, enabling greater transparency across the system.
Here is a refresher on some of the practical advantages being applied across cryptocurrencies.
|Used for purchasing goods without the need of a trusted third-party|
|As the total supply of many cryptocurrencies are limited, this scarcity influences their value
|Digital money that is typically pegged to a currency or commodity, such as gold
|Cryptography, the technology behind crypto, can enable the anonymity of its owners
|Can empower those without access to a bank to enter the financial system
|Digital Gold||Bitcoin||Bitcoin shares similar attributes to money: a medium of exchange, unit of account, and store of value
|Decentralized Apps (DApps)||EOS|
|Enable individuals to create apps without a central authority, directly connecting the user and creator
The Key Players in the Crypto Landscape
The cryptocurrency ecosystem is growing rapidly. Worldwide, private and public actors recognize its potential across many domains.
Who are the primary participants in the field today?
- Institutional Investors
Harvard Endowment Fund, Crypto Hedge Funds
- Cryptocurrency Exchanges
- Banks & Finance
J.P. Morgan, Fidelity Investments, Swissquote
- Power & Utilities
- Central Banks
China, Sweden, Saudi Arabia
Crypto Valley Association, Global Digital Finance
The rising popularity of crypto is bolstering new policies and adoption, as evidenced by the many players trying to break into the space.
The Big Picture:
As crypto continues to gain momentum, its longer-term implications will come into focus. Crucially, its cryptographic foundation sets the stage for future advances in finance.
Anonymized transactions protect users data through cryptographic techniques
Providing a new financial model for 1.7B unbanked individuals around the world
Steep reductions in settlement time and efficacy could save consumers $16 billion annually
Providing immutable, traceable records of security-rich transactional networks
- Programmable Money
Smart contracts could drastically eliminate manual and administrative work— ultimately bypassing them altogether
Rooted in decentralized and autonomous systems, cryptocurrencies are creating second-order effects in the financial world. Ultimately, cryptocurrencies are helping to transform finance as we know it—unlocking countless investment opportunities across the global economy.
Visualizing the Power Consumption of Bitcoin Mining
Bitcoin mining requires significant amounts of energy, but what does this consumption look like when compared to countries and companies?
Visualizing the Power Consumption of Bitcoin Mining
Cryptocurrencies have been some of the most talked-about assets in recent months, with bitcoin and ether prices reaching record highs. These gains were driven by a flurry of announcements, including increased adoption by businesses and institutions.
Lesser known, however, is just how much electricity is required to power the Bitcoin network. To put this into perspective, we’ve used data from the University of Cambridge’s Bitcoin Electricity Consumption Index (CBECI) to compare Bitcoin’s power consumption with a variety of countries and companies.
Why Does Bitcoin Mining Require So Much Power?
When people mine bitcoins, what they’re really doing is updating the ledger of Bitcoin transactions, also known as the blockchain. This requires them to solve numerical puzzles which have a 64-digit hexadecimal solution known as a hash.
Miners may be rewarded with bitcoins, but only if they arrive at the solution before others. It is for this reason that Bitcoin mining facilities—warehouses filled with computers—have been popping up around the world.
These facilities enable miners to scale up their hashrate, also known as the number of hashes produced each second. A higher hashrate requires greater amounts of electricity, and in some cases can even overload local infrastructure.
Putting Bitcoin’s Power Consumption Into Perspective
On March 18, 2021, the annual power consumption of the Bitcoin network was estimated to be 129 terawatt-hours (TWh). Here’s how this number compares to a selection of countries, companies, and more.
|Name||Population||Annual Electricity Consumption (TWh)|
|All of the world’s data centers||-||205|
|State of New York||19.3M||161|
|Walt Disney World Resort (Florida)||-||1|
Note: A terawatt hour (TWh) is a measure of electricity that represents 1 trillion watts sustained for one hour.
Source: Cambridge Centre for Alternative Finance, Science Mag, New York ISO, Forbes, Facebook, Reedy Creek Improvement District, Worldometer
If Bitcoin were a country, it would rank 29th out of a theoretical 196, narrowly exceeding Norway’s consumption of 124 TWh. When compared to larger countries like the U.S. (3,989 TWh) and China (6,543 TWh), the cryptocurrency’s energy consumption is relatively light.
For further comparison, the Bitcoin network consumes 1,708% more electricity than Google, but 39% less than all of the world’s data centers—together, these represent over 2 trillion gigabytes of storage.
Where Does This Energy Come From?
In a 2020 report by the University of Cambridge, researchers found that 76% of cryptominers rely on some degree of renewable energy to power their operations. There’s still room for improvement, though, as renewables account for just 39% of cryptomining’s total energy consumption.
Here’s how the share of cryptominers that use each energy type vary across four global regions.
|Energy Source||Asia-Pacific||Europe||Latin America|
and the Caribbean
Source: University of Cambridge
Editor’s note: Numbers in each column are not meant to add to 100%
Hydroelectric energy is the most common source globally, and it gets used by at least 60% of cryptominers across all four regions. Other types of clean energy such as wind and solar appear to be less popular.
