Ask an average individual what Blockchain technology is and they’ll probably give you the “I have no idea look”. Ask them about Bitcoin and their eyes will light up like fireworks. How can you not invest in something that went from $3,000 to $19,000 in just a few months, right? The world’s crypto markets dominate online and offline media, and many are willing to invest in digital assets without a solid understanding of the stability, theoretical foundation, and mechanics behind them.
From a technological perspective, Blockchain is groundbreaking. It does change the way people do business these days because it’s a mechanism that goes beyond transactional borders with its immutability and transparency when performing transactions.
“Blockchain technology is a cryptocurrency enabler. But it’s not a synonym to cryptocurrency. Cryptocurrencies are based on several other elements, such as public key encryption and a wallet.”
2017 was a great year for the crypto space. For the first time, people outside the community started taking notice of what’s happening; and then institutions opened their eyes too, and then governments started poking around drawing scrutiny from different regulators like the OSC (Ontario Securities Commission) and the SEC (American Securities & Exchange Commission) on ICOs (Initial Coin Offerings) and ITOs (Initial Token Offerings). According to Business Insider, startups managed to raise nearly $5.8 billion with their ICO projects in 2017, but only 48% were successful.
We’ve seen incredible twists and turns in the industry. Millions have been raised to fund ideas that founders could only dream of. Considering recent events, we now have a clearer picture of what the future may hold for Blockchain as a whole.
A hate/love relationship?
Blockchain does trigger mixed feelings. Some hate it, others love it. Some don’t like it, but they’re using it because it provides a real use to centralized companies that can’t find any other way to streamline processes, whether financial or non-financial. According to one very popular article on Medium, Blockchain technology is described as being something like “a very long sequence of small files — each one containing a hash of the previous file, some new data, and the answer to a difficult math problem — and divide up some money every hour among anyone willing to certify and store those files for us on their computers.” Duly noted! It’s complicated, which is why many prefer the less techy definition of “a tamper-proof repository not owned by anyone”.
The good that comes with Blockchain technology
“Bitcoin” used to be associated with words like “ransom”, “fraud”, “Silk Road”, “money laundering”, and many others. In 2017, things changed drastically when the media turned its attention to the stories of the wealthy sharing strategies on how to make millions investing in crypto. Lack of regulation in many countries across the globe triggered a massive boom in ICOs of all sorts and kinds. The figures were looking good across the business community, which led to a shift in perspective that Blockchain goes beyond Bitcoin, and that the underlying technology is here to stay.
With new rules and regulations set in place, investors are becoming more cautious and sophisticated, and less speculative. Not everyone has the ability to see beyond a volatile trend. Legitimacy brings along transparency and positive scrutiny, especially now that the general interest in Blockchain technology keeps getting stronger.
Read on to find out more about asset tokenization, the benefits of owning your data on the Blockchain, and the true implications of a decentralized shared economy.
One of the best things about Blockchain is that it benefits industries that never believed there was a way out of centralization. In the finance sector, words likes “tokenization” and “asset digitalization” remove major pain points in trading where the process of investing in assets is difficult to subdivide. Decentralized exchanges democratize investing, enabling parties to trade without dealing with middleman or third party institutions.
Berlin-based startup Brickblock is one of the best examples of a startup that aims to develop “a future of asset tokenization”. The project is a smart contract platform that helps investors buy real-world assets (e.g. real estate funds, ETFs) in cryptocurrency. With a tested MVP in place and a mission to revolutionize investing via fast settlements that go beyond borders, Brickblock raised over $12 M in its ICO.
Big companies like Facebook monetize personal data by selling it to the highest bidder. Blockchain could prevent advertisers from buying people’s personal information with GDPR compliant models that need a customer’s agreement to access their data. A decentralized model could remove the need to install ad blocking software because people are finally entitled to choose the ads they want to see; and get paid for their actions. Microsoft Corp and Accenture Plc have partnered up to develop a new digital ID network that uses Blockchain technology to legally identify over 1 billion people around the world who don’t have official IDs.
