Blockchains, cryptocurrencies & the decentralized economy: Part 1 —  "Introduction" (generalized article on blockchain and cryptocurrency technologies, basic principles of decentralized economy)

Introduction

We’re living in a time of blockchain and cryptocurrency euphoria. You can’t go too far without seeing the headlines – mostly reports of Bitcoin’s latest price action. It’s 2018, and people are realising that cryptocurrency is here to stay and a decentralized economy is becoming more inevitable as each day passes.
A fully decentralized society, driven by blockchain, will disrupt multiple industries across the world. But, what does this mean for the population? How will this disruptive technology change the world? And will it be for the better?

What is blockchain?

A blockchain can be described as a digital ledger that records electronic transactions occurring between two parties. Rather than relying on a third-party to confirm the transaction, the blockchain’s network collectively reaches agreement, commonly known as “consensus”.
There are multiple different consensus models, with Ethereum using PoW (Proof of Work). There is also the PoA (Proof of Authority) model, which is what VeChain Thor is using for their enterprise-level blockchain platform.
Once the network approves the transaction, the transaction gets digitally recorded to the blockchain ledger. Once this happens, the record can never be tampered with or deleted; this adds transparency and removes the need for a centralized third-party.

What is cryptocurrency?

Cryptocurrencies started with Bitcoin in 2009, all thanks to Satoshi Nakamoto. The Bitcoin founder described the invention as “a peer to peer electronic cash system”. Essentially, Bitcoin is a digital currency built from crypto-economics. This digital currency allows users to transfer value to anyone around the world in a fast, low-cost way that will be recorded on the blockchain. Just last week, somebody sent $300M worth of Bitcoin across the world, for just $0.04 in fees!

Current Top 5 Cryptocurrencies (by market cap)

  1. Bitcoin – The original and “king”
  2. Ethereum – Decentralized platform
  3. Ripple – Payment coin
  4. Bitcoin Cash – “Fork” of Bitcoin
  5. EOS – Decentralized platform

What is decentralization?

When power has transferred from a central authority to multiple decision makers.
Many people argue what “true decentralization” really is – However, Vitalik Buterin, the Ethereum co-founder, believes that decentralization should be categorized into 3 types: Architectural Decentralization, Political Decentralization and Logical decentralization.

Principles of a decentralized economy

  • Goodbye Middleman
    Throughout the course of history, humankind has always relied on a middle man; a person who acts as third-party in every transaction. This includes banks and government entities. For the first time ever, we can wave goodbye to these middlemen, and take advantage of blockchain technology.
  • Smart cities
    Coming to a city close to you! The presence of smart cities is inevitable during most of our lifetimes. Like something out of a sci-fi movie, we’re all likely to witness cities taking advantage of blockchain and IOT (internet of things).
    One country taking advantage of this technology is Dubai. They see blockchain as “the next wave of economic opportunity and digital innovation”.
  • Disrupting industries
    Nearly every industry is working hard on R&D to find the best way to utilize this new technology. These research groups are developing POC (proof of concept) ideas to discover how this revolutionary technology can shake up each industry.
    Supply chain – One of the most obvious industries that will change from using blockchain technology. A great example is the blockchain company called VeChain. This enterprise-level blockchain platform allows companies to track the lifeline of their products. The first use-case was in the wine industry – This allows customers to scan the bottle’s QR code and view the whole lifeline of the product, from the grape to the bottle in their hand.
  • Start-up fundraising
    Do cryptocurrency ICO’s mark the end for traditional IPO’s? This revolutionary way to raise funds has seen massive growth during the last year, and it doesn’t look to be stopping anytime soon. ICO’s allow the regular public to own part of a project they believe in - this is a fantastic way to build a community around your project and allow them to own part of the project.

Conclusion

Blockchain can provide society with a never-ending list of benefits, and it won’t be a surprise to see entire industries will be shaken up. The technology can improve payment speed, efficiency, trust, and more! Cryptocurrencies play a big part in this blockchain revolution, and they constitute a new form of start-up fundraising that allows people to invest straight from their mobile phone. However, we are living in very early days of it. The space is still not fully regulated, and this can pose serious risk to investors.

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