Categories
Crypto Daily Topic

Can Photonic Chips Save Bitcoin?

Bitcoin mining was Satoshi Nakamoto’s idea to release new Bitcoins into circulation only after solving some complex puzzles. The mining system, which verifies transactions after ten minutes, was so designed in order to secure the network. And as Bitcoin has become more popular, so has mining increased. 

But if Bitcoin’s future depends on mining, that future becomes harder to picture every day. This is because mining presents various challenges that make the Bitcoin network less safe and not decentralized as Satoshi envisaged. Also, mining is incredibly expensive and not good for the environment.

Is there an alternative? This is the question nagging many Bitcoin fans.

As it turns out, photonic chips could be the answer.

Let’s take a more in-depth look into Bitcoin mining, what photonic chips are, and if the technology is enough to replace Bitcoin mining as we know it.

A Bit about Bitcoin Mining

Bitcoin mining has a bit of fascinating history. After Bitcoin took a dramatic dip from $17,000 to less than $7,000 at the end of 2017, the overall sentiment was Bitcoin was done. But the cryptocurrency’s mining appeared to be unshaken by what was happening with the price. This meant the value of Bitcoin trumped the costs associated with mining it. In other words, Bitcoin was still profitable.

In the next year, miners continued scoring big. But in November 2018, Bitcoin plummeted from around $6500 to less than $3500. This plunge was what did it for many miners. Bitcoin simply wasn’t profitable enough now. Because many miners checked out, the crypto’s hash rate took a plunge too – going from 60 exa-hashes/sec to 35 exa-hashes/sec.

The drop in Bitcoin’s price and the consequent decline in hash rate had certain ramifications for Bitcoin. For one, this meant mining would almost be confined to regions where electricity was cheap – mainly Western China. Consider too that around this time, China was cracking the whip against cryptocurrencies, a fact that drove cryptocurrency-based businesses to set up in other countries.

What did this mean for Bitcoin? First off, the “centralized” mining, as opposed to mining being geographically diverse, was a threat to the very core tenet of Bitcoin – decentralization. And the cold legal reception in the very region where Bitcoin could be mined posed a threat to its very existence.

Since then, looking for alternatives to Bitcoin mining has become the vocation for some Bitcoin enthusiasts.

The Problem with Bitcoin Mining

Apart from the existential threat to Bitcoin, there was always another persistent problem with Bitcoin mining. While Satoshi Nakamoto devised the computations to increase security for the network, what he may not have envisioned was the massive power bills. And when more people learn about Bitcoin, the more they seek it out, and the more the energy used goes up.

Bitcoin mining is so power-hungry that it gobbles up over 75 terawatt-hours a year. The enormity of this might not register until you learn that this is above the annual power consumption of entire countries such as Austria. For the mere expense and the impact this has on the environment, mining is simply not sustainable.

Photonic Chips – A New Proof-of-Work?

To solve the mining problem, a team of researchers comprising Michael Dubrovsky (co-founder of PoWx), Marshall Ball of Columbia University, and Bogdan Penkovsky of the University of Paris-Saclay have proposed better mining technology. Dubbed “optical proof of work,” oPoW is a laser technology that involves using a more energy-efficient approach to mining.

The idea is to “fix” Bitcoin mining as it is and return mining to “the people” as opposed to a small concentrate of individuals in one corner of the world. Another end goal is to make Bitcoin mining a more profitable venture. Current specialized computers go by the thousands in dollars – and they are not designed to be used for much else.

So what are these photonic chips?

Photonic chips are small optical computers made of integrated circuits and that rely on photons (using light beams to generate energy) rather than electrons.

Also known as lightwave technology, photonics is not nearly a new concept. The term “photonics” goes back to 1967 when the French physicist, Pierre Aigrain, coined it to describe the result of harnessing light to emit energy. There are countless applications of the technology today – in IT, healthcare (biophotonics), manufacturing, sensing, lighting, solar power, space technology, and so on.

Dubrovsky and the team want to introduce photonics to Bitcoin mining. Instead of the power-guzzling ASIC miners, they hope that optical computers will use way less energy.

Mining using photonics will mean changing Bitcoin’s mining algorithm. The team hopes to replace Bitcoin’s encryption protocol with one they call HeavyHash. HeavyHash is optimized for photonic computers and will replace the SHA256-based PoW (HashCash.)According to the team, this new algorithm will lower the barrier to entry to Bitcoin mining, democratize Bitcoin, and massively help the world save power.

Beyond these ambitions, oPoW would stabilize the cryptocurrency’s hash rate, so it’s not so vulnerable to price falls. In short, whether Bitcoin’s price declines or not, miners would still make profits.

The Challenges with oPoW

While the oPoW plan sounds ambitious, it has its share of challenges.

The energy-efficiency of photonic chips is not clear cut. Some photonic applications, for instance, optical switches and photonic circuits, use round-about applications to function. These applications increase the energy use of photonic chips. The researchers have not predicted how much energy the chips will save.  It’s hard to know what this means for oPoW at this stage, and if it will be a power-saving option after all.

The team is also yet to prove how oPoW will address the problem of different regions having different power costs. Hardware costs will rise in the future, not decrease. So finding cheaper sources of energy may be a better solution.

What Would Opow Mean For The Bitcoin Market?

Consider for a moment that oPoW proposes to change the fundamental mining algorithm of Bitcoin. That comes with drastic ramifications, both positive and negative.

If implemented, an oPoW system would, first of all, break China’s control of Bitcoin mining farms. In turn, mining would now be concentrated in technologically advanced countries. Countries that are ahead in photonic technology would benefit the most. As you can see, this would not be the democratization of Bitcoin mining that the researchers imagine.

Drops in Bitcoin’s price would not mean a reduction in hash rate. Whichever way the price goes, miners will continue to enjoy a payday.

There is a lot of chatter about current miners creating some sort of “price floor.” An oPoW implementation would sink this floor further in the event of a bearish market since mining costs would be lower. This would likely influence Bitcoin’s price to gravitate towards the bearish end.

Final Words

As it stands now, it’s hard to be enthusiastic about oPoW, especially with the many gaps in how it will improve the current system. Sentiments are rife within the Bitcoin community that the technology is likely to only be a temporary fix. The team itself has not specified how much power the chips would save. So while the concept looks good on paper, it’s probably not sufficiently innovative to solve one of Bitcoin’s long-running challenges. It’s up to the team to prove the Bitcoin community wrong on this one. 

Categories
Crypto Daily Topic

2local – Environmentally Conscious, Blockchain-Powered Marketplace

Environmental sustainability is an issue that keeps a lot of environment-conscious people awake at night these days. With scientists ringing the alarm louder than ever before, many people are becoming more aware of the need to participate in actions that contribute to a safer, cleaner environment.

And with blockchain slowly taking over industries, it was only a matter of time before we heard of the technology being tapped to mitigate the climate crisis. Its immutable record-keeping, transparency, and accuracy are just some of the qualities that make it an excellent tool for this end.

2local is a Netherlands-based entity that’s leading the way in the environmental-sustainability endeavor – while relying on a powerful blockchain-powered system. But 2local also seems to have other high ambitions in addition to saving the environment.

Let’s dig into the organization’s background, the intriguing way it hopes to integrate blockchain to promote environmental sustainability and its cryptocurrency, the L2L token.

What is 2local?

2local is a blockchain-enabled platform running on the Stellar platform that seeks to promote environmental sustainability and growth and prosperity for all. On the platform, consumers can connect with companies that sell sustainable, locally produced, high-quality goods, and services. The platform operates on a cashback and loyalty system in which consumers, via the use of the native L2L stablecoin, can receive a cashback for purchasing goods from these companies. 

Backed by professionals from the maritime, finance, tech, business, market research, entrepreneurship, and so on, the project seems poised to benefit from a wealth of experience.

2local operates on a three-pillar model to address what it terms as a “man-made crisis” of hunger, inequality, and climate change. These are “a local lens, a cashback system, both deeply rooted in blockchain.” Its local lens encourages companies to go local while encouraging people to buy these locally made products. The cashback system compensates people for purchasing locally made products, while the platform’s blockchain provides a fast, secure, and transparent system.

2local is the first company in the blockchain space to design a smart market model that connects businesses with the end-user, with both parties being given an incentive to preserve the environment.

The L2L Token

All transactions on the platform are conducted via the platform’s native L2L token. L2L tokens can be stored in digital wallets specially designed for the platform. Set to be launched in 2021, L2L is an algorithm-based stablecoin, ensuring users can trade with it without the risk of volatility-triggered losses.

Using the L2L token gets users rewarded with a monthly cashback. Also, when you use the token, you save on high transfer fees. 

The Environment, Blockchain, and 2local

Countless studies continue to show that global temperatures have reached new highs thanks to man-made carbon emissions. Blockchain has been touted and is being explored as one of the potential solutions to this problem. Thanks to its verification potential, the technology could bring a different way of doing things when it comes to mitigating the effects of climate change.

2local is one of the organizations tapping into this potential. Thanks to a blockchain-powered system, it’s easy to track the origin of a product and verify if it’s indeed made with local materials. Locally made goods help promote sustainability by reducing transport miles.

This is because the more the transportation miles, the more harmful gases are released into the environment. The need to transport materials across territories also drives the need for more fuel consumption, which ravages the environment even more.

Conclusion

2local couldn’t be more an organization of the times (or is it the future?) than with its ambitious plans of making the world a better place – while being aided by blockchain, a revolutionary idea in itself. The truth is, blockchain and the need for environmental sustainability are both ideas that simply refuse to be ignored. For this reason, we think 2local is one to watch.

Categories
Crypto Daily Topic

Merged Mining and Its Potential for Mitigating Halving Effects for Bitcoin and Litecoin

Bitcoin and Litecoin are two of the most popular cryptocurrencies. Bitcoin has long maintained peak position in market capitalization, with Litecoin not far behind as the sixth-largest. Both cryptocurrencies also experience a major event every four years. This event is block rewards halving – in which miners’ rewards are slashed by half.

As a result, there’s a decreased incentive for miners to keep supporting and securing the blockchain networks as block rewards diminish.

Merged mining presents a potential solution to this problem. 

What is merged mining, though? What springs the idea, and how can it mitigate halving effects for Bitcoin and Litecoin? This explainer seeks to address those questions, along with a scoop of more on this merged mining phenomenon. 

Merged Mining Explained

Merged mining, a.k.a Auxiliary Proof of Work (AuxPoW) is the process of mining two or more separate cryptocurrencies at the same time. The idea is to do so in a way that does not affect the mining performance on the blockchain of either coin. The concept of merged mining is lately a hot topic in the blockchain sphere – but it’s by no means a novel concept.

Satoshi Nakamoto – the brains behind Bitcoin, had earlier on envisaged the idea of merged mining. In a 2009 post in the BitcoinTalk forum, he shared that “I think it would be possible for BitDNS to be a completely separate network and separate blockchain, yet share CPU with Bitcoin. The only overlap is to make it so miners can search for proof-of-work for both networks simultaneously.”

Merged mining is based on the premise that work on a particular blockchain can be accepted as legitimate on a different chain. Each chain trusts and accepts the other’s work in the verification of data and transactions as well as the addition of new blocks. One blockchain provides proof of work – and this is the parent chain, and the other chain leverages this work and treats it as legitimate. This chain is called the auxiliary chain.

What Does Merged Mining Entail?

To begin with, merged mining relies on the involved cryptocurrencies utilizing the same algorithm. This means, for instance, that coins that use the same algorithm as Bitcoin – the SHA-256, can be co-mined with it, provided the right technical procedures are in place. Usually, the parent blockchain doesn’t need to undergo any sort of modification. The auxiliary, or child blockchain, is the one that needs programming so the two chains can “trust” each other.

At the time of writing, only three examples of AuxPow exist. These are Bitcoin-parented Namecoin, Litecoin-parented Dogecoin, and Myriadcoin – which is parented by both Bitcoin and Litecoin.

Can Merged Mining Mitigate Halving “Shock” for Bitcoin and Litecoin?

When it comes down to it, halving means reduced rewards for crypto miners. For instance, Charlie Lee, Litecoin’s creator, reflected on this scenario in July 2019 before Litecoin’s halving the following month. Interviewing for crypto site Mickey, he acknowledged that halving is always a “shock to the system,” explaining: “When rewards get cut in half, some miners will not be profitable and they will shut off their machine…” And though Litecoin has since bounced back, it’s hard to predict the future of Litecoin in subsequent halvings.

Also, as Bitcoin’s next halving edges closer – when block rewards drop to 6.25, it is expected the event will have a ripple effect on the entire Bitcoin ecosystem. Although the market sentiment will likely be bullish, the question about future halving effects for the cryptocurrency remains open-ended.

But what if there was a solution? Could merge mining be the answer for the halving conundrum?

A study by Binance Research, the research arm of leading crypto exchange – Binance, explored the possibility of merged mining to mitigate the effects of Bitcoin and Litecoin halving.

In the July 2019 report, Binance research determined that merged mining could increase mining rewards for both cryptocurrencies in light of future halving. Per the report, smaller blockchains could also benefit from AuxPoW by gaining access to better security enabled by bigger blockchains. They can also reduce the expenses needed to run a separate mining ecosystem.

In the same report, Binance explored how Dogecoin has held its own since adopting AuxPoW – in a bid to illustrate how merge-mining can be beneficial.

Dogecoin (DOGE) and Merged Mining

Dogecoin, the meme-inspired cryptocurrency, provides us with an excellent case study of merged mining, owing to its status as the most successful coin in this category. Launched in December 2013, the crypto adopted AuxPoW in July 2014. As Litecoin miners forked over their operations to integrate DOGE, the latter’s hash rate started ballooning, reaching well over 1500% that September.

Since then, both cryptocurrencies’ hash rates have moved in close correlation – with the exceptionally high correlation coefficient of 0.95. The two cryptos have also mirrored each other pretty closely in mining difficulty, difficulty ratios, and daily transactions. Also noteworthy is the fact that after some new mining pools started mining only Litecoin in 2017, a sharp deviation between the two hash rates occurred.

Still, merged mining is nothing near a cure-all for miners, or challenges currently facing blockchain, as the research warned. Below, we’ll take a look at the good and the bad of AuxPoW in greater detail.

Merged Mining Implications

The Good

Miners have the motivation to keep mining, thanks to the ability to earn extra income without doubling up on expenses

The cryptocurrencies involved get a liquidity boost, thanks to miners clearing transactions for both blockchains at a faster rate

Auxiliary blockchains benefit from enhanced security provided by the parent chain, but still, get to keep their distinct chain

Auxiliary chains are catapulted to mainstream recognition thanks to their association with larger, more established chains

The Bad

Some miners might not warm up to the idea of supporting child chains, as this would require them to adjust a lot of their mining operations. This takes time and money.

Some miners might not perceive child chain cryptos to hold a lot of promise. For this reason, there might be little incentive to adopt and support auxiliary networks

Some miners, especially new ones, might be entirely unaware of merged mining and the potential to make more from the technology

Child chains might become overly dependent on the parent chain, hamstringing their development and adoption of scalability technologies

Merged mining opens new attack vectors on the child chain

If not enough miners from the parent chain fork over to the child chain, the merged-mining model is vulnerable to a 51% attack

Final Thoughts

Merged mining sounds like a promising proposition for blockchain. Bitcoin and Litecoin networks could utilize the technology to secure their future, while up and coming blockchain networks could hop on the train and get exposure, enhanced security, and more. Admittedly, technology has its flaws, but the promise trumps the peril.

Categories
Crypto Daily Topic

Why is Bitcoin’s hashrate on the rise? 

Bitcoin’s hash rate has reached an all-time high of almost 120 exahash per second. The crypto reached this milestone two days shy of its birthday – on January 1st. (January 3rd is Bitcoin’s birthday, being the day the first block of Bitcoins was mined.) On new year’s eve, Jameson Lopp, CTO of CASA, the multisig wallet company, tweeted that “Bitcoin’s network hash rate increased by 162% during 2019, from 38 to 100 exahash per second.”

To put this in perspective, bear in mind that Bitcoiners were celebrating when the hash rate went over six exahashes in 2017. 

Also, consider the fact that this year’s surge in hash rate is despite 2018’s rather bearish market, followed by the subdued market sentiment in 2019. 

What’s A Hash Rate?

For the nontechnical crowd, the hash rate is simply the speed at which a mining computer operates. In the case of Bitcoin and other cryptocurrencies that rely on mining to release new coins into existence, the hash rate is the efficiency and performance of a mining machine. It refers to the speed of mining hardware (specialized computers designed to handle the intensive computational power of crypto mining) when trying to solve or “compute” a block.

A higher hash rate is advantageous because it means a miner has an increased chance of finding the next block and receiving a reward.

What Does This Mean For Price? 

Many crypto enthusiasts take a high hash rate to mean a higher price for Bitcoin. But this is still a contested fact. Other people believe that a high hash rate has the opposite effect. 

Sometimes the correlation is the other way round. An increase in Bitcoin price causes the hash rate to surge, as was the case around the period of May to June 2019, when, according to BitInfoChart, hashing power leapfrogged in response to the price uptrend. This trend continued until Bitcoin’s hash rate reached an all-time high of 108.8 m terahashes per second. (100 m TH/s = 1 exahash.)

