Blockchain & New digital currencies

A few weeks ago I came across the Netflix documentary 'Banking on Bitcoin'. Although I have heard about Cryptocurrency and Blockchain before, I never really bothered to understand more of it, until now.

What is a Cryptocurrency?

These days, money is no longer limited to bills, coins or credit and debit cards. In fact, some money is not owned by any particular government, or regulated by a central entity. It also exists wholly on the internet. They are international in the sense that there are no fees for payments that cross borders, and the transaction works the same no matter where you are.

What is Bitcoin?

Bitcoin has been hailed by some as the future of currency, but its volatile price and questionable safety is something to keep in mind.

Bitcoin is a virtual currency that was created in 2009 by Satoshi Nakamoto, but up until this day, nobody knows who he is, in fact, he could be more than one person.

Source: Newsweek.com

Individual Bitcoins are created by computer code and the total value of all Bitcoin in existence is now more than £185billion.

Like paper money and gold before it, bitcoins, allow people to exchange value. Unlike their predecessors, they are digital and decentralized. The digital transactions are made without middlemen (banks), there are no fees, and no need to provide personal data.

For the first time in history, people can exchange value without intermediaries which translates to greater control of funds and lower fees. The possibilities are endless, and what makes it attractive to some users is its anonymity, as well as its lack of government control.

Is it dangerous?

As a result of an unsupervised and untraceable digital money transaction system, Ross Ulbricht, a 29 year old startup founder, created the Silk Road, the internet's biggest market for illegal drugs and goods. He was caught in October 2013, by the FBI and charged with drugs trafficking, money laundering and attempted murder.

The whole Silk Road enterprise had reportedly seen $1.2bn in sales in its existence, and nearly one million anonymous customers.

I keep thinking, even though this is the future of money, I question the ethics. How far are people willing to go? Since Bitcoin is still the preferred method to buy drugs and illicit goods. While it keeps Bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them.

How much does it cost?

The creators of Bitcoin designed the system so there would only ever be a limited supply of bitcoins to be mined (a maximum of 21 million). Bitcoins aren’t printed, like pounds, dollars or euros. They’re produced by people, and increasingly businesses, running computers all around the world. It's value, like all currencies, is determined by how much people are willing to exchange it for.

Their values are incredibly unpredictable, with the ability to plummet as quickly as they shoot up.

Several marketplaces called “Bitcoin exchanges” allow people to buy or sell Bitcoins using different currencies. People can also send Bitcoins to each other using mobile apps or their computers in the same way people send cash digitally.

The value of Bitcoin has fluctuated tremendously since they were introduced and have reached a record high.

Source: https://charts.bitcoin.com/chart/price

In 2013 when they first came to public attention, the value soared by 10,000 per cent before the price crashed. In September 2016, a Bitcoin was being traded for around £469. In October 2017, a Bitcoin was traded for more than £4,000, and Today at the moment I am writing this post, a Bitcoin is worth £7963.88

Emerging currencies

Although Bitcoin was the first cryptocurrency, more digital currencies are being introduced in the market, such as Ethereum, Litecoin, Monero, Neo, Cardano, Ripple, Iota and Bitcoin Cash. The later, is a new version of bitcoin that’s incompatible with bitcoin.

What is Blockchain Technology?

Bitcoin is only one of several hundred applications that use blockchain technology today. Blockchain is an open and shared database that operates in a decentralized network format. It allows users to transfer and add information to it anonymously, without security compromises.

To understand better, I searched for a video that explains blockchain for 'dummies'. So here is a video where Bettina Warburg, a Blockchain researcher illustrates this complex concept better on 5 different levels of difficulty.

On a simple level, blockchain is a new network that will help us decentralize trade, allowing us to do transactions much more peer to peer directly and lower our use of intermediaries (companies & banks).

• Level 1: Child - A way that we can trade with any kid all over the world whatever you want. You don't need to go to a store and you don't need to know the other person.

• Level 2: Teenager - A tool where you can sell online, but the money goes directly to you., you don't need a brand in between. It is a network of computers that all have the same history of transactions, instead of being one company with one database that holds all the information, the same list is held by all these different people and it gets validated by everyone, and it is constantly updating itself. It uses cryptography, it encodes all the transactions, you can't see what happened, but you know what happened.

• Level 3: College Student - Instead of there being a company in the middle that helps you make a transaction, there is a bunch of software code that is being run by all these different computers that have a node, so they are all running the same software. There are a lot more use cases about blockchain that aren't around the currency side, but on how to take any asset and being able to trade that using the same technology. To verify that a person is a legitimate seller or producer, a lot of people are working on how to create identity structures that leverage blockchains. An example is how to cryptographically sign a given attribute so in that sense, the government could sign that you have a passport, or a university could sign that you are an enrolled student, so you could control that information yourself.

