An introduction to blockchain

What, exactly, is blockchain? Blockchain is a rapidly increasing list of records that are linked to each other via cryptography. In simple terms, a blockchain is a record of a particular transaction that is encrypted, secured, and linked to other transactions.

When blockchain started out, it didn't gain much ground. However, by 2017, it was hard not to pay attention to a market that had increased in value by around 50 times over the course of 12 months, from around 15 billion US dollars in January, 2017, to over 830 billion US dollars on 7 January, 2018.

These are eye-watering numbers, but they only represent the value of publicly traded cryptoassets (meaning the currencies that are in circulation), and not the entire supply! A lot of the supply is still locked away and kept by the founding teams, which helps to make Bitcoin as secure as it is now. You will learn more about this in later chapters of this book.

The rise of blockchain

Just like with the internet stocks in 2000 (and pretty much every single asset that has ever existed), blockchain has gone through the boom and bust cycle of markets driven by greed and fear.

Every market participant has probably heard the following terms thousands of times:

• FOMO: Fear of missing out
• FUD: Fear, uncertainty, and doubt

These terms correctly describe the psychology of the crowds that drive the roller coaster situation in the markets. This is especially amplified in markets dealing in new technologies, where people speculate on the future of such new technologies and startups, especially when these markets are public and global, which means that anyone, from anywhere in the world, can take part 24/7! That's the main reason for the incredible volatility that we have seen in cryptoassets.

Some fun facts are as follows:

• In December, 2017, Satoshi Nakamoto, the publicly unknown founder of Bitcoin, became one of the 50 richest people in the world, with a net worth estimated at around $20 billion, all based on his or her Bitcoin holdings.
• In January, 2018, the cofounder, executive chairman, and former CEO of Ripple, Chris Larsen, made an even bigger jump, becoming the fifth richest person in the world! His holdings in Ripple's cryptocurrency, XRP, were valued at approximately $60 billion. This catapulted him ahead of people like the founders of Google, Larry Page and Sergey Brin, and the founder of Oracle, Larry Ellison. Only Amazon's Jeff Bezos, Microsoft founder Bill Gates, Berkshire Hathaway's Warren Buffett, and Facebook's Mark Zuckerberg were ahead of him at the time.

Since its peak in January 2018, the market capitalization has gone down to the 100-200 billion USD range. While such a fall may be disappointing for some, we should still be reminded of the 15 billion market cap in January 2017. This is still amazing growth in a very short period of time, which has hardly been observed in other industries throughout history.