While the relationship between hash rate and price is still a point of debate, it’s worth noting that the increase in hash rate is happening just as we are entering the year of the next halvening. As we count down to 20 May 2020, the date when Bitcoin halving will take place, prices will almost unquestionably have a bullish run. What effect will this have on the hash rate? We can only wait and see. 

Hash Rate Doesn’t Mean Everything

An increased hash rate translates into stronger network security. That’s pretty much agreed upon. What it does not mean, though, is more miners are joining the network, or decentralization has been strengthened even more. For instance, the vast majority of miners are located in China, as opposed to a proportionate global distribution the way Satoshi Nakamoto envisioned. As such, the hash rate is not close to a holistic dimension of network health. To its credit, however, the network has so far proven resilient against attacks and censorship, which is quite impressive. 

Conclusion

Eleven years since its inception, Bitcoin is presenting with an unprecedented hash rate. This fact only spells good tidings for the network – and its cryptocurrency. The world’s first cryptocurrency is getting stronger, and this is good news for investors, crypto enthusiasts, and even blockchain fans. Let’s see which way the hash rate goes as we advance towards the next halvening, and especially after it.

Categories
Crypto Daily Topic

A Cryptocurrency Indices Guide

Indices are a construct that’s been in the financial world for ages. Many people are already acquainted with stock indices that track the performance of the stock market as accurately as possible.

Essentially, an index is a function that indicates the price value of a security in that security’s market.

Cryptocurrency indices are not much different from stock indices – they keep track of movements in blockchain and crypto as well as gauge the general crypto market performance. With cryptocurrencies becoming such a rage, many investors are now gravitating towards them.

And thanks to crypto indices, professional investors can know where to put their money, and newbie traders can get a reliable exposure to the crypto asset class.

Let’s take a look at the most dominant cryptocurrency indices today.

CCi30

Launched in January 2017, the CCi30 is one of the oldest indexes. Unlike most crypto indexes, CCi30 only tracks the 30 largest cryptos by market capitalization. The team behind it is a combination of tech, mathematics, and economics gurus – including Igor Ravin (Professor of Mathematics at Temple University), Carlo Scevola (Economist and president of CS&P, a Swiss fiduciary company) and IT expert Robert Davis.

By focusing on the 30 largest cryptos, CCi30 assesses the overall growth and movement in the blockchain and crypto space. The index is being used by passive investors (investors who buy a security for holding in the long-term) to take part in crypto trading.

Bloomberg Galaxy Crypto Index

The Bloomberg Galaxy Crypto Index (BCGI) is another crypto index – but only geared at the largest cryptocurrencies traded in the US dollar. BCGI was launched in 2018 with a starting value of 1000. The BCGI index is owned by Bloomberg in a branding partnership with Galaxy Digital Capital Management.

According to the BCGI website, the index operates under four guiding principles:

  • Data integrity. Crypto pricing sources are selected based on their liquidity and reliability and after a rigorous risk and suitability assessment. As well, cryptos must meet the minimum threshold for daily traded USD value.
  • Diversification. No single crypto value can contribute more than 30% or below 1% of the market cap of the index.
  • Representative. The index’s goal is to provide a reference tool for the broader cryptocurrency market.
  • Continuity. The index seeks to be responsive to the ever-changing, dynamic nature of the market, while still preserving the character of the index over time.

The BCGI index selects cryptocurrencies on quite stringent criteria, including the following:

  • Trades in USD
  • A minimum of two pricing sources that meet Bloomberg’s pricing criteria
  • A minimum of 30-day median value traded at $2 million on those two pricing sources, or another eligible source
  • A free-floating value – one that is not pegged on any asset, even a digital asset
  • Be able to meet the above criteria for three consecutive months
  • Hard forks are evaluated on the same gamut of eligibility requirements as established cryptocurrencies
  • Twelve is the maximum number of cryptocurrencies that can be included, with the limitation being based on the highest performing – by market cap.
  • Any cryptocurrency to be included in the index needs to follow the above eligibility requirements for three consecutive months.

The Coinbase Index

Coinbase Index is an offshoot of the Coinbase crypto exchange giant. The index only tracks the performance of digital assets listed on the exchange. The index determines its overall value by weighing the value of crypto assets based on its market cap.

Coinbase index also keeps track of new cryptos introduced – or the supply of such cryptos.

The index was introduced in March 2018, with several improvements added since then.

The index has the advantage of easy access to price points – thanks to its Coinbase platform. Coinbase Index has given rise to the Coinbase Index fund, which gives passive investors exposure to all assets listed on the exchange. The fund is continuously rebalanced to include new assets that get listed on the exchange platform.

Huobi Index

The birth of Huobi Index was as a result of the need to simplify the trading process for investors on the Huobi exchange platform. The index, also known as the HB10 index, was launched in May 2018, with a starting value of 1000.

The index’s value is weighed with the Pasche weighted composite price index. The average daily volume of previous quarters is the main measurement that determines the samples that will be selected. Some of the current constituents at the index include Bitcoin, Ripple, Ether, EOS, Litecoin, Ethereum Classic, Ontology, IOST, and the native token for the Huobi platform.

The percentage of individual constituents moves in real-time, allowing investors to track it as such. HB10 uses Tether – as opposed to the US dollar, since the former, being a digital currency, better reflects the actual volume of transactions taking place.

Bitmain Big 10 Index 

Bitmain index (BLC 10) was launched by Bitmain – one of the largest companies in the world that produce crypto mining hardware. The index tracks the top ten largest and most liquid digital assets – denominated in USD, in the crypto market. These top ten cryptos are selected out of a total of 17 constituents whose data is aggregated from reputable crypto exchanges. These crypto exchanges must have high asset liquidity, be regulation-compliant, transparent, and stable.

Some of the exchanges the index uses are as follows: Bitfinex, Gemini, Huobi, Itbit, Bitstamp, Binance, Poloniex, Kraken, and Bittrex.

BLC 10 covers over 90% of the total market capitalization of the cryptocurrencies, with a diversified mix of decentralized as well as private coins. Investors can check real-time updates of price values – but they can also rely on the reference price that’s published daily at 10:00 am, Hong Kong time.

Conclusion

Indices are nothing new in finance. They help investors make more informed investment choices and to better study market sentiment. Also, investors can diversify and rebalance their portfolios as and when appropriate, to avoid incurring losses by putting all their eggs in the same basket.

With cryptocurrencies making such a splash, it only makes sense to have crypto indices that will make the investing experience much more worthwhile.

Categories
Blockchain and DLT

Why One Bitcoin Analyst’s Prediction Went Viral 

2020 promises to be an exciting year for the crypto community, a year when most cryptocurrencies and their backers make major moves and further their undying quest to establish dominance and woo in more users. And we aren’t just talking about Facebook’s Libra – though we expect its eventual entry into the blockchain and cryptocurrency world to rattle the markets. We are talking about the near-silent moves that the popular cryptocurrencies have been involved in and some of which will materialize early in the year.

From Bitcoin to Ethereum to Ripple, we expect each of these major coins to embrace significant structural or operational changes in the coming months. And in this article, we will be detailing these changes and their significance to the coin itself and the crypto community.

We start by looking at Bitcoin halving and why one man’s prediction of its price after the halving has gone viral.

Bitcoin halving

In May 2020 – that’s less than four and a half months away – Bitcoin will undergo its third halving process. This basically means that the amount of the Bitcoin cryptocurrencies being rewarded to miners for contributing to the blockchain will be slashed in half. Why is this significant, you might ask? Because it not only has a direct impact on the price of the most popular and most valuable cryptocurrency but also impacts bitcoin transaction costs. To understand the impact that this year’s halving will have on the price of the lead crypto, however, we look back at its last two halving processes.

Bitcoin halving takes place every four years, and the first took place in 2012, with the most recent coming in 2016. In its premier stage, Bitcoin miners received 50 BTC for every block contributed to the blockchain. Granted, the November 2012 halving didn’t have much impact on the price of Bitcoin that was going for $11 at the time. After the July 2016 halving, however, the coin price would sway between $580 and $700. 

Interestingly, the most significant Bitcoin price movements for the two halving stages would manifest within the 18 months following the process. After the 2012 halving, for instance, Bitcoin price rallied to hit $1100 by the end of 2013. And following the 2016 halving, the pioneer digital currency soared to its highest ever price yet of over $20,000 by Jan 2018.

In an ideal market structure, you would expect the halving to inspire significant value rise rallies that would possibly take it through to the next four years.

Nothing ideal about Bitcoin market

But there is nothing ideal about the bitcoin pricing and the larger crypto market. These markets and the digital currencies traded therein have time and again defied the conventional economy laws. And this is evidenced by their huge and persistent volatilities. These plus the relatively slow response to the halving process has become a major cause of division on different bitcoin and crypto analyst’s predictions of the coin’s price after halving. While most believe that it will ultimately go up – albeit sluggishly – a significant portion of these is adamant that the Bitcoins price increase has nothing to do with halving.

The Canfield hypothesis

Jacob Canfield is a long-time crypto analyst and his end of the year commentary about the Bitcoin’s price trajectory going into 2020 has gone viral. And with regards to the expected halving, Canfield believes that it will have significant impacts on the price of Bitcoin. But it’s his opinion on why most people don’t associate the bitcoin value rise with the halving that caught the attention of the crypto community. In a tweet sent out three days to the New Year, Jacob Canfield argued that:

“The halving is priced in so much that it’s actually not priced in and no one is buying bitcoin except the smart money who knows it’s not priced in who has convinced everyone else it is priced in so when the halving occurs and price is skyrocketing no one will be holding bitcoin.”

These sentiments – that have been regarded by some quarters as an extremely meta prediction of Bitcoin – were nonetheless echoed and interpreted by Willy Woo – an Adaptive Capital analyst. Who mentioned that:

“Translation: While the public believe in efficient market theory and that markets perfectly price in all available information. Market traders know the price chart is a war of strategy and fuckery designed to make the most money for the best players.”

Woo reckons how naive it would be for any crypto enthusiast to imagine that market prices are always a reflection of the available market data.

Any crypto analyst worth their salt will also tell you that in the periods leading to both bitcoin halving processes, the coin witnessed declining prices. Canfield was quick to observe this and put it down in a tweet expressing his confidence in Bitcoin’s price dip before the end of January. He argues that he is:

“Longing $6700-6800 in January will be a good deal. I was hoping for $5500, but not sure we get there. Not sure we see much lower for a while after that. Will revise if the context of the market changes, but that’s what I’m seeing so far.”

Ethereum and its new hard fork

On 2nd January, Ethereum completed the Muir Glacier hard fork upgrade.

What you probably do not know is that this is the second major upgrade to the blockchain in a month after a similar upgrade – the Istanbul Upgrade – in late November. The upgrade effectively holds back the kicking in of the “difficulty bomb,” also referred to as “ice age,” that will mark a transition to Ethereum 2.0. It was effected after the mining of block 9,000,000 and is expected to hold back Ethereum’s transition to a Proof-of-Stake model by about 4,000,000 blocks – or more than 600 days.

The difficulty bomb mode algorithm was embedded onto the Ethereum blockchain network in 2015 with the aim of increasing hashing difficulty and push the network towards a PoS concept. The proof of stake model adopted by Ethereum 2.0 will, however, be dissimilar to that of Bitcoin blockchain in one primary way. While bitcoin blockchain reduces the reward to miners, Ethreum’s difficulty bomb increases the time it takes to mine a block by between 10 and 20 seconds.

However, both approaches have similar side effects as they contribute to high transaction costs and demotivate miners. By delaying the difficulty bomb and the transition to the proof of stake, Ethereum will be looking for different ways of continually incentivizing their miners to ensure that they remain within the platform during and after the switch.

Ripple and XRP at the ATM

Following in the footsteps of Bitcoin and Ethereum, Ripple would also start the year with an ATM partnership that will see General Bytes dispense XRP tokens.

General Bytes is a Crypto ATM Company with a network of over 3000 machines across the United States. The XRP partnership means that virtually anyone using their machines now has the option of loading and withdrawing ripple coins from their ATMs. The company, however, mentions that this is not a default feature with their ATMs, but it is up to the ATM operator’s discretion to chose whether to enable the XRP feature or not.

While making this Ripple news public, General Bytes stated that:

“Owners can now enable XRP as it is backported to all machines sold to date. Of course, an ATM operator needs to enable it as they are the ones who own the machines, wallets, etc.”

The move confirms Ripple’s continued chase for dominance within the retail crypto space. It should particularly be noted that this isn’t the first time the blockchain developers are partnering with crypto ATM companies. In the months leading to the end of the year 2019, for instance, Xpring – Ripple’s fundraising and crypto development arm – invested over $1.5 million in CoinMe, a Seattle-based Crypto ATM company.

 

Categories
Crypto Daily Topic

Will dot Crypto Domains Phase Out The Cryptocurrency Wallets?

Sending and receiving cryptocurrencies has always been complicated. You always have to deal with the rather complex crypto addresses. But all this is about to change with the introduction of .crypto domains by Unstoppable Domains to the crypto world. According to the software company, the .crypto domains will gradually phase out the need for complicated wallet addresses.

Instead of sending Ethereum to such wallet address as 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy, you will now be able to send it to the easy to remember ‘ABC.crypto.’ But there is more to the domain registry than just simplifying the art of sending and receiving cryptocurrencies. And we highlight them all here while looking at the revolutionary impact these .crypto domains have on the way we transfer crypto.

What is a .crypto domain?

.crypto is ideally a blockchain-powered domain registry. It was created on the Ethereum Blockchain and was initially supposed to help simplify the art of sending and receiving cryptocurrencies. It was developed and introduced to the crypto community by Unstoppable Domains software company to complement and eventually replace the complicated wallet addresses.

With a .crypto domain, you no longer need to deal with complex wallet addresses when sending or receiving crypto coins, all you need to know is the receiver’s domain name. You then proceed to pay the domain, just as you would pay the crypto wallet address.

While explaining the simplicity of.crypto domains, Mathew Gould – co-founder and CEO of Unstoppable Domains had this to say,

“We believe that tribalism in the crypto community is slowing down adoption of the technology. .Crypto is a domain name system meant to be used for any cryptocurrency payment and with any cryptocurrency wallet. Sending money to a .crypto domain is a way simpler user experience for the millions of cryptocurrency users that currently have to copy/paste and type in long addresses in order to transact.”

What challenges does the .crypto domain seek to solve?

Crypto tribalism:

Crypto tribalism refers to the existing identity differences between different cryptocurrencies. This is, to a large extent, based on the perceived technological superiority of particular cryptocurrencies and their underlying blockchains. It is evidenced in the fact that different wallets will only host-specific cryptocurrencies making it virtually impossible for a single crypto wallet to support all cryptos in existence today. .crypto domain, however, seeks to eliminate this tribalism by creating a one-fits-all wallet that is supportive of virtually every coin.

Complex wallet addresses:

Crypto wallet addresses are complicated and hard –if not impossible – to memorize. This means that you are always copy-pasting or referencing from different sources every time you wish to send or receive cryptos. With a .crypto domain name, you only need your easy-to-remember domain name.

Need for escrow:

One of the primary advantages of the .crypto domain in cryptocurrency exchange is its speedy cash transfer and the integrity of the system. This implies that crypto transfer can be initiated by virtually anyone from any part of the world and have them in your name within a minute. The fact that these domains are created on a blockchain platform means that they are highly secure and thus no need for an escrow agent to guarantee the secure exchange of funds over the domain.

Other things you need to know about .crypto domain

As mentioned earlier, there is more to .crypto domain than just the facilitation of secure cryptocurrency payments:

No renewal fee:

The .crypto domain differs from the traditional domain in several ways. Unlike traditional domain registries, .crypto is built on the highly secure and immutable blockchain infrastructure. More importantly, it isn’t a subscription but a purchase where you get to pay once and own the domain for life.

No website censorship:

Traditional websites are subject to censorships from governmental agencies and other higher authorities. On the .crypto domain where you get to own the domain, neither the governmental agencies or any other institutions have control over the content you write or is affiliated with your domain.

Independent registry:

For the longest time, domain registries and the entire domain registration process has been regulated and controlled by ICANN. The blockchain-powered domain registry, however, presents crypto enthusiasts with an independent registry outside ICANN’s grip. The domain regulatory body does not get to approve names on this registry or regulate the issuance of domain names.

No third-party custodians:

Simply put, there are no custodians of the .crypto domains. By buying the domain name, you assume full control over the blockchain domain. You get to store your domain, and no one can get access to either move or seize them without your authorization. And this comes off as one of the many problems that the .crypto domain seeks to address.

Who owns .crypto domains?

The .crypto domain registry was started by San Francisco based software company – Unstoppable Domains. It was launched by the brand in partnership with Draper Associates and Boost VC, who have been backing the company. The registry is built on the Ethereum blockchain. It started as part of the Ziliqa foundation that established the Ziliqa domains (.zil domains) whose evolution would see the birth of .crypto domains.