• Level 4: Grad Student - Whenever we have a transaction and I buy something from someone, this information gets logged and it gets verified by a third party and if all this information verified matches then the transaction goes through without any intermediate, and it gets stored, and when we make further transactions this information is ready and embedded in the ledger (collection of financial accounts), you can add more information, but you can't erase anything.

• Level 5: Expert - Blockchain is a persistent transparent public append only ledger. It is assistant that you can add data to and not change previous data within it. It does through a mechanism for creating consensus between scattered parties that do not need to trust each other, they only need to trust the mechanism. It randomizes the process so it insures that no one can force the blockchain to accept the particular entry onto the ledger that others disagree with.

So what will happen?

It is uncertain. Bitcoins are unregulated. In the near future, governments will be forced to take control over it, the taxation, and keep a better eye on illegal transactions. Banks will also need to ride the Bitcoin boat.

One thing is certain, blockchain technology and cryptocurrencies are transforming the economy. It also represents an opportunity for tech savvy startup founders to join the 'Cryptocurrency' craze. There are many smart engineers a building today's cryptocurrency companies for the future: Javvy, Divy project, Stream token, Monetha, Shapeshift, Bancor, Coinbase, Circle and Bitpagos, the first Latin American blockchain platform.

Undoubtedly, the bitcoin economy is growing at a fast pace, and even though some questions arise, such as ethics, security and safety, more and more companies are coming up with their own cryptocurrencies such as Kodak, Atari, BurgerKing with it's WhopperCoin in Russia,

Some countries are now creating their own cryptocurrencies. To name a few, Ecuador, Israel, Tunisia, Senegal, Sweden, China, Estonia, Russia, Japan, and Venezuela, which is in the midst of a financial political crisis, is planning on introducing 'The Petro' a government-issued cryptocurrency,

Worldwide, there are around 200,000 merchants that accept cryptocurrencies. An example of this is the Brisbane Airport, which is now accepting Bitcoin to boost tourism. If businesses don't use any of these cryptocurrencies already, they may want to start incorporating them soon as a form of payment. Why? because companies that want to attract new customers, especially Millenials and Generation Zs, who are the early adopters of these technologies, need to incorporate these new systems into their business.

The rules in economy need to be rewritten. The actors are no longer just people, it is also machines.

Bitcoin has a lot of issues mainly trust and hacks and a need to work on trust and feeling that is a safe technology. Bitcoins getting stolen and getting lost. Education and standards will be a big part before it actually transitions into the mainstream for average users to use it.

This requires the design of services and the user experiences around the use of this new technology.

Some of the risks companies may encounter are that their customer's information will become anonymous, secure and encrypted, because people use digital currencies as a way to protect their personal identity, and to benefit from low transaction fees and exchange rates but when the masses move, companies must move with them.

In terms of Blockchains, it is on research state to be developed to be applied in many areas. A lot of companies and consortiums are getting together to building private blockchains, at the moment there are proof of concepts for energy, pharmaceuticals, retail and different fields, but it may be seen in a few years what this means for trade. According to Finn Brunton, Historian at New York University, blockchain will emerge in the field of electricity, power grid automatically and

One thing is certain, these new emerging digital currencies are the future of economy.

References:

https://www.theguardian.com/technology/2013/nov/10/silk-road-internet-market-illegal-drugs-ross-ulbricht

https://www.thesun.co.uk/money/3000715/bitcoin-what-is-price-gbp-usd-today-value-cryptocurrency/

http://www.bbc.co.uk/news/technology-40800270

https://www.coindesk.com/bitcoin-milestones-silk-road-goes-dark-bitcoin-survives-its-biggest-markets-demise/

https://blockchain.info/wallet/#/

https://www.marketwatch.com/story/bitcoin-bitcoin-cash-take-weekend-roller-coaster-ride-as-prices-fluctuate-wildly-2017-11-12

https://charts.bitcoin.com/chart/price

https://www.entrepreneur.com/article/293053

https://www.verdict.co.uk/bitcoin-countries-digital-currency/

https://steemit.com/cryptocurrency/@luzcypher/bottom-line-business-benefits-of-accepting-cryptocurrency

http://uk.businessinsider.com/invest-cryptocurrency-blockchain-technology-2017-8

https://www.recode.net/2018/1/25/16933514/robinhood-crypto-currency-free-trading-bitcoin-payment-asset

https://www.lonelyplanet.com/news/2018/02/01/brisbane-airport-bitcoin-cryptocurrency/