Other big companies in surprising sectors like tourism, are also looking to leverage the perks of a decentralized ecosystem. TUI, one of the largest tourism companies in the world, plans to move all of its data onto the Blockchain and improve a broken system with an app (BedSwap) that is seeking to maintain records of hotel inventories in real-time. A single, transparent and secure distributed ledger could significantly reduce costs for travel agencies, airlines, and hotels by easing bank payments, tracking internal contracts, and performing faster, more secure transactions.
Contrary to popular belief, Blockchain technology won’t bring down government banks or conventional financial institutions that make up our economy. But it does pave the way to creating a truly “decentralized shared economy”; think Airbnb on Blockchain – fully transparent, inexpensive, independent from middlemen. With Blockchain at the heart of the sharing economy and all operations locked on blockchains, peer-to-peer transactions eliminate transaction fees. Weeve.network is looking to disrupt the system with a business model that “bridges the technological gap between IoT and blockchain technologies”.
Located in Berlin, the project “envisions a world whereby things are enabled to freely participate in an economy; buying, selling and trading their digital assets by our secure, low cost and interoperable technologies”. A decentralized economy that leverages the peer-to-peer protocol can be a lot more efficient and secure than today’s existing infrastructure. Given that alterations of blockchain records can’t be done without hacking thousands of computers at the same time, the technology provides an unbreakable digital ledger system that is a lot cheaper and faster than existing solutions.
Many types of blockchains operate on token models to manage or fund Node economics development. Ether (ETH), for example, is used as payment method for the computing power (Gas) on Ethereum. Therefore, it is a computing power digital currency. Conventional currencies such as EUR, USD or GBP (fiat money) are connected to the value pertaining to their own economies. But unlike Ether, these economies are stable, regulated and well-developed. Ether isn’t.
Considering the disruptive potential of blockchains, the population has turned to speculating the intrinsic value of digital currencies. In the absence of universal rules to keep things under control, whatever happens in the market is pure speculation; which triggers manipulation, fluctuation, and sudden spikes in transaction value. When trading cryptocurrencies, 1 ETH worth $400 today may be worth $350 tomorrow.
What are some of the worst things associated with Blockchain technology? Read on and you’ll find out more about some of the most notorious ponzi schemes to date, poor regulation, Blockchain con artists that have built a reputation in the field without any in-depth knowledge of a technology that goes beyond Bitcoin, and a lot more.
The hype surrounding Blockchain technology turns initial coin offerings (ICOs) into a digital gold rush. But according to Bitcoin.com, $9 million a day is lost to some sort of cryptocurrency ponzi scheme. Unlike IPOs, most ICOs are not regulated by a financial authority. OneCoin remains the biggest and most notable ICO scam in the history of Blockchain. Rumor has it that the business model proposed by the founders was meant to be a scam since inception.
Founded by Bulgarian entrepreneur Ruja Ignatova, OneCoin emerged in 2017 as a cryptocoin with its own private Blockchain. In spite of having a poorly designed website, no prototype whatsoever, and really bad content, OneCoin marketed its ICO so beautifully that investors were ripped off of $350M. The company managed to target wanna be entrepreneurs and newbie investors who were bewitched by the booming value of cryptocurrencies. However, they didn’t understand the technology nor the differences between a genuine ICO and a scam.
Plexcoin, REcoin, DRC and others, were caught red handed, too. When left unchecked, the crypto market can do irreparable damage to one of the most promising technologies of the century. ICO scammers are great at creating a sense of urgency amidst an overwhelming hype that makes investors buy now or lose out on the “greatest deal of their life”. Truth be told, when it comes to investing in something, whatever that something is, you need to perform due diligence.
Hacks, forks, & developer wars
Contrary to popular belief, errors and hacks are real even on a Blockchain that claims to be secure, immutable and fully transparent. Ethereum, for example, has dealt with its fair share of lost funds. One of the most embarrassing events was when a top-tier development company based on Ethereum, Parity Technologies, accidentally allowed a user to lock away 300M ETH. In 2016, the famous DAO hack led to the loss of 3.5M ETH, following which the Ethereum Blockchain went through a hard fork and was split in two to be able to re-credit the lost funds back to the users.