The Ziliqa Foundation is constituted by the website hosting blockchain that exploited several decentralized storage networks as well as the Interplanetary File System in storing the web content. It also included a payment system. In .crypto domains, Mathew Gould and his company are merging both the website web content and crypto payment processing capabilities into one.

Where to buy them:

The sale of .zil domains that kicked off in early 2019 would go on until late October in the year. By this time, Unstoppable Domains reported huge interest in these blockchain-powered domains, adding that they managed to sell over 100,000 .zil extensions during this period.

.crypto domain registration went live in November 2019, and you can now register this 8-character web extension on the Unstoppable Domains website. The good thing is every one that purchased the .zil domain extension can upgrade to a .crypto extension of the same name for free.

Possible challenges facing .crypto domains

Squatting and trolls:

Interestingly squatting and trolling challenges aren’t an exception of the conventional domain industry. Right after the launch of the .crypto domain, a hacker was able to exploit a bug within this blockchain technology that they used to gain permanent ownership of key domain names. Some of the trolled names include apple.eth, defi.eth, wallet.eth, and pay.eth. The company, however, claims that it was able to detect and fix the bug in time and negotiate for the surrender of these domain names.

User-education:

Blockchain and cryptocurrency are already complicated subjects. And while crypto exchanges may be accused of perpetuating the highest cases of crypto tribalism, they have done a commendable job in providing the crypto community with free and relatively secure online wallets.

It will take a lot of time and resources to convince this crypto community on the need to migrate from these free wallets to the paid domains. The case of domain trolls makes this even harder given the sensitive nature of the crypto traders and investors on matters security.

Bottom line

Unstoppable Domains, the San Francisco based software development company, has come up with a solution to the complexity posed by different crypto wallets. The .crypto blockchain-powered domain will not only serve as an independent website free of censorship but will also serve as a universal crypto wallet. It will not only support all the cryptocurrencies currently available, but the fact that it is built on the blockchain technology gives it an extra layer of security and integrity not common with the conventional crypto wallets.

Categories
Crypto Daily Topic

Crowdfunding: A new dawn for SMEs

It is already a cliché today to say blockchain and cryptocurrency have revolutionized pretty much every industry. Blockchain started a revolution. The old system of the banking industry and governments were quick to realize the revolutionary power of the tech. That is why there were attempts to regulate or outright ban blockchain and crypto in some countries.

However, blockchain has won against all naysayers.

For the financial industry, it has been the Holy Grail that enabled small businesses in the United States – over five million of them – to access capital and to thrive. Entrepreneurs who had little to no chances to fund their ideas without begging the banks and venture capitalists have been among the biggest beneficiaries of the cryptocurrency boom.

It is true to say the odds have been good for the people who, for years, have been shut out of opportunities because of their gender, age, race, or where they are from. Considering that small businesses have always been the backbone of the US economy, the problem of open bias in the access to capital was a problem that badly needed to be fixed once and for all. 

The JOBS Act merging with cryptocurrency has brought a storm of disruption that opened the floodgate of opportunities for everyone with a small business.

The brief history of the blockchain religion

Bitcoin was released by an anonymous individual or group of individuals called Satoshi Nakamoto in 2009. Very few people will go into history as witnesses of the birth of this new technology that would rapidly grow to take over every aspect of humanity from the money we use to how we govern ourselves. It was the blooming of the idea that decentralized ledgers were the solution to the lack of trust between two people when a transaction is made. This new tech quickly proved to be the antidote to the kind of system manipulation that resulted in a great recession and almost crashed the global economy in 2008.

Today, everyone has a good idea of what blockchain really is. A fair number of people today agree that cryptocurrency may be the future of money. It started with cryptographers and software enthusiasts playing with bitcoin and explaining it to anyone who cared to listen. True believers know that blockchain is a revolutionary trust system because it is simple.

The Bitcoin whitepaper describes Bitcoin simply as a peer-to-peer network that makes it possible for two people to transact and exchange value without the need for a middleman or a third-party. Bitcoin keeps rewarding its believers, and it is enticement enough for more people to want to derive value from it.

As with everything healthy for an economy, the success of Bitcoin created dozens of similar offshoots cryptocurrencies. Bitcoin Cash, Ethereum, Litecoin, Zcash, Monero, and every other cryptocurrency with unique features have contributed something new to the blockchain world. In the case of Ethereum, their ERC-20 platform has been just as revolutionary as the blockchain itself. Small businesses had the power to create their own tokens for capital.

The JOBS Act and the age of crypto crowdfunding 

JOBS is an acronym for Jumpstart Our Business Startups Act. It was signed into law with little publicity in 2012. This was the legal whistle that the game was on, and every small business could legally raise funds by selling equity in crypto tokens. By pitching directly to the crowd, entrepreneurs no longer needed to beg VCs and bankers for capital.

The JOBS Act law was an update to the Securities Act of 1993 that modernized the finance law in one simple way: by easing various regulations that governed the US Securities and Exchange Commission, in the process streamlining ways in which businesses in the United States could raise funds. It encourages small businesses to pitch directly to the masses and back it up with equity.

The JOBS Act was written to directly impact how far startups can go to raise funds. It gave them irresistible exemptions when they issue shares on the blockchain in the form of tokens or cryptocurrency. This means small businesses could develop their own assets and sell it directly to investors without having to go through the pain of IPOs.

The law essentially leveled the small business equity crowdfunding market by guaranteeing every investor that as long as they agree to the terms and conditions of a coin offering (ICO), they could buy equity directly from a small business.

Crowdfunding and the opportunities it brings

To understand why crowdfunding was such a disruptive force in the startup and small business world, you just need to appreciate the three severe problems in the current systems that it fixed:

☑️ For over 80 years, it has been virtually impossible for most people to invest directly in small businesses by buying shares. The stock market was inaccessible because of all the brokers and regulations companies had to deal with. Now, they can legally and easily create special-purpose funds to sell directly to the crowd.

Equity-based crowdfunding has proven more effective and accessible compared to traditional reward and debt-based capital funding alternatives.

☑️ Small businesses have always had a hard time winning over investors because of the bureaucracy that bogs traditional equity-based funding. Before the JOBS Act was passed, very few businesses had the legal backing to sell shares because the only option was an initial public offering (IPO). It’s just sad that IPOs are slow and expensive.

This act essentially saved entrepreneurs the commissions they had to pay to brokers and lawyers, and the government removed all the unnecessary legal hurdles.

☑️ Tokenization of shares became the most popular way for businesses to get liquidity fast and affordably. With ready-made blockchain implementation platforms such as Ethereum evolving each day, it became straightforward for small businesses with limited resources to create and roll out smart contracts with commercial value.

The ERC-20 contract offered simple yet powerful tools for businesses to develop and issue their own cryptocurrencies and tokens.

Building a community of believers key to tokenization success

It may be easy for a business to raise funds on the blockchain by creating and selling digital assets, but there is a price to pay to actually make the sales. Considering how stiff the competition is for the small but growing pool of investors, only entrepreneurs who can convince potential investors that their assets are worth their money succeed in selling them.

Startups and small businesses that go this route have to be creative and impressive to win subscribers. The cryptocurrency crash of 2018 taught them to be even more selective where they put their money in the crypto market.

It takes a great effort to build a community of believers and investors that will buy into a business’s idea. For entrepreneurs that put the effort, the reward is worth it in the end. As a rule of thumb, the number of subscribers the small business gets in three months during beta is indicative of how the market will value shares when the offer opens to the public. This information can even be used to get favorable terms from traditional investors, including venture capitalists and bankers. 

The best thing about crowdfunding using a smart contract is that it offers the opportunity for a business to win the minds and wallets of backers anywhere. Since blockchain is not limited by geographic barriers, it allows entrepreneurs to create a mega community of people from any country in the world. Casting such a wide net has made it possible for them to get support from sources they least expected.

According to the World Bank, 2016 was the first year when small businesses and startups raised more money from crowdfunding than from venture capital. The crowdfunding environment has evolved fast since then to become a global phenomenon as businesses in all industries rush to raise capital by issuing their own digital assets. These assets serve their purposes in different ways from medium of exchange to store of value. Every blockchain expert predicts a bright picture for businesses that embrace and rigorously take advantage of the financial innovations brought by blockchain.

Categories
Crypto Daily Topic

CDC Turns to Blockchain to Keep Track of Outbreaks

The United States government has been one of the first governments in the world to embrace the blockchain technology. While it was very apprehensive of it largely because of the threat of blockchain, but it has not been long before it realized its many other benefits.

Blockchain’s capability to build trust in public service provision through transparent and collaborative networks makes it an ideal system to use in governance and critical information distribution. The Center for Diseases Control and Prevention (CDC) has figured out how blockchain can be leveraged to track patient health data, monitor infectious diseases, and track prescription medication.

The CDC launched a pilot project late in 2018 to explore ways in which the distributed ledger technology – that is blockchain – can be used to manage patient data over a period of time efficiently, and across different settings. This is particularly important in this age when artificial intelligence presents a huge potential to detect, track, and stay on top of outbreaks and threats to public health.

The department has partnered with various leading technology companies, including IBM, to provide the artificial intelligence technology for the blockchain project and Intel to develop the backbone on which the new blockchain platform will run.

How blockchain works in health

You probably already know blockchain as the underlying technology for cryptocurrency. Blockchain is a distributed ledger technology (DLT) with great potential across almost every industry, including healthcare. Simply put, ‘blockchain’ is a ‘block’ of transactions or data linked together using cryptographic signatures called hashes to form a ‘chain.’ The blockchain is a ledger in which the blocks are verified and stored by a network of connected computers or processes known as ‘nodes.’ Every node in the blockchain network maintains an entire copy of the blockchain that is constantly synced and updated.

Various governments, organizations, and private companies are exploring how the new technology can be used to boost access and quality of healthcare as well as cut costs. Blockchains and their applications differ depending on the underlying specifics such as networking type, encryption, hashes, and intended applications.

However, in general, all blockchain platforms offer the same benefits, including transparency, secure collaboration, faster transactions, automatic and real-time reconciliation of accounts, and transactions without the need for intermediaries or third-parties.

Blockchain strategy to manage and analyze patient data

To demonstrate how committed it is to integrate the newest technologies to improve the welfare of its people, the United States government last year pledged to spend as much as 20 percent of its GDP on healthcare.  The CDC is already tapping the blockchain technology to track and stem the rising cases of opioid addiction in a project that looks to streamline the traditional long-running surveys used to track patient symptoms and treatments.

The new system has proven to be easier for the CDC to collect data through surveys from such institutions as the National Hospital Ambulatory Medical Care Survey, which collects patient health data and visit information from hospitals and doctors all over the country. Presently, the government relies on data collected and analyzed by the CDC to make many determinations from how doctors prescribe opioid painkillers and antibiotics to how frequently Americans are seeking medication for stress management.

The new blockchain-based health surveillance system set to be rolled out by the CDC will make it easier for public health agencies to survey the hospitals and physicians to acquire important information about their patients as well as their prescription practices. In addition to collecting the data, the system will also track, secure, and a log of who accesses which parts of the data and when.

The transparency that the blockchain platform brings to the operations of the CDC is unparalleled and comes at a time when data security is just as sensitive as it is open to how it is used. While the technology itself does not store the patient data, it simplifies the process of keeping track of which data was collected from whom and where it is stored. This helps safeguard sensitive patient information while allowing medical providers access and update the information on the blockchain.

The blockchain platform the CDC is testing stores its data in encrypted electronic records in IBM’s cloud servers. Only authorized individuals in specific agencies would be able to obtain the encryption keys required to access the data.

Managing breakouts and epidemics

One of the most anticipated uses of the blockchain platform in the health industry is to help health workers respond to crises faster and more effectively. The agency is testing how it can use blockchain to study and monitor trails of any reported outbreaks of diseases to help its scientists find their origins and patterns. 

The new platform is very convenient, largely because of the timestamping feature. Coupled with the benefits offered by distributed data processing tools on the cloud, the CDC is certain that proper implementation of blockchain will better help in suppressing the spread of diseases.

When a person contracts an infectious disease such as hepatitis A, the CDC needs to be among the first to know about it in order to take action and contain it. Institutions under the Health Department within the neighborhood in which the diagnosed patient comes from must also be notified. This is important since the patient may have contracted the virus that causes the disease from contaminated food or water in that area, and drastic measures must be taken to prevent further contamination.

The CDC will make use of the blockchain platform to routinely share public data with local and national health organizations besides institutions under the health department. This communication revolution in the health industry has enabled easier and more efficient ways to coordinate the mitigation of the spread of infectious diseases. The institution has already developed special applications that are specially designed for improved public health surveillance and public health data management. The CDC believes that moving such crucial data from one peer to another – faster, securely, and in a compliant manner – is the key to its success in dealing with outbreaks and epidemics.

IBM is not the only company that strongly believes that the blockchain technology has proven invaluable in suppressing epidemics and generally making work easier for the CDC. Intel, too, is partnering with private giants in the pharma industry, including Johnson & Johnson and McKesson, to develop blockchain platforms that would help the CDC. One particular way is helping them better trace how prescription pills are distributed from the manufacturer to the patients.

With such a formidable tool, the CDC will better understand, from a supply chain management perspective, which physicians prescribe which medications and whether they are culpable of malpractices.

Other future blockchain applications in health

There is presently a serious problem in the way health institutions keep public health records. The storage and data distribution system is incoherent and not fully utilized. The confusion arises because the CDC expects the institutions that collect them to file the same data with different institutions, often using different documents.

With the blockchain technology, the CDC will be able to eliminate delays and inaccuracies in data collected from different sources while ensuring that sensitive data is protected from unauthorized individuals.

Another way in which the CDC is exploring the use of blockchain is in consent management. In the current healthcare environment, every state has its own patient and privacy consent regulations. A blockchain-based system would be used to record data sharing consent to ensure that no patient’s privacy is breached on purpose or unintentionally.

Categories
Cryptocurrencies

What is the Basic Attention Token?

Advertising is the lifeline for most businesses. However, the current digital advertising space is, to put it mildly, broken. The three players in the advertising model: the user, publisher, and advertiser all get shortchanged. Users’ data is harvested without their consent, publishers (owners of the ad) don’t effectively monetize content, and advertisers (creators of the ad) are perennially subjected to fraud.

Those are not the only problems with the current advertising model. For instance, who’s to say a user, for example, on YouTube, will click on that pop-up ad? Chances are they will skip it as soon as the five seconds are up.

And let’s not even get into dishonest platforms. Everyone still remembers Facebook’s infamous debacle when they sold users’ private data to the shady Cambridge Analytica, which the latter used to sway elections in several countries.

As you can see, modern digital advertising needs an overhaul. The Basic Attention Token (BAT) is an ingenious attempt at this – by seeking to have every participant in the advertising chain get what’s due to them.

This article delves deeper into this proposition, explores the BAT token and how to acquire it, and demystifies the game-changing browser technology behind the BAT system.

What is BAT?

BAT stands for Basic Attention Token – a digital advertising token built atop the Ethereum blockchain. The token is used to facilitate a decentralized ad exchange marketplace between users, advertisers, and publishers. It is based on a novel concept – that user attention is critically important for advertising end goals. So the key is to monetize what really matters: user attention and to eliminate the needless expenditure that’s associated with the current model.

BAT is still young – only launched in 2017. It was created by Brenda Eich, the brains behind JavaScript, and who is also Mozilla Firefox co-founder. Eich envisaged that the BAT token would accomplish the following:

☑️ Eradicate the middlemen in the current advertising model

☑️ Reward users, advertisers, and publishers with what is rightfully theirs

☑️ Provide an incentive for users to view ads (give ads attention)

☑️ Reward advertises with better ROI for their content

☑️ Give publishers a share of ads revenue

How Does the Basic Attention Work?

The BAT token can currently only be utilized on the Brave Browser. Using smart contracts, advertisers pay BATs to publishers to run their ads. When a user views the ad, his attention is measured in real-time on the browser – taking into account the visibility of the ad, time spent viewing the ad, and their actual engagement with the ad. The user is then rewarded with a portion of the token payment, and the remainder is paid to the publisher hosting the statement. 

Users can then spend the BAT on several offerings on the browser – from premium products to high-resolution photos to data services.

This system works for everyone involved in the following ways:

☑️ Users can anonymously serve the web, with advertisers still being able to monetize their attention.

☑️ Publishers can get their fair share of revenue that was previously lost to middlemen

☑️ Advertisers can glean more accurate data on their campaigns, enabling them to target audiences more effectively, and relevantly, next time 

The blockchain-based model eliminates fraud on behalf of advertisers 

What is the Brave Browser?

Brave uses a background ledger system to monitor your attention and what kind of content you mostly engage with. Based on this info, publishers are then paid accordingly. Also, users receive content that they most probably would like to see.

And although Brave measures your attention, that information remains anonymous, and your private data always remains in your control.

Your attention value, or the degree of attention you’ve devoted to an ad, is calculated using the incremental time the ad is viewed, plus the number of ad pixels visible in proportion to relevant content.

The Brave Bowser epitomizes the following features:

Privacy. Users can surf the web completely anonymously. Any information that would unethically be harvested is unavailable. All tracking is also blocked automatically.

Enhanced ad matching. Brave keeps an impressive collection of user data – from active tabs, URLs, keywords, and so on.