Coal energy plays a significant role in the Asia-Pacific region, and was the only source to match hydroelectricity in terms of usage. This can be largely attributed to China, which is currently the world’s largest consumer of coal.
Researchers from the University of Cambridge noted that they weren’t surprised by these findings, as the Chinese government’s strategy to ensure energy self-sufficiency has led to an oversupply of both hydroelectric and coal power plants.
Towards a Greener Crypto Future
As cryptocurrencies move further into the mainstream, it’s likely that governments and other regulators will turn their attention to the industry’s carbon footprint. This isn’t necessarily a bad thing, however.
Mike Colyer, CEO of Foundry, a blockchain financing provider, believes that cryptomining can support the global transition to renewable energy. More specifically, he believes that clustering cryptomining facilities near renewable energy projects can mitigate a common issue: an oversupply of electricity.
“It allows for a faster payback on solar projects or wind projects… because they would [otherwise] produce too much energy for the grid in that area”
– Mike Colyer, CEO, Foundry
This type of thinking appears to be taking hold in China as well. In April 2020, Ya’an, a city located in China’s Sichuan province, issued a public guidance encouraging blockchain firms to take advantage of its excess hydroelectricity.
Visualizing the New Cryptocurrency Ecosystem
Cryptocurrencies have evolved past digital cash. This graphic explores the the new cryptocurrency ecosystem and how it’s impacting the modern economy.
Visualizing the New Cryptocurrency Economy
Over a decade ago, the birth of Bitcoin sparked a revolution in the digital world — and just last year, the number of active cryptocurrencies jumped from roughly 1,600 to over 3,000 worldwide.
Cryptocurrencies have now evolved past simple digital currencies, offering solutions to meet the complex needs of modern financial markets.
Today’s graphic from Abra visualizes the complex, ever-evolving cryptocurrency ecosystem and its real-world applications.
Characteristics of Cryptocurrencies
Why are cryptocurrencies important for the future of digital finance?
Drastically reduces fees and processing times due to a lack of cross-border restrictions
Prevents governments or major institutions from blocking financial activities at whim
- Greater financial control
Individuals can have total control of their funds
- Greater security
Prevents fraudulent alterations from third parties
- Lower costs
Lower transaction fees thanks to fewer third parties
- Greater Accessibility
Reduces or eliminates traditional barriers to capital markets
Much like the internet has forever altered how we live and work, cryptocurrencies have the potential to change how people participate in global financial markets.
Categorizing the New Crypto Economy
Today’s cryptocurrencies go beyond replacing cash. This new token-based economy is evolving─with unique solutions emerging in finance, security, identification, social engagement, and ownership.
Cryptocurrencies are generally categorized by their primary application within the ecosystem:
Digital cash can be used for both ecommerce and brick-and-mortar retailers
- Store of value
New form of scarce native currency and a means of settlement
- Programmable money
Borderless money that enables easy conversion between currencies
Crypto version of fiat which is tied to the value of resources like gold or the U.S. dollar
Private digital transactions, with some offering anonymity
- Digital ownership
Digital handling, storage, and monetization of data
- Decentralized utilities
Crypto-enabled networks, products, and services that exchange between assets
- Alternative finance
Digital assets such as collectibles, commodities, and tokenized securities
Cryptocurrencies are adding both value and utility to the digital economy, and to the global financial market as a whole.
Applications of Cryptocurrencies
Because cryptocurrencies are programmable, customizable computer code, developers can design and adapt them for many use cases within the digital economy.
How are these various cryptocurrencies being used in everyday applications?
- SPEDN auto-converts crypto to fiat for merchants, reducing exchange rate risk while offering convenient customer payment options.
- Slice offers real estate investing to anyone for as low as $10,000 through fractional investment.
- CyClean plans to launch a blockchain-enabled electric vehicle (EV) fleet that mines crypto as users travel—reducing emissions and rewarding users for doing so.
- Digital construction platform Builderium connects contractors to clients around the world through blockchain, opening up a global marketplace of potential deals.
These are just a few of the ways cryptocurrencies are breaking down barriers for people and companies worldwide—allowing them to grow personal wealth and enter the global market.
The Growth of the Crypto Economy
Worldwide, the numbers show that blockchain-based technology and cryptocurrency use is growing. Blockchain wallet users rose from nearly 9 million in 2016 to over 42 million in 2019.
Developers produced a mere 100 decentralized apps (DApps) in 2015─with that number skyrocketing to over 3,100 by 2019.
Overall, cryptocurrencies are helping to create an innovative and accessible financial system around the world.
Cryptocurrency deserves an opportunity to find a sustainable future in our economy.
—Adena Friedman, President & CEO of NASDAQ
While the future of the new cryptocurrency economy is still taking shape, one thing is certain─cryptos are forever altering the way we view and measure the value of money.
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