There have been forks in the Bitcoin Blockchain, too. After numerous attempts of trying to solve Bitcoin’s scalability issues, several hard forks were created to change some of the rules of the blockchain. Three of the most notable happened on:
- August 1, 2017 – Bitcoin Cash
- October 24, 2017 – Bitcoin Gold
- February 28, 2018 – Bitcoin Private
From an outsider’s point of view, Blockchain is still a dubious way of making money. Some people believe that the technology is just a “get rich fast scheme” with ICOs at its core. On top of that, considering that hacks are still happening in spite of all the security claims made by the technology, there’s still a chance of losing money when holding crypto in cold wallets that appear to be unhackable.
In Blockchain we trust? Not just yet.
While some see Blockchain as an unshakeable next-generation technology that can come up with a solution to any pain point, others don’t necessarily believe it’s bulletproof. Because, it’s not. Billions have been thrown into Blockchain-based companies that seemed to have potential just because they advertised a bold mission and vision.
Envion was one project that wanted to revolutionize the mining markets on a global level with its mobile units (MMU). The German based company managed to raise hundreds of millions with its fancy ICO. But at a closer look, the business model was just another project with an impossible mission. The team behind Envion allegedly created scalable, modular, and easy to move mobile mining units. This way, the owners could easily relocate their mining businesses where electricity was lower-priced.
Just before entering the production phase, the bubble burst. The founders started accusing one another of fraud and all of a sudden, what seemed to be one of 2018’s most successful ICOs turned into a full-blown scandal with no turning back.
Is the world ready to trust the computer code behind Blockchain technology? Not exactly. Although things are changing and improvements have been made in the industry, not every company is ready to decentralize their business models and go fully digital. It was not easy for the Internet to win people’s hearts. But even with all the “fake news” and annoying pop-ups, we trust the web for a wealth of different activities, whether financial or non-financial.
One of the craziest aspects about Blockchain technology is that we don’t know who created it. And yet, it’s worth billions. Although the maker’s identity is still one big secret, it hasn’t stopped people from trading bitcoins or buying houses in crypto. Blockchain developer at Blockchain Labs, Roman Storm, says that “pretty much every single industry will, at some point, be affected by Blockchain technology.”
It’s actually a good thing that we don’t know who’s behind Bitcoin’s Blockchain because it leaves plenty of room for people to speculate, make assumptions, and even claim ownership. Rumor has it that the famous Satoshi Nakamoto is a 37-year old Japanese, although the people who actually talked to him debunked the myth highlighting his perfect English accent.
Ethereum’s maker on the other hand, is a 24-year old Russian-Canadian genius programmer who developed the second most powerful type of Blockchain at age 18. One of the most insane facts about Ethereum Blockchain is that you can build DApps (decentralized apps) on it. Think Kryptokitties or EtherCraft, the most popular game on the network with over 100k weekly transactions.
As opposed to the Bitcoin blockchain, the Ethereum network is a decentralized programming platform, which basically means crypto tokens can’t be mined. To be able to execute functions, Ether is the digital currency “fueling” the blockchain. Inspired by Bitcoin, Vitalik went beyond with its own idea to solve some core issues, including transaction time and transparency.
Last but not least, we have an insane aspect of Blockchain technology that will knock your socks off. Enters the scene IOTA, a cryptocurrency that substitutes conventional blockchains with its DAG approach, or The Tangle. Still in its early stages, IOTA is looking to build a fully decentralized and secure ecosystem for the IoT (Internet of Things).
The mere fact that IOTA doesn’t use a Blockchain is what makes it so unique. The DAG system is superior to existing consensus because it solves one major concern associated with Ethereum – the fact that the network hasn’t figured out (yet) how to implement the proof-of-stake protocol. Rumor has it that the alternative could be IOTA’s DAG. With the Internet of Things at its core, IOTA is an ambitious project that could revolutionize Blockchain technology sometime in the future with its scalability potential.
“Blockchain” is today’s most popular word in the tech world. Lots of companies are revamping their business models by adding “powered by Blockchain technology” to look more interesting. But the truth is, it’s not that easy to get out of a centralized system when you are bound to abide by the rules of a centralized economy. New startups are making attempts to get the best of both worlds. Some of them run off to crypto-friendly countries like Germany, Switzerland, and Japan; others are trying to fight the system in the hopes that governments will finally understand that Blockchain technology is here to stay.