Improved user experience. Users never have to look for external servers for every new page. Ad matching is done locally, leading to better quality browsing, utilization of power, saving of internet data, faster browsing, and uninterrupted content flow.

Basic Attention Token Statistics 

BAT has a total supply of 1.5 billion tokens. As of December 18, 2019, it has a market cap of $229, 862, 410, and a 24-hour trading volume of $69, 897, 505. It ranks at number 34 in terms of market cap, while trading at $0.162913. Its all-time high was $0.980702 on Jan 09, 2018, while its all-time low was $0. 66209 on July 16, 2017.

Where to Buy and Store BAT

You can acquire some BAT tokens through any of the following methods: 

  • Funding a Brave wallet with Bitcoin, Ether or Litecoin – upon which an automatic conversion to BAT takes place
  • Using a credit or debit card through the Brave wallet
  • Buying BAT on cryptocurrency exchanges like Coinswitch, CoinbasePro, Binance, Kraken, Huobi, Bittrex, Coinex, and so on.

Being an ERC 20 token, you can store BAT in any ERC 20 supported wallet. You could also consider hardware wallets like Trezor, Ledger Nano, KeepKey, CoolWallet, and so on.

The in-house Brave wallet is also another great option.

Conclusion

BAT is one of the few crypto projects with big-name support, a straightforward case, and a feasible product. The founder of the project is the true and tried creator of the popular Firefox browser, and on top of that, he has the relationships to push BAT onto other browser platforms.

The technology has serious potential to reshape the way that users, advertisers, and publishers interact with each other – with everyone getting rewarded accordingly. It’s safe to say that BAT’s interruption of the current advertising ‘order’ is a matter of if, not when. It should be exciting to see how BAT turns tables.

Categories
Cryptocurrencies

Demystifying Maker – The Groundbreaking Stablecoin

Unpredictability and wild volatility swings have always been the bane of cryptocurrency’s existence. As a solution, crypto experts invented the idea of stablecoins – which is a cryptocurrency pegged against “real-world” money to tame the fluctuations of crypto. But stable coins also turn out to have their own share of problems.

Maker is a token and a platform that seeks to improve the stablecoin model while mitigating the volatility risk inherent with cryptocurrency.

In this guide, we’ll discover the Maker system, how it works, the place of Maker in the entire crypto ecosystem, and how you purchase the Maker token.

What is Maker?

To begin to understand Maker, we need to get a good understanding of what is a stablecoin. Stablecoins are a new class of cryptocurrencies that attempt to mitigate the risk of normal cryptocurrencies. Cryptocurrency prices are prone to volatile fluctuations, which ultimately makes them unsuitable for day to day use or as collateral. For instance, who’d want to spend 100 crypto coins on a pair of jeans only to find out the next month they’re worth a fortune? 

This is where stablecoins step in: to offer the best of cryptocurrencies – the privacy of money and instant processing, as well as the stability and predictability of fiat currencies.

The Maker System

The first thing to understand is that the Maker platform has a dual coin system: Makercoin (MKR) and Dai (DAI). Makercoin is a volatile token that governs the Maker platform. Dai is a stable coin designed for daily use, savings, and collaterals.

Dai is denominated in US dollars in a 1 DAI = 1 USD formula. Unlike the other stablecoins out there, DAI is not pegged to any fiat currency. Stablecoins that are pegged to fiat currency do not live up to the cryptocurrency vision of decentralization and censorship-resistance. By using external market economics, Makercoin is the volatile crypto coin that allows Dai to be a stablecoin.

As a decentralized stablecoin, Dai offers itself to four markets that could benefit from its use:

Gambling Markets – it doesn’t make sense to gamble with the wildly unpredictable cryptocurrencies. This would only expose the gambler to two risks: the risk that comes with the bet itself and the risk of the asset price. Using a stable cryptocurrency like Dai allows you to limit your risk solely to the usual probability of loss.

Financial Markets – Such financial markets like derivative smart contracts and options need collaterals of stable price values. The collateralized debt positions offered by the Maker platform also offers a permissionless, interest-free decentralized trading leverage, and decentralized tools.

International Trade – International transactions usually rack up high costs. Dai mitigates foreign exchange volatility while also removing the need for intermediaries in the transaction process.

Transparent accounting systems – Dai provides a completely transparent platform where all transactions can be verified – allowing organizations to improve efficiency and reduce the probability of fraud.

What Is the Use of the Maker Coin?

On the Maker system, the Maker token plays these roles:

Utility token. MKR is used to pay for the collateralized debt positions that generate Dai on the Maker ecosystem.

Governance token. Coin holders use the token to vote for operational changes in the Maker protocol through a continuous approval voting process. This means that the proposal that has the most votes from coin holders becomes the “top proposal” that can be activated to improve the protocol. 

Recapitalization Resource. The Maker system automatically creates new MKR tokens in case of a shortfall on the collateralization system.  

How Does The Maker Platform Work?

The Maker platform has a unique smart contract system called Collateralized Debt Position (CDPs). To generate Dai tokens, users must deposit collateral assets, which are then held by CDPs. Generating Dai also incurs the user some debt. The debt is what locks a user’s deposited collateral assets within the GDP until they can repay the debt in the same quantity of Dai, and withdraw its collateral.

Currently, “pooled ether” (PETH) is the only collateral accepted by the Maker system. To generate DAI, you must first convert Ether into the pooled ether.

A user’s interaction with CDP has the following stages:

Making the CDP. A user sends a transaction to Maker to initiate a CDP. They then send their PETH to collateralize the CDP.

Generating Dai. The user sends a transaction stating the amount of Dai they want from CDP. After generating Dai through this process, an equivalent amount of PETH is locked away in a CDP smart contract. They can only access this PETH when the Dai debt is paid off.

Debt Reconciliation. To get back their collateral, a user must pay off their outstanding debt in the CDP together with a “stability fee” that is essentially interest on the outstanding debt.

Withdrawing collateral. After the user’s debt and stability fee are paid off, the user can retrieve their collateral by sending a transaction to the platform

MKR Statistics

Makercoin impressively ranks at number 22 in terms of market capitalization. As of December 19, 2019, the crypto has a market cap of $476, 146, 583, a 24-hour trading volume of $4, 797, 594, and a circulating supply of 1 billion. Its all-time high was $1,773.92 on Jan 18, 2018, with its all-time low being $21.06 on Jan 30, 2017. Its current going price is $476.15.

How to Buy and Store MKR

Buying Maker comes with a two-step process. First of all, you need to buy some BTC or Ether from an exchange that accepts debit card deposits or bank wire. You then need to transfer the crypto to an exchange that will accept the BTC or Ether in exchange for MKR.

For example, you can buy BTC or Ether at Coinbase and exchange it for MKR in CoinbasePro, Gate.io, HitBTC, OKex, Kucoin.

Both coins of the Maker system are Ethereum tokens based on the ERC-20 protocol. As such, any ERC-20 compliant wallet is suitable for storing MKR. Hardware wallets such as the Ledger wallets, Trezor, Keep Key, Cool Wallet S, etc. are also recommended.

Conclusion

Maker addresses one of the biggest issues with cryptocurrency – its volatility. By stabilizing Dai’s value through external market systems, users get the best of crypto and fiat currency – privacy, instant payments, and the stability of value. Thus, you can invest in the crypto without worrying that its value will plummet overnight.

MakerDai also solves the issue of questionable centralization status and lack of transparency associated with other stable coins.  As it is now, Maker has the opportunity to seize the stage and become the ideal stablecoin. It has the recognition, a working model, and an irresistible proposition for the cryptocurrency economy.

Categories
Cryptocurrencies

Breaking Down the Populous Cryptocurrency

Many small and medium-sized businesses grapple with the issue of late invoice payments. Late invoices cause businesses to miss many money-making opportunities, not considering the error and fraud-prone paper-based trails of the existing invoicing system.

Blockchain technology can solve this by enabling decentralized, transparent, and error-free invoice financing that would save businesses money and time.

Populous is a platform that promises to simplify invoicing for businesses. In this explainer, we explore in more in-depth detail on how Populous achieves this, the role of its three tokens, how the future looks for the platform, and more.

What is Populous?

Populous is a peer-to-peer platform built on Ethereum’s blockchain that uses its distributed ledger technology to provide small and medium-sized businesses a global and efficient invoice financing platform. Populous describes invoice finance as “a form of funding that instantly unlocks the cash tied up in outstanding sales invoices. Business owners allow invoice buyers to buy invoices at a discounted rate in order to unlock the cash quicker. Once invoices are paid by the invoice debtor, the invoice buyer receives the amount previously agreed upon.”

In short, Populous wants to reduce or eradicate the need for third parties, intermediaries, or moderators in invoice processing and transactions.

How Does Populous Work?

On the Populous platform, there are two types of transacting parties: buyers and sellers. These parties exchange invoices via smart-contract-based auctions. We can think of invoice sellers as borrowers, with invoice buyers as investors.

To sell an invoice, you must first register your company. You will then wait until you receive approval from a Populous administrator. Once you’re approved, you can offer an invoice with specific sales goals. This will also need to be approved.

If your invoice offer is approved, an invoice buyer will view available invoices and identify which one they would like to invest in. The buyer will then make a bid for the invoice. They will also set an interest rate for the invoice.

Next, the invoice seller will view the bid, and if satisfied, confirm it. The seller then releases the invoice and then, via a smart contract, receives funds equivalent to the bid.

Populous’s Altman Z-Score Formula

The approval of bidders is done using an in-house credit rating system called the Altman Z-Score Formula. The formula is a financial modeling tool that assesses businesses’ credit risk based on these three factors:

  • The probability that a business will become bankrupt within two years
  • The probability that a business will default on terms of the agreement
  • The control measures of a business in times of financial distress

The Z-Score formula solely assesses a company’s suitability for the platform.

Sellers’ bids usually only last for 24 hours. A bid ends under either of the following circumstances:

  • An auction is successful – meaning your sales goal is matched with a bid
  • 24 hours elapse before your sales goals match a bid. In this case, you can either take the best available bid, cancel your offer, or submit another offer
  • You withdraw your offer, in which case you can completely cancel the auction or accept the best bid available 

Explaining Populous Tokens

The Populous platform has three tokens, which can be confusing at first glance. Let’s break them down below. 

Pokens

Pokens are the in-house currency of the Populous platform. The currency is pegged to an equivalent of fiat currency. For example, in the U.K, 1GBP Poken is equal to 1GBP, and in the US, 1USD token is equal to 1USD. Pokens are ERC 20 tokens, and users pay with them to acquire invoices. The Pokens themselves can be directly purchased from Populous with GBP, USD, EUR, and Yen. Other currencies will be converted to GBP on the London Stock Exchange rate before you can purchase the tokens. You can also buy Pokens using supported cryptocurrencies such as Bitcoin and Ethereum.

Pokens are ERC 20 tokens, meaning you can store them in any ERC 20 compatible wallet. 

Populous Platform Token (PPT)

These tokens were distributed to the public during the ICO and are used for investment purposes. PPT tokens have a capped supply of 53, 252, 246.

Apart from holding PPT, you can use it to invest in invoices. When you invest in an invoice through Populous, your tokens are put up as security for the investment, after which you receive Pokens in exchange. Once the invoice is paid, you receive Pokens as profit together with your Original PPT investment.

PXT

PXT (Populous eXtensible Business Reporting Language (XBRL) Token) is a token that allows you to access Business Intelligence (BI) data on the Populous XBRL Platform. With PXT, you can access the one quadrillion bytes of business on the Populous Data Platform. This data enables you to create customized reports regarding credit scores, SWOT analyses, your business’s financial health, and so on.

PPT Statistics

As of December 19, 2019, PPT has a market cap of $21, 423, 195, and a 24-hour trading volume of $1, 108, 105. Its all-time high was $76.49, while its all-time low was $0.298937. The token has a circulating and fixed supply of 53, 252, 246 tokens.

Where to Buy and Store PPT

Most exchanges do not allow you to buy crypto with fiat currency. You’ll thus need to buy BTC or ETH so as to exchange it with PPT. You can get the token on exchanges like Binance, Kucoin, P2PB2B, IDEX, Coinplace, LATOKEN, Bitrue, Livecoin, etc.

PPT is an ERC 20 token, meaning you can store it in any ERC 20 supported wallet, e.g., MetaMask and MyEtherWallet.

If you prefer tighter security (and who doesn’t?), you’re better off using a hardware wallet. Trezor, Ledger Nano, and Parity are some of the popular PPT compatible wallets.

What’s the Future of Populous?

So far, there doesn’t seem to be any serious competitor of Populous. The biggest challenge it faces is getting clients to ditch existing invoicing models and transition to their platform. For now, the Populous system is limited to the UK and China/HongKong markets. That means only invoices originating from those territories can be sold on the platform. Populous is likely working to implement support for more countries – something that will help it achieve its goal of being a global trading platform.

Conclusion

Populous is a platform with an excellent model and vision but is yet to truly capture the imagination of cryptoverse. This can partly be blamed on its current country limitation, or it could be because it’s still a ‘teething’ project. Either way, PPT needs to expand its platform and market itself better if it hopes to make a bigger impact on the crypto and blockchain sphere.

 

Categories
Crypto Daily Topic

Are Anti-Money Laundering Rules Hurting Crypto?

Netherlands-based cryptocurrency mining pool Simplecoin and Bitcoin gaming platform Chopcoin are shutting down over the fifth European Union Anti Money-Laundering Directive that is set to come into force on January 10, 2020. The proposed directive will require crypto operations in the EU territory to conduct Know Your Customer procedures on customers for anti-money laundering purposes. 

One of the basic tenets of cryptocurrency is privacy, and some crypto operations would rather close shop altogether than go against that principle. Indeed, Simplecoin argues this as the reason informing its decision to shut down: “We believe in the power of cryptocurrency and its potential. Mining should be available to anyone and we refuse to jeopardize our users’ privacy.”

Chopcoin’s website is currently inactive, while its Twitter page sent out a tweet on November 18th informing users that it will be suspending its services due to “regulatory concerns.”

This comes barely a week after UK-based crypto payments provider BottlePay announced its decision to cease operations on 31st of this month, citing an unwillingness to subject users to “the amount and type of extra personal information” that it would be required to extract from customers.

Some member states have even taken it a notch higher. In the Netherlands, it is alleged that the Central Bank and the Ministry of Finance are planning to introduce more rules than the ones outlined in the AMLD5.

While some crypto firms may be closing down over ideological reasons, others may be closing down due to the financial implications spelled by AMLD5. Wouter Vonk, the co-founder of Dutch-based crypto exchange Coingarden, which is also closing, has revealed that the new regulations “will come with serious costs”, forcing them to end operations.

What is the AMLD5?

The fifth Anti Money-Laundering Directive (AMLD5) entered into force in 2018 and will take practical effect in January 2020. EU member states are obliged to entrench the new policies into law by January 10th. Many crypto services regard the directive as privacy-intrusive.

AMLD5 is set to bring changes such as limiting the anonymity of cryptocurrencies, wallets and prepaid cards; increased exchange of information between anti-money laundering authorities, public registers for crypto entities; monitoring of transactions and reporting any suspicious activity to authorities.

Crypto Regulation in America

It isn’t just the EU that is cracking the whip on crypto operations. In the US, the Securities Regulation Commission continues to crack down on crypto-based projects, including those that seem to not have registered “properly.”

And the current administration’s reception to crypto has been hostile – to put it mildly. Treasury Secretary Steve Mnuchin has branded them a “national security threat”, while President Donald Trump has tweeted before that he’s not “a fan of bitcoin and other cryptocurrencies.” Some in the crypto community worry that the president could exercise his supreme powers and enforce more stifling regulations on cryptocurrency. 

Hurting More than Helping

These regulatory proposals could have a negative effect on cryptocurrency and the emerging blockchain ecosystem.

To begin with, the majority of such regulations are more likely to push out or hurt small crypto operators who can’t keep up with the costs of compliance.

And, of course, these regulations defeat the very purpose of cryptocurrency – to wrestle control of money from central authorities and provide censorship-resistant finance for all.

These proposals could also backfire. Crypto dealings may be pushed to the ‘underground’ world in exchanges that fall outside of ALMD5’s and other regulations’ scope.

Such blanket regulation also risks curtailing the flow of crypto assets, including that of honest actors. This is evident with the US where KYC requirements for banks, so as to curtail the spread of drugs, have been extremely financially taxing for banks. Also, entire regions such as the Caribbean have suffered debt thanks to the enforcement of indiscriminate compliance requirements. 

And overall, uncontrolled regulation could push up the costs of operating crypto enterprises, which would have the undesirable effect of stifling the growth of the crypto and blockchain infrastructure. 

Conclusion

With such increasingly stringent controls, what’s the future for the crypto space? Will it achieve the desired effect and curb illegal crypto use, or will it backfire and encourage such activity in less detectable platforms? It’s hard to tell at this stage.

What’s already clear is more crypto entities will be pushed out as they find it impossible to operate in the full glare of regulation or the costs that come with it. It will also be interesting to watch the effect of such regulations on the growth of the crypto sector and the burgeoning application of its underlying technology, the blockchain. 

