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Cryptocurrencies are digital or virtual currencies with a decentralised, distributed and cryptographically secured payment system. Cryptocurrencies can be traded on public exchanges. Bitcoin and Ethereum are among the best-known cryptocurrencies.

A blockchain can be compared to an Excel file that is updated in real time and whose validity is confirmed by thousands of computers.

To build the blockchain, each individual transaction is processed by all nodes in the network, or thousands of computers all over the world, before the data is permanently stored within the respective block of the blockchain. This ensures that nobody can manipulate or change entries afterwards.

Decentralised data management: Since the data in a blockchain is not managed by a central authority but decentrally by a large number of involved actors (the so-called nodes), manipulation by individual persons is impossible. All transactions are stored and archived permanently so that a subsequent modification of the data is impossible. Transparency: The data from public blockchains can be viewed. Although it is not known who is behind an address or transaction, the complete transaction history of the blockchain is permanently stored and can be reproduced at any time. Reliability: The data records of a blockchain are stored in a decentralised way throughout the entire global network – and not in a single location, such as a server – which means that there is no risk of data loss.

Large memory requirements: A blockchain gets longer with each new block. This means that the memory requirements of the nodes in the network – which save the entire blockchain and verify the data blocks that are added – also increase. Limited scalability: One of the biggest challenges of public blockchains is to meet the requirements of rapid user adaptation without neglecting the aspects of decentralisation. In order to solve this scaling problem, sustainable solutions are already being researched. Low data throughput: Payment systems such as those of credit card companies can currently process considerably more transactions than a public blockchain. The data throughput (the net amount of data per time that can be transmitted over a network) of a classic blockchain solution is still limited. However, research is underway to increase the data throughput significantly. In addition, private blockchain solutions already offer possibilities to process larger amounts of data simultaneously. Technically sophisticated: Blockchain is still a very young technology, which is why only a few IT experts currently have the necessary skills to adequately design or further develop a blockchain network. Furthermore, many of the blockchain applications currently in use are not yet fully developed, even from the user-interface point of view. However, the applicability is constantly evolving so that a continuously improving user-friendliness can be expected.

The concept of blockchain technology was first introduced in the Bitcoin white paper, which was published in 2008 under the pseudonym ‘Satoshi Nakamoto’. The first block of the Bitcoin blockchain was mined in 2009, and in the following years, a number of other digital currencies based on blockchain technology (so-called cryptocurrencies) were created. Ten years later, there are myriad possible applications for blockchain technology, which is described by many as a groundbreaking advancement of the World Wide Web.

Blockchain technology can be used wherever processes or transactions need to be checked and verified securely and without intermediaries or third parties. Cryptocurrencies are technically based on blockchain technology and were the first blockchain-based application to gain recognition. However, these are only the first of many examples of how the underlying technology is applied, just as email was once one of the first applications of the internet. In addition, numerous other applications are imaginable: For example, blockchain solutions can be used in the area of a decentralised financial system (also known as DeFi or ‘decentralised finance’ applications), in the area of contract management (by means of so-called smart contracts), or as part of decentralised applications (so-called DApps). The technology is considered to be a particularly relevant application for the Internet of Things. But the blockchain can also promote sustainable improvements in decentralised data management, digital identification possibilities and decentralised computer networks as well as in supply chain management.

A public blockchain is stored on several thousand computers (all participating nodes in the network). Each of these computers keeps an updated and complete copy of the blockchain and is sometimes responsible for checking the correctness of the new transactions (data of the incoming blocks). All transactions of a public blockchain can be viewed, so that it is always possible to transparently reproduce when which transaction was made or received from which address.

Nobody can predict the future with certainty, and blockchain technology is still at the beginning of its development. However, industry leaders, experts and innovators see great potential in the digital and transparent decentralisation aspects underlying blockchain technology. In addition, new application areas start to use the technology to help shape a better and more secure digital future. ECR AG is convinced that blockchain technology offers substantial opportunities, as it favours the development of various useful applications and brings with it a variety of advantages.

A wallet for digital currencies and cryptocurrencies can be compared to a physical wallet, but, in this case, a wallet stores digital currencies or virtual vouchers. Some wallets include additional features, such as transaction summaries, user information and maps that show where the wallet can be used.