Categories
Cryptocurrencies

What Is Augur (REP)?

Ethereum’s blockchain has made it possible to build all sorts of exciting decentralized applications on its platform. Augur was one of the very first projects to take advantage of Ethereum’s smart contract and Solidity tools and create its unique protocol.

Unlike many of its contemporaries, Augur does not seek to improve upon any aspect associated with the crypto or blockchain technology like block sizes, scalability, transaction fees, or centralization. Rather, the project seeks to capitalize on blockchain technology to improve the traditional prediction markets model.

In this guide, we’ll look into this exciting project, how it works, whether it’s worth sinking your money into, and more.

What is Augur (REP)

Augur is a decentralized, peer-to-peer, and open-source prediction platform built on the Ethereum blockchain. When trading on Augur, you’re rewarded if you correctly predict the outcome of any future event – whether it’s an election, a football match, political events, policy decisions, a natural disaster, market crashes, weather events, and so on. The project’s website says “anything is fair game” – if you can’t find your preferred choice of a bet, you can create your own.

Augur leverages the “wisdom of the crowd” – the idea that a collective group of people is smarter than individual experts when it comes to problem-solving, general knowledge, predicting, etc. Those who predict the right outcomes win and those who don’t, lose. The more unlikely an event to occur, the bigger the reward for the accuracy of its prediction.

The platform has its own currency known as REP – “Reputation,” which people use to report on and dispute the outcome of events. Coin holders are rewarded for accurate predictions of events if they occur, while others can object if they don’t agree.

What Does Augur Aim to Achieve?

As a decentralized application on the Ethereum blockchain, Augur is censorship-resistant, is not owned by anyone, and thus cannot be shut down by anyone. Blockchain experts Jack Peterson and Joey Krug created the project in 2014 to ‘democratize’ the prediction markets.

With the creation of Augur, Peterson, Krug and the team had the following goals in mind:

  • To design a prediction market model operated and accessible by anyone
  • To enable people to make predictions with as little fees as possible
  • To achieve better accuracy of predictions compared to the traditional prediction model

How Does Augur Work?

Augur is more or less a decentralized take on traditional betting. The Augur protocol utilizes four processes in the prediction model, which we will expound below.

Creating Markets. Anyone can create a market of their choice on the platform. All you need is a small amount of ether and a hot betting topic. But first, you need to check the list of topics on the platform to avoid double coverage. You can come up with anything, from “Will Mark Zuckerberg Be Voted Out as CEO of Facebook in 2019?” to “Will France Take Home the World Cup in 2020?” to “Will Game of Thrones Return for a Sequel?” Users creating prediction markets usually set a ‘creator fee,’ which must be between 0 and 50%.

Trading. After a market is created, trading begins. Users can buy shares in the outcomes of the event, as well as receive rewards for participating and sharing their insights and opinions about the market. The price of the shares is calculated based on the likelihood of that event occurring. The more people buying into a particular event, the higher the price will be. Users also have the option to trade their shares with others or invest in unlikelier outcomes for better returns.

Reporting. This stage comes after a market closes – that is, a market’s underlying event takes place in the ‘real world.’ The potential result, known as ‘Outcome,’ is determined by profit-motivated ‘Reporters,’ who simply report the real-world outcome of the event. Any REP holder can be a reporter. Reporters who consistently provide accurate reports are financially rewarded, while those whose reports are not consistent with the actual outcomes are financially penalized. Note that users of the platform do not need to own or use REP, it’s only reporters who need it to participate in the reporting process.

Settlement. In this final stage, a trader can close their position by selling the position to another user in exchange for ether, or automatically settling their shares on Augur’s smart contracts. Predictions by users that turn out to be accurate are rewarded. Reporters whose reports were determined to be accurate are rewarded in reputation tokens, while reporters who did not respond or gave inaccurate information are penalized, with their share of tokens being given to reporters whose report was accurate.

REP Market Policy and Availability

As of December 12, 2019, REP’s market cap was $97, 856, 775, with a 24-hour trading volume of $7, 271, 550. At the token’s crowd sale in 2019, 8.8 million tokens were distributed to the public, with 2. 3 million tokens reserved for operational costs.

The REP token can be acquired on crypto exchanges such as Bittrex, Coinswitch, Poloniex, Coinbase, Kraken, etc.

Augur is an ERC 20 token, meaning you can store it in any wallet with ERC-20 support. Other options include hardware wallets such as Ledger Nano X, Ledger Nano S, Trezor, KeepKey, etc.

The Future of Augur, And Whether You Should Invest In It

Augur was one of the very first projects to launch on the Ethereum blockchain. It is also one of the Ethereum projects that made headlines upon its launch and continues to be consistent. Besides, the project has gotten the node of notable figures in the crypto and blockchain sphere.

Brian Armstrong, CEO of Coinbase, has described it as “an awesome project,” while Vitalik Buterin, Ethereum’s co-founder, noted its ingenuity when he called it “Uber for knowledge.”

We think that its uniqueness among other Ethereum tokens coupled with its solid reputation makes it a worthy investment. 

Conclusion

Augur has been on the scene for a while now – being one of the first to be built upon the Ethereum blockchain. It is a decentralized prediction market platform that’s available to anyone. With a small amount of ether, anyone can participate in event likelihood stock trading.

Categories
Cryptocurrencies

What is the ZRX Token?

Cryptocurrencies have stirred the financial space in a way that more and more people want to jump on this economic bandwagon. As the newest asset class, cryptos are overtaking other securities in an unprecedented fashion. But this is where we have a problem. For people to join the crypto revolution, they have to go through centralized exchanges. These exchanges, however, come with their own set of issues.

Enter decentralized exchanges (DEXs). DEXs, in which traders transact directly with each other, are fast becoming popular. 0x is one of the most high-profile of these types of exchanges, and it allows users to trade ERC 20 tokens via its native token, ZRX. In this guide, we’ll dive deeper into the 0x project, how it works, and the ZRX token and how to get your hands on it.

What is 0x?

0x is an open protocol designed to facilitate the peer-to-peer exchange of Ethereum tokens on the Ethereum blockchain. 0x was formed by industry experts Will Warren and Amir Bandeali in 2016.

The two envisioned a future where all kinds of securities, including stocks, precious metals, etc. could be traded as tokens publicly on the blockchain. 0x is created to be different from both centralized and decentralized exchanges and thereby provide the best combination of both their features.

It also seeks to solve problems that arise from both types of exchanges. Let’s begin with the issues facing centralized exchanges.

☑️ Susceptibility to Hacks

Centralized exchanges will always be prone to hacking attacks. Mt. Gox, Bitfinex and Binance are only some of the examples of centralized exchanges that have been hacked for Bitcoins worth millions of dollars. 

☑️ Subject to Mismanagement

Centralized exchanges are regulated by people who are fallible and prone to human error. The example of Mt.Gox is an exchange whose fate was caused by mismanagement.

☑️ Volume problems

Centralized exchanges often have trouble dealing with a sudden increase in demand. For instance, a sudden surge in demand for Bitcoin in November 2017 caused some exchanges to temporarily halt processing transactions while others experienced downtimes.

☑️ Subject to Regulatory Whims

Centralized crypto exchanges are registered in countries. This means they must play by the rules that the government of that country wishes to enact.

0x’s Technology and How It solves these, plus DEXes’ Problems

Decentralized exchanges rely on smart contracts for trading of ERC tokens. However, the sheer proliferation of tokens on Ethereum’s blockchain presents the problem of confusion and scalability. At the time of writing, there are more than 200,000 token contracts on the blockchain.

0x’s whitepaper notes: “End users are exposed to smart contracts of varying quality and security with unique configuration processes and learning curves, all of which implement the same functionality.”

This has caused several problems for the network, including increasing transaction costs for the network. This means for crypto exchanges, transactions would be charged a specified amount of ether. Also, as the volume of orders increases, the costs of operating it increases as well.

Second, the numerous exchanges have led to a fragmented user base and with it, fragmented liquidity for the DEXs crypto market. 

0x’s technology attempts to solve this by combining two technologies – State channels and Automated Market Maker. State channels take transactions off the blockchain, therefore reducing transaction fees. Automated Market Maker (AMMs) are algorithms that conduct trades between two parties, while also acting as the opposite party in transactions.

0x relies on “relayers” to host the off-chain order book and connect buyers and sellers.

Having seen how the platform aims to improve the DEX model, let’s look at how it addresses the main issues faced by centralized exchanges:

  • It provides a more secure platform as there is no single point of failure, thanks to the Ethereum blockchain which is open-source, pubic and distributed 
  • It eliminates the possibility of a rogue or malicious exchange running away with people’s crypto funds
  • It eliminates the whims of governments or regulators  
  • It makes crypto trading an affordable endeavor for all types of traders
  • It makes it effortless to swap tokens on the blockchain by removing the high transaction fees associated with centralized as well as smart contract decentralized exchanges. It intends to do this by taking transactions outside of the blockchain

What is ZRX?

0x has its own Ethereum token, known as ZRX. The token is used to pay relayers for their services. However, 0x’s main intention for the token is to facilitate decentralized governance over the 0x protocol upgrade system. This means anyone who owns ZRX gets to have input – proportional to their holdings, into any upgrades the protocol may get over time.

How to Buy ZRX

The ZRX token is available on the majority of crypto exchanges, including Coinbase, Binance, Bittrex, Shapeshift, Poloniex, Changelly, KuCoin, Huobi, Coinswitch, Bitit, and Idex.

Being an Ethereum token, ZRX can be stored in an Ethereum wallet. Other options include MyEtherWallet, Exodus, Eidoo, and Ledger wallet.

There is a fixed supply of one billion ZRX. During its launch, 50% of the tokens were released to the public, with the 0x project retaining 15%, 15% going to the developer fund, 10% to the founding team, and 10% to the project’s advisors and early supporters.

The Problems With 0x’s Approach

0X is an ambitious project and one that could be the solution to both centralized exchanges and DEXes problems. However, some crypto experts assert that the ZRX token has no clearly defined purpose.

Also, the staking approach – in which the more ZRX you hold the more you can contribute to the project’s development, means that it can be hijacked by investors with large holdings – which does not keep up with the spirit of decentralization. 

Also, some experts contend that the business model is not sustainable. By having its platform open and free, the project might be foregoing revenue from trades and setting itself up for failure in the future.

Conclusion

The 0x project has its flaws, but the protocol is a promising proposition. It solves the challenges presented by centralized exchanges while improving the decentralized exchange model. Its flexibility, versatility and its free availability may very well catapult it to be the future of cryptocurrency exchanges. It’s going to be interesting to see how this project pans out in the future.

 

Categories
Blockchain and DLT

Distributed Ledgers – The Technology That Could Revolutionize Industries 

If you’re regularly tuned to cryptocurrency subject, no doubt you’ve heard the term ‘distributed ledger’ or DLT, thrown around once or twice. You’ve probably also heard some people use the phrase to refer to blockchain – the technology underlying everyone’s most familiar cryptocurrency. But does a distributed ledger and blockchain mean the same? And what is this distributed ledger thingy anyway?

In this guide, we dive full form into the world of DLTS: some of their popular examples, how they can be integrated into real life, and that burning question – whether they are the same thing with blockchain. But first, a little background is in order. 

What Are “Distributed Ledgers”? 

A distributed ledger is simply a database that is shared and replicated across multiple locations or institutions and among multiple participants. No central authority or third party is involved. Every entry in a distributed ledger is immutable – that is, it cannot be changed, and every participant in the network has an identical copy of it. 

We can think of a distributed ledger in terms of its opposite – a centralized ledger. A centralized ledger has one point of control and has a single point of failure. On the contrary, it’s hard to attack a distributed ledger because all the distributed copies would have to be attacked simultaneously for the attack to be successful. 

Ledgers have existed for centuries. People in the early days would record transactions on clay or papyrus. Over time, these were replaced by paper, and then computers, and now we’re entering into the realm of distributed ledger technology. 

In the past, the word ledger referred to financial records. Distributed ledgers are used to refer to the database, without any specific inference for the contents. Nowadays, the uses cases of distributed ledgers are numerous and varied. 

How Do Distributed Ledgers Work?

Distributed ledgers function via nodes – which, in simple terms, are connection points within the network that can receive, store, share, or synchronize data. The connection points allow users within the network to be linked to each other – facilitating peer-to-peer, decentralized transactions between individuals on the network. 

All updates to the ledger are first agreed upon by the nodes via a voting process known as consensus. Once consensus has been reached, the distributed ledger automatically updates this, and the latest version of the ledger is saved on every single node. 

Blockchain vs. DLT

A lot of people use the terms ‘blockchain’ and ‘distributed ledger’ as if they meant one and the same thing. However, it helps to remember something simple: all blockchains are distributed ledgers, but not all distributed ledgers are blockchains. Any database that’s shared across multiple sites and participants, decentralized, and that needs consensus among nodes can be described as a distributed ledger.

A blockchain is simply a subset of DLTs. It’s a series of blocks of data chunks known as ‘blocks,’ which are encrypted after every transaction. ‘’Miners’ validate transactions and ensure they are accurate – that is, ensuring a coin is not being double-spent. Miners then get rewarded with coins of the native cryptocurrency or a fraction of the transaction fees.

On the other hand, DLTs do not feature or require such a chain, nor are there miners to validate transactions. DLTs also do not need to have a data structure in the form of blocks.

Suffice it to say, many DLTS today were designed to circumvent the shortcomings of blockchain – issues like scalability, processing time, massive computational power, transaction fees, and so on.

Types of Distributed Ledger Technologies

There are a few types of distributed ledger technologies today, with some being more popular than others. We’ll look at four of these – specifically blockchain, Directed Acyclic Graph (DAG), Holochain and Hashgraph.

Each of these DLTs has their strong and weak points, but they all aspire to offer the same solution – a decentralized, transparent, fast, and safe avenue for relaying transactions and/or data. Let’s take a look at each, starting with the most familiar one – blockchain.

1. Blockchain

Satoshi Nakamoto, the creator of Bitcoin, noted that a network would collect and record information in blocks – which would be linked to each other, hence blockchain. Each block in the blockchain is identified by a unique hash generated by the SHA256 cryptographic hash algorithm. Due to the uniqueness of each block, it’s impossible to alter a transaction since that would result in the creation of a new block – indicating an invalid transaction.

In addition, transactions are added on a public ledger and are accessible to every participant in the network. This distributed and transparent nature of the ledger makes it even more difficult for any actor to modify the details of a transaction.

These qualities of immutability (unchangeable, and hence tamper-proof) and transparency are the major factors that make the blockchain so revolutionary. Its ability to inject integrity and transparency in processes and data storage is the chief reason blockchain is disrupting entire industries.

2. Hashgraph

Hedera hashgraph is a type of distributed ledger that works like blockchain but uses a different kind of consensus mechanism that relies on the concept of gossip, gossip about gossip, and virtual voting. Gossip here means that information is relayed by each participant repeatedly to another randomly selected member – informing him everything about the transaction.

This “gossip protocol” utilizes this mechanism for building network consensus as more and more people become aware of the information, whether in full or partially. In hashgraph, transactions are arrived at fully by consensus. As such, unlike blockchain, nodes or members do not have to validate transactions that are conducted on the network, and service requesters do not have to submit “proof of work.”

With the blockchain, proof of work causes transactions to be bulky, leading to very low transactions per second (transactions take place every 10 minutes.) By contrast, the gossip protocol enables hashgraph to support up to 10.000 transactions per second.

Hashgraph’s creators claim that it has overall efficiency than blockchain, “making it suitable for enterprises and commerce.” The CEO maintains that “…it’s a different data structure, different technology and looks nothing like blockchain, but solves the same kind of problems with better security and better performance.”

3. Directed Acyclic Graphs

Directed acyclic graphs are a type of distributed ledger that requires newly added data to be validated previously entered data. Usually, every new transaction involves the confirmation of at least two previous transactions before it is added onto the network. As more transactions are submitted, more are validated and recorded, and we end up with a mesh of doubly-confirmed transactions.

Directed acyclic graphs are by no means a new concept. In Mathematics, a DAG is a graph that has no cycles connecting to the other edges. As such, it’s impossible to navigate through the entire graph by starting from one point.

In a DAG ledger, all transactions are linked to at least one transaction in the following way: 

  • Directed – all links are in the same order and point in the same direction, with previous transactions linked to subsequent ones
  • Acyclic – A ‘cycle’ or loop is not possible. A transaction cannot circle back on itself after being linked to another transaction
  • Graph – the connected transactions can be represented on a graph, with nodes being linked to each other by links.

DAGs do not require miners to validate the authenticity of transactions since each transaction is automatically verified by at least two earlier transactions. The result of this process is that transactions are confirmed almost instantaneously, and it also removes the need for miner’s fees, helping to keep transaction fees at a minimum. 

DAG is commonly applied to processes dealing with data processing, scheduling, navigation, and data compression. ByteBall, Nano, and Fantom are some of the cryptocurrency projects utilizing the technology. 

4. Holochain

Holochain, according to the project’s white paper, is an amalgamation of blockchain, BitTorrent, and Github. With the DLT, each node runs on a chain of its own. It has a feature known as distributed hash table (DHT) where users can store data using certain keys. However, the data stays in actual locations “distributed” globally.

The distribution of locations around the globe decongests the network – rendering it a good candidate for scalability and poising it to achieve even millions of transactions per second.

Scalability is an issue that’s been dogging the traditional blockchain – since developers need validation from a majority of the network participants. On the other hand, a developer only needs confirmation from the single chain that makes up the whole Holochain network, dramatically reducing the wait time that is associated with the traditional blockchain.

Use Cases of Distributed Ledgers

Distributed ledgers can be applied across many industries – both as the driver of processes or to improve existing processes.

Blockchain, thanks to the world’s most popular cryptocurrency – Bitcoin, is the mostly applied DLT today. The most obvious application of blockchain is Bitcoin. The technology is also being applied in finance to reduce duplication of information that creates delays and confusion in many aspects of financial services.

The blockchain is also helping to reduce intermediaries in international remittances who not only prolong waiting times but are also expensive. Furthermore, blockchain allows securities trades to be settled within minutes – instead of the traditional several days.

DLT networks are also being used in supply chains to increase transparency and enhance accountability by tracking and logging details, flow, and payment of goods in real-time.

They can also be used to prevent fraud in financial transactions by providing immutable – and hence unchangeable audit trails and demanding more transparency and a higher standard of data integrity than the existing system.

DLTs could also be used in the food industry to prevent food fraud. Food can be tracked ‘from farm to plate’ so that customers can see the origin and handling of food.

Smart contracts – which are pieces of code on a DLT are another case of use of DLTs. Smart contracts define the terms of the agreement between parties – with the agreement unalterable and available for every party to see and refer to. They can be used in such cases as invoicing, shipping, procurement systems, quality assurance, compliance, and so on.

Benefits of DLTs

  • The immutability, i.e., permanent nature of DLTs records, leads to improved transparency, improved speed of processes, reduced costs, and so on. Also, it removes the need for paper trails that are not only labor-intensive but are vulnerable to damage, theft, or loss.
  • DLTs consensus mechanisms allow processes to be more consistent – facilitating reduced errors, real-time data, and flexibility for network participants to take part in decision making
  • Decentralization of DLTs removes the need for a central authority which means increased trust and integrity and multiple sources of authentication
  • Their distributed nature removes the single point of failure since the data is backed up by every node in the network – multiple participants
  • DLTS are less complex to build and operate, and they need very minimal work to maintain – which makes them less costly than many current systems
  • Distributed ledgers can manage real-time data across varying scenarios, places and contexts, eliminating the clutter that is associated with managing multiple centralized ledgers

The Future of DLTs

DLTs are still a nascent technology. However, they present a fundamentally new way to run processes, conduct business, and carry out transactions. For now, it remains to be seen if they will gain mainstream traction and change how businesses, institutions, and industries operate. 

As of now, academic and financial experts question whether DLTs – in their current form, are reliable enough to be adopted for full-scale use. Still, influential finance institutions such as the World Bank recognize their potential to transform various sectors such as manufacturing, government financial management systems, and clean energy.” 

What’s clear, though – their incorporation into systems will likely be done incrementally – by first replacing redundant and manual procedures and activities. They could come handy in areas such as record-keeping in payment and settlement processes, tracking agricultural systems, syndicated loans, and so on.

Conclusion

DLTs hold vast potential for changing the way we organize our lives and societies – thanks to their radically transparent, unalterable, and democratic nature. From food to finance to supply to negotiations – incorporating DLTs could transform our very lives and societies. This, however, is entirely contingent on whether they will transcend the current scalability issues, or whether they will gain widespread acceptance across industries.

Categories
Crypto Daily Topic

Luxury Car Lamborghini Embraces Blockchain

Ten years after blockchain came to life, we’re seeing new adoptions of the technology on a larger scale than ever before. These days, barely a week passes without hearing another blockchain application in news headlines. The latest to enter the fray has been none other than sports car favorite Lamborghini – which is now using Salesforce blockchain to authenticate cars.

One of the most recognized luxury car brands, Lamborghini, has been leading from the front in innovation in the automobile industry since 1963. And the brand is now tapping into blockchain’s potential to streamline its processes, enhance customer experience, and maintain the value of its legacy autos.

“Innovation has been at the core of our company since its founding,” said Paolo Gabrielli, Head of After Sales at Automobili Lamborghini, adding “Salesforce Blockchain will allow us to take our innovation a step further, accelerating the authenticity of our heritage vehicles faster than ever.”

And Adam Caplan, senior vice president of emerging technology at Salesforce, said: “Blockchain is changing the way companies approach trust and transparency. Lamborghini is a perfect example of this – we’re excited to see how such an iconic brand is able to innovate and transform the vintage car market with cutting-edge technology like Salesforce Blockchain.”

A Brief Background

Lamborghini’s application of blockchain follows a recent pilot project involving its first car to be certified using the technology. In August, Lamborghini Aventador S was certified on Salesforce Blockchain for a show at the Monterey Car Week in California – to protect the authenticity and art of the car. Salesforce announced that the process was one of “authenticity certification, which makes use of Salesforce Blockchain to guarantee data security and incorruptibility.”

The goal, the company announced, was to “prevent counterfeiting; to trace and certify all the information related to the model, and at the same time favor an increase of value for all the stakeholders.”

What is Salesforce Blockchain?

Salesforce is an American digital marketing automation and analytics company. In May this year, the company announced a Blockchain-powered solution that “extends the power of client relations management.” The answer would help users build and maintain the blockchain network, apps, and smart contracts.

The Salesforce Blockchain is built on the Hyperledger Sawtooth Platform – an open-source blockchain platform that allows companies to develop distributed ledger applications and networks.

Salesforce and Blockchain: a History

Salesforce and blockchain go back a year ago – when the company announced its blockchain plans at TrailheadDX. Marc Benioff, the company’s CEO, told Business Insider that he had been thinking about the idea after an attendee at the World Economic Forum approached him and suggested Salesforce should incorporate blockchain in its services. Benioff said he was intrigued by the idea, stating, “And it’s like you know if you did this, this and this you could add blockchain and cryptocurrencies into Salesforce…and I’m like ‘wow,’ and that’s kind of how it works.”

The company had had a dalliance with blockchain before, partnering with the blockchain startup Dapps Inc, which in May 2017 had announced the release of a product allowing users to integrate the Salesforce system with the Hyperledger, Ethereum, and Bitcoin blockchains.

This year, the company joined the Blockchain Research Institute, the global blockchain think tank, which boasts members like Microsoft, IBM, the Bank of Canada, PepsiCo, and other influential companies. In November, Salesforce secured a patent for a blockchain system that would enable it to filter spam and verify the authenticity of emails after they were sent. The patent spoke to the immutability (unchangeable nature) and distributed nature of blockchain that makes it impossible to modify information once it’s been committed to the blockchain.

On May 23, the company published a brief primer of the technology on its blog – recounting the basic principles of blockchain-like its ability to facilitate faster money transfers, improve medical storage procedures and increase transparency in supply chain management. It also explained how blockchain could help Salesforce in its customer relationship management field.

“Blockchain is a technology that promises to fundamentally change how we share information, buy and sell things and verify the authenticity of the information we rely on every single day – from what we eat to who we say we are. And because it can facilitate all of this in a secure, efficient, and transparent ways across many different domains, the effects can be transformative –every business, government, and individual can benefit.”

How Lamborghini Uses Salesforce Blockchain

As a high-end luxury car brand, Italian car manufacturer Automobili Lamborghini has been at the forefront of innovation all its existence. The brand is known for its agility in adopting innovative technologies to transform operations.

Its latest move to leverage blockchain has shown the auto industry that utilizing novel technologies can streamline processes, increase value for customers, and uphold brand value.

In the official press release on November 19, Salesforce gave some insights into how the car brand is using blockchain to improve processes. Divulging that each Lamborghini vehicle undergoes at least 800 certification checks before being released, they stated that the inspections require a massive network of people – “photographers, auction houses, dealerships, repair shops, newspapers, magazines, and other media sources – to curate the full history and most importantly verify all of the parts and service of each unique vehicle.”

The Blockchain Approach

In light of how grueling the process is, Salesforce is stepping in to create trust between all the partners involved and to enable Lamborghini to authenticate each vehicle faster and more securely than ever before.

Blockchain is designed to increase trust, transparency, and accountability with every player involved receiving secure, verified, and tamper-proof information. Any change to the chain is immediately recorded on the blockchain and is visible to everyone.

But getting every party involved on board has always been challenging– as it requires heavy-duty data integration at each stage. To resolve this, Salesforce uses clicks – rather than code, to achieve a faster set-up process. This saves the time that would have been used building up lines and lines of code as well as helps to integrate partners who are aren’t Using Salesforce applications.

Lamborghini has named its blockchain system “sicura” – which means safety in Italian. Sicura is the layer that links all the parties involved – dealers, logistics companies, auction houses, media houses, dealerships, photographers, and the car manufacturer itself – so that data can be gathered and shared faster and in a trustworthy manner. Before, the verification process for a car was three to six months, but thanks to Sicura, the process now takes place in a matter of days.

Customers can also download an app that allows them to request a certification or hire a car. And partners can access real-time info, enabling everyone to track progress every step of the way. Once authentication is complete, data is stored on the blockchain where all current and future owners of a vehicle can access it.

Conclusion

Lamborghini is only one in a growing field of companies that are adopting blockchain to make processes quicker, more transparent, and make information permanent and hence tamper-proof. By utilizing the technology, plenty more companies could cut on costs, increase accountability, and enhance the customer experience. One thing is clear, though – the technology is here to stay, and we can expect to see it being adopted on a larger scale in the coming years. 

Categories
Crypto Daily Topic

Blockchain World Wire: The Future of Cross-Border Payments?

Sending money across borders – whether to friends and family or paying for goods and services – is expensive, cumbersome, highly inconvenient and takes a lot of time. Sending money from one country to another may have gotten better in the age of the Internet, but you will agree that there is still a long way to go before the whole world becomes one village – financially.

Globalization has completely revolutionized possibilities for businesses as an increasing number of individuals and businesses are tapping into overseas suppliers. In the same breath, more people are finding it easier and necessary to live away from home. These two factors have fueled the surge in cross-border payments, and with fintech technologies evolving rapidly, a lot has changed from just a few years ago.

To understand what the future of cross-border payments is, we will first briefly cover present-day options and briefly compare the top cross-border remittance options of tomorrow already in the market.

Popular Cross-Border Payment Options

The most popular international money transfer methods vary depending on where you live. These preferred methods are international wire transfers, credit card payments, and eWallets.

International Wire Transfers

The term wire transfer refers to a method of sending money across borders electronically, often through a money transfer service such as a Bank, MoneyGram, Xoom, or Western Union. In a wire transfer remittance, money is transferred from the bank or credit union to another using an existing network such as ACH, SWIFT, or Fedwire.

For a long time, bank transfers have dominated the international money transfer scene, just as they have dominated every aspect of people’s financial world for decades. International wire transfers, which plainly refers to funds transfers between banks in different countries, are known to be quite cumbersome and expensive.

International wire transfers are often used for large payments due to their high transfer fees that often exceed $50. This option also offers limited traceability since the routing methods may vary from country to country. Wire transfers are also non-reversible, which in itself is a great risk to the sender. This is what makes wire transfers very attractive to scammers. 

The main reason that alternative ways of cross-border remittances were developed and prospered in a short time is that banks and companies dominating the wire transfer sector refused to evolve with advancements in communication technologies.

Credit Card payments

Credit cards are the go-to money remittance option for many people who pay for almost everything using the cards. From the consumer’s perspective, since the cards already play a major role in their financial life, it is only reasonable that it is their first option. All they have to do is enter their card details on to a browser and wait for them to be verified and transaction initiated.

Behind the scenes, cross-border payments using credit cards take a lot of work from the credit card company and the involved banks. For instance, the money oftentimes has to be converted to different currencies by an exchange, and the receiving banks may have to take longer to confirm receipt, especially if they are not a part of the credit card network. This explains why cross-border credit card payments can be expensive and take a lot of time.

eWallets

eWallets, or electronic wallets, is a form of electronic payment system that uses a computer or smartphone connected to the internet. This type of money transfer works a lot like a credit or debit card and is often linked to the user’s bank account to make and receive payments. The most popular global eWallets today are PayPal, Stripe, Payoneer, and Skrill.

eWallets rose in popularity fast to threaten old-school cross-border money remittance methods, including wire transfers, bank transfers, and paper checks, because they use the latest technologies to make funds transfer faster and more convenient for the users.

The biggest downside to eWallets, however, is that they attract high transaction fees because, behind the scenes, the money still has to be moved using traditional methods such as bank or wire transfer. This explains why eWallet companies do not always operate globally, and transactions may not be instantaneous in every transfer. Worse still, these companies do not have a clear policy that explains how and why funds may be held.

Blockchain World Wire solutions

Blockchain World Wire is an innovative blockchain-based global money transfer solution developed by IBM in an effort to solve all the obstacles in cross-border presented by current methods. The selling point of BWW is that it offers near real-time payment exchange and money transfer in 47 currencies between 72 countries. The company touts it as the first-ever blockchain network that integrates cross-border payments with messaging, fund clearance, and settlement – all in a single network.

Cryptocurrency, the form of money created with the invention of blockchain, may be all the rage today, but unfortunately, people still heavily rely on traditional government-issued money for everyday payment. IBM came up with BWW as a modern-day solution to offer the benefits of cryptocurrencies without forcing people to convert their fiat money into cryptocurrency before sending it across borders.

Blockchain World Wide was created specifically to disrupt cross-border payments. It is a completely new type of payment network that accelerates remittance by revolutionizing how money moves from one country to another. It works by bringing on board different financial institutions and supporting multiple digital assets to encourage financial inclusion globally. The blockchain network on which the platform runs uses a Stellar blockchain protocol to facilitate sender-to-receiver money transfer, effectively cutting out middlemen such as banks and exchanges.

Under the hood, Blockchain World Wide actually remits money as digital assets. The sender’s funds are sent as either cryptocurrencies or stable coins. The term stable coins refer to digital assets whose value is pegged on the value of another currency such as USD or Euro. This conversion is what makes it possible to send money almost instantaneously at no charge.

Bringing banks on board and supporting multiple currencies

When launched, BWW already had the support of some of the major financial stakeholders in the world. Six global banks had already expressed interest in joining the network and issue their own stable coins to take advantage of the benefits of cryptocurrency without severely altering their business modus operandi. Presently, supported currencies already backed by stable coins include US Dollar, Euro, Indonesian  Rupiah, Korean Won, Philippine Peso, and the Brazillian Real.

IBM’s cross-border payment solution wins against current solutions for the simple reason that it is efficient and has the capacity to scale well. By eliminating the need for many intermediaries and removing the bureaucracies in clearing and settlement, the company is setting the stage for a payment solution that gets the world ready for a future of cryptocurrencies.

The payment system is designed to make it easy for money to flow in and out of the blockchain network using gateways such as banks for easier integration with existing payment systems. Banks and other gateways do not need to set up a new infrastructure for their clients to use this money transfer system.

The Stellar Protocol and Digital Assets

The backbone of the Blockchain World Wire is an open-source, decentralized blockchain platform called the Stellar Protocol. This serves as the engine that powers the entire payment platform and facilitates the cross-border payments and settlements. The platform uses its own cryptocurrency known as the Stellar Lumens (XLM). The platform promises the scalability the World Wire will need to process all the payments the world will make in the near future, which is expected to run into thousands every second.

Adopting the use of existing digital assets, including cryptocurrencies and stable coins already in use, adds trust and efficiency as well as improves the system’s simplicity. Since these digital assets already have an ‘agreed-upon’ value, parties transacting save time and costs of the transfer while sending and receiving money. Blockchain World Wire chose to use the open approach in selecting digital assets to use on the platform to encourage financial institutions as well as individuals to use the platform for their everyday payments as well as cross-border remittances.

In the near future, IBM aims to allow customers to use every major digital asset to send and receive money on the BWW platform. It will not be long before anyone can send and receive Bitcoin, LiteCoin, XRP, Bitcoin Cash, and any other digital assets.

How Blockchain World Wide’s competition stacks up

IBM is not the only company to come up with a potential solution to the serious shortcomings in the cross-border money transfer industry.

SWIFT

SWIFT, which is an acronym for The Society for Worldwide Interbank Financial Telecommunication, was founded back in 1973 as a cooperative organization to promote and develop standardized global interactivity for cross-border transfers. SWIFT is essentially a large network of Banks that uses the old wire transfer techniques to send money from one member bank to another using special codes. Although it has been around for quite a while, SWIFT is still slow and expensive, largely due to the large number of intermediaries and the old technologies it uses to this day.

Ripple

Ripple was formed to take on SWIFT and become an affordable, reliable, and fast global payment option. Simply put, it was meant to replace SWIFT. Just like Blockchain World Wire, it runs on a blockchain platform and links numerous financial institutions, including banks, to make cross-border payments a breeze. Presently, Ripple operates in over 40 countries across six continents and has recruited over 300 financial providers into its network.

Through its two remittance products, xCurrent, and xRapid, Ripple implements highly efficient protocols with private nodes to offer near-instant payments with complete transparency and without intermediaries. Its main selling points are low clearing fees, thorough transaction tracking, and compatibility with numerous currencies and various digital assets.

How does IBM’s BWW differ from Ripple’s service?

For starters, Ripple focuses on facilitating payments for financial institutions and not cross-border remittances. Since the company issued its XRP token, it has been the go-to remittance platform for cross-border payments in the world of cryptocurrency and has established an impressive customer base.

However, despite its commendable performance so far, Ripple has a weakness in that although it runs on a blockchain platform, it is not fully decentralized. This means that the company controls all the transactions processed by its platform, and it has to approve all transaction validators. Essentially, Ripple’s blockchain platform is a centralized blockchain. In choosing an open-source blockchain platform, IBM is positioning itself to offer the full benefits of decentralization that Ripple cannot. 

Presently, IBM is rolling out a set of APIs that institutions can use to integrate their existing payment systems. The company is also in the process of actively working with regulators all over the world to bring the cross-border remittance platform online in every jurisdiction. The seamless integration of legacy payment systems is expected to gradually phase out the need to use alternative money remittance systems.

IBM is laying the infrastructure required to make their cheap and fast money transfer system available “anywhere and everywhere in the world.” In time, the company hopes, Blockchain World Wide will phase out its rivals, including SWIFT and Ripple’s XRapid platform, to be the go-to payment system for cross-border remittances.

Categories
Cryptocurrencies

Decentralized Financial Systems: What Are Their Benefits?

The current financial system is centralized. Currency is issued and regulated by governments or central banks. We also entrust our assets to finance firms so that we can get returns on savings. This translates to our financial systems being centralized. And therein lies the problem. Not only do centralized systems have a single point of failure, but they also comprise humans who are prone to making mistakes.

It also means many people are excluded from the financial system. For example, to qualify for a loan, one must have a bank account and a good credit score. And to have a bank account, a person must comply with the bank’s KYC procedures. For someone who doesn’t have the necessary KYC documents, it’s impossible to open a bank account and hence get access to banking services such as a credit card, savings account, loans, etc. 

In a centralized system, there is too much power in the hands of institutions, while a big chunk of people is excluded from financial services that would allow them to engage in activities of economic value. Also, entrusting our money in centralized financial institutions means we have very little say in how it is invested and handled – meaning there is no transparency.

So what can we do to solve the centralization problem? The solution is decentralized finance. Decentralized finance is an idea that has caught on, especially in the last couple of years. Crypto ‘purists’ are mainly responsible for pushing the concept into the fore, as they strive to accomplish ‘’Satoshi’s vision.” Bitcoin’s founder – Satoshi, had this as the very first line in the Bitcoin white paper: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

In this article, we deconstruct decentralized finance, its inherent features, its defining principles, and the benefits that it could herald for the finance world. 

What is Decentralized Finance?

When we take away all the buzz, “decentralized finance” comes down to mean financial access for all, without the middlemen. It’s the idea of handing economic power back to the people.

It’s another application of blockchain technology that aims to expand financial services to more people. Decentralized finance includes digital assets, smart contracts, protocols, and decentralized applications built on public blockchains. After all, blockchains such as Ethereum and Bitcoin are more than the driving technology of cryptocurrencies. They are open sources whose concept could change how the world economy works. 

The decentralized financial system movement has three core principles:

☑️Interoperability and Open Source – this means decentralized finance projects should be woven together on a technical level to strengthen their effects as a whole

☑️Accessibility and Financial Inclusion – this means the end goal is to have a financial system that’s accessible to at least everyone with internet connectivity, no matter their geographical location

☑️Financial transparency – this means that the market level of information of services is transparent to all participants while still preserving their privacy

Decentralized finance has six defining characteristics that set it apart from the private networks used by the traditional financial system:

  • Permissionless – this means anyone can connect to the network regardless of their social status or location
  • Decentralized – there is no central authority overseeing transactions. Records are kept simultaneously across numerous computers across the world
  • Trustless –  there is no need for a central authority to validate transactions as they are automatically validated
  • Transparent – all transactions are publicly available and auditable
  • Censorship resistant – interference by a central authority is not possible
  • Programmable – developers can code business logic into affordable financial services

Pros of a Decentralized Financial System

A decentralized financial system has a whole host of benefits that could change not only how we interact with money, but also improve the very premise that it originated from – namely cryptocurrency. The following are the advantages of decentralized finance:

Expanded financial access

With decentralized finance, anyone with a smartphone and internet connection has access to financial services. Currently, several barriers prevent a section of the world’s population from accessing financial services:

  • Status – lack of citizenship, identifying information, etc.
  • Wealth – high fees required to sign up for access to financial services
  • Location – long distances from financial service providers

A decentralized financial system equalizes finance such that a top financial trader at a global firm has the same access to financial services as a storekeeper in a remote area of Kazakhstan

Affordable Cross Border Payments

A decentralized financial system removes the need for costly intermediaries, making sending money to loved ones overseas more affordable.

In the current remittance system, there are too many intermediaries involved, making cross border payments too expensive. The current global remittance fee is roughly 7%. In a decentralized financial system, remittance fees could well be below 3%.

Improved Privacy and Security

In decentralized finance, individuals have full control and custody of their wealth. There are no intrusive KYC procedures, and transactions can take place without validation from a third party. This is unlike the current system where users’ wealth and personal information are stored in institutions where it is at risk.

Censorship-resistant

Decentralized finance has censorship-resistant financial products. Transactions are in unchangeable records, and the network cannot be shut off by governments or central banks at a whim. The decentralized finance system is entirely independent of existing legal or regulatory structures.

Simple to Use

A decentralized financial system would feature plug and play applications free of any complexity.

For example, a user in Morocco could receive a loan from India, invest in a business in the US, pay off their debt, etc., – all through interoperable applications.

Improving the Crypto Ecosystem

Decentralized finance solves several problems in the crypto ecosystem. Unlike many cryptocurrencies that grapple with scalability problems, decentralized finance payment products are helping in making micropayments fast, low-cost, and convenient. For example, decentralized exchanges are helping drive liquidity for the crypto market.

Driving Innovation

Decentralized finance helps to drive innovation. People can create financial products whose rules will be coded in a smart contract, and offer them to the world. This leads to not only diversified financial products suitable for different financial needs but also more improved ones as developers compete to unleash the next superior product.

New Forms of Value

Decentralized finance products also contribute to the crypto ecosystem by creating new forms of value and expanding the original idea of cryptocurrencies. Thus, a decentralized financial system helps the crypto ecosystem expand and diversify – all for the benefit of users.

Conclusion

Decentralized finance is an exciting idea and one that could finally equalize financial services. What the internet has done for information could be what decentralized finance does for the global financial system. With rapid developments like digital assets, smart contracts, decentralized exchanges, etc., Satoshi’s vision may very well be an idea whose time has come.

Categories
Crypto Daily Topic

Bitcoin is the Best Asset of the Decade, According To Bank of America Merrill Lynch

Bitcoin has been ranked as the best asset of the decade. This is according to Bank of America Merrill Lynch (BAML), which has made a list of the best and worst asset classes of the last ten years.

CNBC reporter – Carl Quintanilla tweeted today that the banking giant has listed Bitcoin as the best asset class, with the worst spot going to the Myanmar Kyat. In the analysis, BAML indicates that an investor who paid $1 for a Bitcoin in 2010 would have an equivalent of $90, 026 today. This is a stark difference from an investment in U.S equities, which would have yielded $3.46 today for a $1 investment in 2010, and shows Bitcoin’s impressive performance ten years after it was launched by the anonymous individual(s) Satoshi Nakamoto.

Bitcoin’s Volatility over the Years

Bitcoin had come a long way from 2010 when it was worth $0.0025. The bitcoin community knows this because that’s the year computer programmer Laszlo Hanyecz famously bought Papa John’s pizza for 10,000 BTC on May 22, 2010. The day has become folklore, not for the transaction, but the price – Hanyecz paid for the pizza with 10,000.

Since “Bitcoin Pizza Day,” the cryptocurrency has steadily witnessed an astronomical rise in price. Nine months after the purchase, the crypto attained equal value with the US dollar, making the pizza $10,000. In 2015, the two pizzas would’ve gone for $2.4 million. As of December 13, 2019, the pizzas are worth $72.2 million.

Bitcoin’s all-time high was a staggering $20,000 in 2017, after which it started declining, experiencing an incredibly bearish market. Today, the cryptocurrency tends to stagnate between $7000 to about $7,250. Bitcoin investors are hoping for a bullish market after the crypto’s halving in May 2020.

The Crypto Decade?

Bitcoin’s strong showing comes against a backdrop of a year when cryptocurrencies, in general, outshined other major asset classes. Despite kicking off the year with a dismal run, large-cap cryptos started picking up around March, and by June, the asset class was way ahead of other assets. 

Establishing themselves as the world’s leading asset class this year, cryptocurrencies have outperformed annualized returns of US equities, bonds, and commodities such as gold and oil.

Digital Assets Data co-founder and President Ryan Alfred told Coindesk that big-name cryptocurrencies posted significantly higher returns this year when compared with traditional markets.

“Looking back at the performance of the top ten large-caps in comparison to other major asset classes, we can see their special signature,” said Alfred.

Of course, cryptocurrency’s big rally is attributable to Bitcoin, which is currently up 100% since the year kicked off.

The asset class’s success can be attributed to the very reason risk-averse investors steer clear of it: its unpredictable volatility. This volatility creates a satisfactorily liquid market – allowing traders to quickly trade between digital and fiat currencies.

Being still a burgeoning market, crypto prices are bound to jump back and forth in a frantic manner, which actually works to the assets’ advantage.

And with Bitcoin being the most popular cryptocurrency, it is no wonder it is the best asset of the decade.

Conclusion

Having marked its 10th year with a bang, what’s next for Bitcoin? As usual with cryptocurrency, it’s impossible to tell. Bitcoin devotees are hopeful the cryptocurrency will retain its lead over other asset classes. Remember that events like crypto whales – for example, investor organizations entering the market could significantly boost its price. But most observers are pegging a bullish return on the next Bitcoin halving, six months from now.

Categories
Cryptocurrencies

The downside of centralized systems

In today’s finance, governments and central banks pretty much control the whole system – from the issuance of currency to setting of interest rates, while big players like regulators, corporations, and international organizations wield so much power over the system. As such, the current global financial order is centralized – with influence and power belonging at the top.

We have worked with centralization since the very invention of banking. That doesn’t mean it is the ideal system – far from it. A centralized system has its own challenges – some of which have contributed to the global problems we face today.

In this article, we break down the cons of centralized finance and what that means for the average person. But first, what exactly is a centralized finance system?

Defining Centralized Finance

Centralized finance, which characterizes today’s global financial system, concentrates authority, control, and decision making at the hands of the top few. Just like other sectors that employ a centralized approach, centralized finance features the following characteristics:

☑️ A clear chain of command – everyone interacting with the system – from employees to consumers, to intermediaries, etc., knows who to turn to for any major decision making.

☑️ Standard operating procedures – financial institutions follow specific standard procedures and methods. As all decisions lie with the managing body, there is little variation between departments and branches.

☑️ Bureaucracy – owing to the central chain of command, the more a financial institution grows, the more the layers of management and hoops that have to be jumped before reaching the front lines

Cons of Centralized Finance

Having all the decision making power and control at the top financial institutions means the entire system has to grapple with these risks and drawbacks:

Billions of People Are Unbanked

In the current centralized system, having a bank account is a prerequisite to accessing financial services. However, over 1.7 billion worldwide do not have a bank account, either due to banks being too far away, not having enough money to open an account or lack of necessary documentation or credentials.

 As a result, these people cannot access financial services to enable them to create economic value and improve their standards of living. As the high-economy countries run the global financial system, these people are left behind.

A Centralized System Favors the Financially Literate

To utilize financial services and participate in financial markets, one must have a degree of financial literacy. But currently, only one in three people have an understanding of basic financial concepts, with a majority living in high-income economies. A centralized financial system favors the financially literate while leaving behind the illiterate and semi-illiterate.

Without a basic understanding of financial concepts, it makes it hard for the bigger part of the population to make the right financial decisions and hence create wealth.

Global Inequality

In the centralized financial system, financial markets are usually dominated by those with the best connections to them. These people have access to financial opportunities and asset classes, capital, unhindered access to market information, and access to financial expertise. As a result, wealth is distributed in a top-heavy manner, i.e., the majority of global wealth is concentrated among very few people.

On the other side of the spectrum, the overwhelming majority of people have no access to information or even capital that can help them start building wealth. They may not only be living from hand to mouth, but they may also lack access to investment tools like stocks, bonds, mutual funds, etc.

High Intermediary Fees and Slow Transactions

Centralized finance tends to involve high intermediary fees while sending money across borders. The average cost for sending money overseas is 7% of the total value, and that rises to almost 11% when sending money via a bank.

Even worse, international bank transfers can take several days, leaving many people who are waiting for cash stranded. 

Low Trust in the Financial System

Due to the lack of transparency associated with centralized finance systems, many consumers have little or no trust for the model. A report by Edelman shows there is only a 57% level of confidence in the financial sector, with trust in governments – which regulate the financial industry, even lower. Many people report feeling they are not being served in acceptable standards.  

Currency Manipulation and Censorship

In a centralized financial system, governments have the power to manipulate fiat currencies. Venezuela and Zimbabwe are two examples of how governments have devalued currencies, causing runaway hyperinflation and a devastating effect of citizens. For instance, currency manipulation in Venezuela caused the price of a cup of coffee to skyrocket by over 772,400% in six months.

Centralized power also means governments and banks can financially censor citizens by freezing their accounts, assets, denying them access to payment systems, emptying their accounts, denying them access to their funds, etc. In short, a centralized system takes away the financial power of citizens.

Systemic Risk

With financial power held by just a few elite institutions, it means one abject failure can send the whole system crashing. This is illustrated only too well by 2008’s US’ subprime mortgages that threw a wrench into banks’ balance sheets, causing a massive downturn that created a ripple economic effect worldwide.

Centralization creates an “all eggs in one basket” scenario, and if that basket breaks, it can spell doom for the world’s wealth on a massive, destructive scale.

Extractive of Value Rather Than Adding Of Value

There are two types of economic activities: those that add value and those that extract value. In today’s centralized financial system, too much economic activity is intended to extract value from other parts of the economy, rather than adding value. To put it another way, much of today’s economic activity is geared at making a profit at the expense of other people and industries.

This state of affairs stifles innovation and advancements that could lead to a better financial system for the betterment of all, as everyone rushes to gain more value while contributing little to nothing in the system.

Complexity

In the centralized financial system, there is too much complexity of terms, concepts, and financial instruments, which increases instability or amplifies shocks in the system. For instance, the average person on the street cannot start to fathom complicated things like CDO-Squared or Commercial Mortgaged-Backed Securities. These complex financial instruments transfer the risks in the finance sector to other countries and industries, with negative consequences for the entire system.

Is There An Alternative?

With such drawbacks for the centralized financial system, is there an alternative? The answer is yes. The proliferation of mobile phones, internet connectivity, and the development of groundbreaking technologies such as blockchain could create never before seen opportunities for a decentralized, accessible-to-all financial system.

This evolution, however, depends on the attitude of governments and the existing financial system.  Its willingness, or lack of it thereof, to embrace decentralized financial solutions will very much determine the future of the global financial system.

Categories
Cryptocurrencies

What Is This Bitcoin Remittance Business All About?

Bitcoin and cryptocurrencies, in general, have been at the receiving end of governments’ crackdown around the globe, as they move to regulate its influence and prevent its use in illegal activities. On the other side of the lever, though, the crypto is basking in its surge in the global remittance market. 

Bitcoin is increasingly being used as a medium for cross-border money transfers – in which it lets users transfer money at a way more affordable price than the traditional system.

Remittance involves people sending money to their relatives and loved ones who live overseas. As more and more people migrate to high-income countries, the remittance business grows more and more. Such money is sent for school fees, daily expenses, starting a business, and other uses.

In this article, we’ll look at how Bitcoin came to be a powerful player in the remittance industry, just how Bitcoin-based money transfer works, why it’s the better option, and what the future holds.

Bitcoin-Based Remittance: A Background

In the olden days before the advent of Bitcoin, the global remittance business was dominated by players such as Western Union, PayPal, Moneygram, and so on. However, these channels are associated with exorbitantly high fees and slow processes, which can leave recipients stranded for days. The traditional remittance model faces the following challenges:

☑️ High intermediary fees – Fees can go as high as 10% of the total amount, which can be quite expensive

☑️ Slow money transfer – it takes days, sometimes weeks depending on the destination, for money to reach the recipient

☑️Susceptible to fraud – the current money transfer system is prone to hacks and theft. For example, Venmo, the Pay-Pal owned money transfer service lost a total of $40 million in the first quarter of 2018 from fraudulent transactions

Enter Bitcoin-based remittances. Also known as “rebittance,” this model slowly taking space in the global remittance industry. But how does it work? Let’s first compare it with the traditional money transfer model.

The Standard Remittance Model

To get a firm grasp of Bitcoin-based remittance, it helps to first look into how the traditional model works.

Let’s say, for example, a person working in the US wants to remit a dollar to their home country in Africa. They will go to a shop known as a Money Transfer Operator (MTO), hand over the cash at the prevailing exchange rate, after which the MTO starts the process of sending the money to the intended recipient. The MTO will charge for the service.

However, the MTO is only a frontend agent. The service, software, and system they are using are provided by a remittance software provider (RSP). The MTO only pockets a fraction of the fees it charges the customer, with the bigger chunk going to the RSP. On top of that, the MTO may also need to pay the RSP for installation, maintenance, and subscription of the software.

The overall cost of the transfer is thus borne by the end-user, who is the customer, as both the MTO and RSP try to retain the maximum fees possible. What’s more, the MTO may not be transparent about how they arrived at the specific exchange rate, which leads to the customer bearing another brunt of unfavorable rates.

How Bitcoin-Based Remittance Works

Bitcoin remittances work via a cloud-hosted solution for MTOS living in developing countries. As long as it’s connected to the internet, the cloud solution works seamlessly with little to no banking infrastructure.

Via a simple internet connection and free software or app running on a suitable device, MTOs can send and receive money on behalf of a customer, without any overhead costs for installation, subscription, or maintenance charges.

The transaction details, including Know Your Customer details and other anti-money laundering protocols, are secured in a low-cost database, which can also be a blockchain. 

The MTO will simply estimate the amount of money needed for a business that day or for several remittances, purchase an equivalent of Bitcoins in advance, and immediately sell them for the fiat currency in the destination country. For example, an MTO will buy Bitcoins and exchange them for Nigerian naira for all remittances towards Nigeria.

The Bitcoin-based business is almost risk-free as it sells the Bitcoin tokens almost immediately, minimizing chances of theft or hacking. Customers’ transactions are also conducted in a matter of minutes.

Big Savings on Transfer Fees

The end results of Bitcoin-based remittance is lower costs for the customer, faster and more convenient global money transfers, no subscription, installation, or maintenance fee for MTOs, higher commissions for MTOs, and a safe and secure remittance mechanism. 

The person operating the MTO doesn’t have to have any knowledge about the underpinning blockchain technology, thanks to the effortless interface that features incredibly easy steps to process the money transfers within seconds.

What Are Some Bitcoin Remittance Businesses?

Bitcoin remittances provide a way for there to be only one entity between the sender and the recipient. Although Bitcoin was designed as a peer-to-peer mechanism, the infrastructure to support that is simply not mature at this point. Thus, Bitcoin remittance companies have reduced the cost of sending the money from up to 10% to anywhere between 1% and 3%.

Bitcoin-based remittance companies are constantly mushrooming across different parts of the world. Some of the established names so far include BitPesa, Rebit, Payphil, Bitso, Coicove, Payfast, and Sendmoney.

The Future of the Bitcoin Remittance Business

Owing to its ability to instantly send money across the globe, Bitcoin is garnering more attention as a viable means for more convenient transactions. However, the traditional model still holds sway over the remittance business, and their services are still in plenty of demand.

However, as more people learn about Bitcoin-based remittances, they will likely gravitate towards these services as they are cheaper, quicker, and more secure. People will also want to ensure they extract the most value out of remitting money, resulting in Bitcoin-based remitting becoming more popular.

If the traditional model can’t keep up with this, the Bitcoin and cryptos, in general, might even take over the industry.

Conclusion

The Bitcoin remittance business is making brave inroads into the industry, and that’s because it provides a better alternative to the traditional model by many measures. Money transfer operators can run their business without the headache of overhead costs, and customers are sure their money is safe and secure, with the unprecedented minutes-only transactions. Still, this model is yet to go mainstream, mainly because it’s still a young technology – at least in this industry.  But this could change in the very near future as more people discover its ingenuity.

Categories
Crypto Daily Topic Cryptocurrencies

The Future of Blockchain

Even though blockchain is mostly known for being the technology behind Bitcoin – and other cryptocurrencies, it is more than that. And yes, the revolutionary nature of cryptocurrencies is what makes cryptocurrencies stand out from other digital currencies. Blockchain is known for many things – but its immutability, transparency, and decentralization are what make it such an object of frenzied interest, research, and even apprehension from traditional systems.

Today, blockchain applications have transformed how things are done across multiple industries – from manufacturing, to supply chains, to identity management, to finance and countless others. Given that it’s still a young technology but with incredible potential, how does the future look? 

Blockchain: A Background  

The concept of blockchain was first ever mentioned by Scott Stornetta and Dr.Stuart Haber in 1991. In a white paper titled ‘How to Time-Stamp a Digital Document,’ the two discussed the idea of timestamping a document and linking it to the previous document in a manner that rendered it impossible to change the content of the documents. Essentially, this was the first idea of “cryptographically linked chain of blocks,” which is how we know the blockchain today. 

Of course, Bitcoin’s burst onto the scene and gave blockchain an impetus it hadn’t seen before.

However, in 2014, the conversation started shifting from Bitcoin and to the potential of its underlying technology. People began to realize blockchain’s potential for other uses, and the exploration of this idea kicked off. Blockchain 2.0 was now the next buzzword – referring to applications beyond cryptocurrency. Today, there are hundreds of blockchain applications already active, with even more being explored. 

The reason blockchain has gained so much traction is because it has brought out business-changing ideas in plenty of industries. It’s hailed for facilitating complete transparency, a peer-to-peer model of sharing information, and the unchangeable nature of its records. 

And its influence seems to be getting only stronger – to the tune that the International Data Centre predicts global investments on the technology to hit $11.7 billion in 2022. Blockchain solutions also feature in increasingly many companies’ agenda. 

What’s Holding Back Blockchain from the Mainstream?

For now, blockchain’s implementation faces many hurdles. These limitations have slowed it down – but only just, its mainstream adoption. It’s important to note that ‘slowed’ here is relative because, given the stakes, blockchain has, in fact made such an impressive showing. With that, let’s briefly look at some reasons why its implementation is still not full-throttle a decade later:

☑️ Cost – Most blockchain platforms consume too much energy compared with their actual transaction throughput, e.g., Bitcoin’s 7 per second and Ethereum’s 15 per second

☑️ Scalability – Partly due to the issue of low transaction throughput with blockchains, blockchains have just not attained the potential to serve many users

☑️ Data privacy – The public model of public blockchains is not very enticing to enterprises who would rather keep their sensitive data private (through projects like Hyperledger have made it their goal to solve this problem by developing private blockchains)

☑️ Insufficient blockchain knowledge – Blockchain solutions are still a novel and complex concept for the majority of people. Also, most organizations lack people who have an in-depth knowledge of the technology

☑️ Entrenched systems – most organizations see no reason to “fix something that’s not broken.” They have been working with established methods for so long and providing services to customers. Transitioning into fresh mechanisms can prove challenging.

Blockchain’s Development Trajectory

Despite blockchain being so promising, it’s still very much at the teething stage. Some people see it as not a technology issue, but an issue of breaking down barriers and collaboration between companies.  

And we already see this happening. Hyperledger is one example of a successful collaboration of organizations with the sole aim of pushing blockchain into the mainstream. With the coming together of more than 200 influential organizations spanning the blockchain, finance, manufacturing, academia, and more fields, Hyperledger is determined to ensure blockchain counts. Today the group has released about 15 projects, including blockchain projects, blockchain tools, and libraries, and so on.

Furthermore, many in the blockchain space contend that the technology is still struggling to break ground. However, the progress so far can’t be denied. 2014 was the year when Blockchain 2.0 became a thing. The next year we saw the introduction of an entire blockchain dedicated to smart contracts, one of the most touted and promising applications of the technology. Already, major industry players like Microsoft, UBS Group, and the BBVA group have already integrated smart contracts in their organizations – in various forms.

The year 2016 saw the explosion of more pilot projects. 2017 brought along with it more enterprise-level experiments, while 2018 and 2019 were the years we saw the crystallization of many projects and, ultimately, their application. 2019 has been the year of bolder forays into the blockchain sphere.

Blockchain: Thinking Ahead

Based on blockchain’s showing in the last few years, many experts think brightly of its future. The blockchain and its fellow distributed ledgers will soon become the preferred mode for many business transactions.

Forbes predicts that stablecoins – the “incredible manifestations of blockchain power” will find even more popularity. The publication also asserts that as fiat currencies falter, people will likely “turn to blockchain to safeguard their savings.” What’s more, it makes a strong case for blockchain’s future, saying it deserves to be applied to “better technologies” and that “those improvements are on the way.”

Author of “Blockchain Revolution” Don Tapscott calls blockchain a “platform for truth and trust” with “staggering implications…for virtually every aspect of society.” The technology, according to him, is revolutionary with “vast potential to change society.”

The Institute for Innovation Development notes that there are more than 50 industries already deploying blockchain, and that “this corporate activity and experimentation will increase exponentially.” It also foresees blockchain changing “how transparency and authenticity are derived” with all types of things – from food, to property ownership, to verifying memorabilia, to personal identification.  

Spencer Bogart of Blockchain Capital Blog sees blockchain’s development shifting from the “launching of insufficiently differentiated new chains to improving and building ‘up the stack’ of winning protocols.”  

The Future of Blockchain 

Blockchain is still experiencing “growing pains,” and thus, its potential is yet to be fully realized. However, given that it has already successfully penetrated so many industries, it’s likely a matter of time before it penetrates nearly every industry.    

Many people, from both within and without the blockchain community, acknowledge blockchain’s powerful potential to instill transparency in all aspects of the business. Dataversity says that the technology will “emerge as a savior for transactional integrity.”

Blockchain has also received support from higher-ups in the finance regulation sector. Former chairman for the US Commodity Futures and Trading Commission, writing for Coindesk, asserts that “emerging digital technologies” have “far-ranging implications for capital formation.”

The Future of Blockchain Companies foresees a blockchain era when businesses will easily exchange assets in a peer-to-peer environment without government interference or regulatory fear. If blockchain maintains its current level of trust, then the current lack of transparency and “lack of governance over personal data” will be a thing of the past. 

Conclusion

Blockchain is here to stay, and soon, we will be using it in our daily lives without even realizing it. And for the better – because, as stated many times in the article, this technology has the potential to revolutionize how we do things. And while blockchain’s development and adoption has been slow, we know its mainstream adoption is a matter of “when,” not “if.”

Categories
Cryptocurrencies

What are the Real-Life Use Cases of Blockchain?

Blockchain is transforming the world around us. Introduced to the world by Bitcoin – the world’s most successful and popular cryptocurrency, blockchain has taken a life of its own and is slowly taking over industries. And why not? It’s a revolutionary technology that could instill transparency, promote accountability, and help us streamline processes like never before.

In this article, we look at some of the real-world blockchain implementations that are changing how things are done in respective spheres – from music to governance to insurance to healthcare and more.

Media

Ujo Music is a blockchain platform that lets artists users create, publish, distribute music, get rightfully compensated, and retain full copyrights. The Ujo platform is decentralized and transparent so that artists can see and verify anything without having to consult or rely on a centralized identity.

Transactions to purchase music are conducted directly using Ether. Transactions are also secured using an Ethereum Chrome plugin known as Metamask. This built-in payment infrastructure allows Ujo to provide a blockchain-based streaming service with better convenience and reliability than ‘legacy’ streaming services such as Spotify, Apple Music, and so on.

Real Estate

UbitQuity is a blockchain-based platform that aims to change centuries-old real estate transaction and record-keeping methods. It is one of the first platforms that offers a software-as-a-service (SaaS) to help real estate firms organizations achieve transparency, security, and accountability.

When a transaction takes place, information about the property is automatically recorded on a stack, thus saving time on future searches and increasing confidence of the customer and transparency for the whole process. Also, details of the transaction are immutable (permanent), and the buyer and the seller can both refer to the blockchain for details of the transaction at any time.

Identification

Uport is a company that helps to build and maintain trust between people and organizations by providing a decentralized, blockchain-based identity system. Anyone can register and store a globally unique identity onto the Ethereum blockchain, allowing users to take control of their identity, user accounts, and so on.

Also, users can issue and request credentials – including attestations, verifications, certificates, badges, and more. Uport’s platform also lets users digitally authorize transactions, legal documents, and other material using TouchID authentication. Examples of applications of the Uport include attendees’ verification at the third Developer Conference, registering citizens at Zug, Switzerland, and verifying identity and documents at the Brazil Ministry of Planning.

Manufacturing

LO3 Energy is a blockchain platform that allows users to manage their energy consumption by giving them the ability to generate, buy, store, and sell energy at the community level. To do so, they use Smart meter – an electronic device that records energy consumption, API (Application User Interface), blockchain, and Grid. The API and Grid provide a collaborative network with ‘legacy’ grid systems

The blockchain is for recording transactions and lets everyone on the network – buyer, seller, energy provider, etc. verify and have a copy of transactions. This saves a lot of back and forth time that would be spent verifying transaction details across different parties.

Finance

Aeternity is a smart contract interface that enables organizations to work with real-time and real-world data. The platform’s vision is to provide next-generation, unmatched scalability, and transparent governance.

Aeternity allows users to create smart contracts that become active when network consensus agrees that agreement terms have been met. For example, parties to a transaction could agree that the conditions have been met for automated payment. The consensus is achieved via a hybrid of Proof of Work and Proof of Stake consensus mechanisms.

Healthcare

MedRec is a blockchain platform that allows patients’ health history and data to be stored and accessed across different health providers, individuals, and healthcare specialists. On the part of patients, it helps them to have their medical information right at their fingertips. It also saves time that would have been spent cross-checking patients’ histories, allowing healthcare providers to administer timely care to patients. 

MedRec also protects patients’ privacy by not ‘storing’ data directly, but rather encoding metadata (data that give info about other data) through which records can be discreetly accessed by patients, healthcare personnel, and so on.

Supply Chain

Blockverify is a blockchain platform that aims to introduce transparency to supply chains. It’s a “blockchain-based anti-counterfeit solution” with a built-in mechanism for identifying counterfeit products and thus protecting brands.

Blockverify offers a transparent environment where it’s impossible to duplicate products. It will not only detect a counterfeit product already in possession, but it will also identify a product that has been diverted from its original destination and track it down. It can track fraudulent transactions of any type throughout the chain. Also, companies do not need to rely on trust because every step of the system is open for every participant to see.

Cybersecurity

Remme is a cybersecurity blockchain project that aims to protect users’ and companies’ data from cyber attacks. Its goal is to improve from the current standards of security to public key infrastructure (PKI) apps for the modern web.  Its products include a protocol that uses block producers to provide consistency and fault tolerance. They also enable companies to register keys on the Remme blockchain, as well as validate transactions by combining them into blocks.

Remme utilizes a delegated proof of consensus to allow block producers to validate the information that will be appended on the blockchain and ensures nodes are in agreement about the priority of how entries will be added. Its KeyHub product helps to track expired certificate dates, potential vulnerabilities, and any policy violations in the system.

Data Management

Factom is a company that aims to protect businesses, governments, and non-profits from data theft and instill transparency in systems. It provides data-layer technology to preserve and validate digital assets. It uses a Backend as a Service (BaaS) platform that makes it easy to secure data by employing a cryptographically unique fingerprint of the data, enabling clients to audit and share sensitive documents.

By using blockchain, organizations can achieve transparency, integrity, and security of data and also enable them to meet compliance and identity requirements. The Factom software can be used on a plug and play basis, allowing users to use it on the go without having to build an infrastructure from scratch.

Content Distribution

Paperchain is a blockchain solution that enables companies, artists, news organizations, etc. to have a decentralized, peer-to-peer marketplace. In this environment, parties can push their content and get paid for it while circumventing the current industry’s convoluted payment cycles. 

It aims to solve the problem in the current distribution and payment model where content creators can get paid months away from the time content is consumed for the first time. Paperchain takes the data of that content consumption, prices it, and closes the payment gap on the spot, so that content owners can get paid the same day.  

Advertising

NYIAX is a blockchain software solution that allows advertisers to trade advertising contracts via the use of a patented financial matching engine. Advertisers can buy, sell, and rent digital ad space as guaranteed contracts with complete clarity and transparency – thus boosting confidence among all parties.

As advertisers and other players trade advertising inventory, the use of distributed ledger and smart contracts offers an immutable and open record of transactions. Also, blockchain-based smart contracts automate the process, providing better returns on investment by reducing labor costs during the deal lifecycle.

Insurance

AIG, the international insurance company, is using blockchain technology to enable faster, borderless, and collaborative policy creation. The blockchain solution is based on Hyperledger Fabric. Coordinating and placement of insurance policies in multiple countries is a time-consuming and very complex process. This is where blockchain comes in. It helps the company streamline complex multinational processes and facilitate real-time sharing of policy information.

It also instills trust and transparency in the risk evaluation, and analyzing the process, enabling AIG to provide multinational insurance services more efficiently. Overall, the blockchain solution helps AIG achieve a new level of trust, reduce errors, clear backlog, and provide faster and more reliable services to clients.

Governance

Democracy Earth is an ambitious project to solve world issues like forced migration, terrorism, and unequal resource distribution through open-source decision-making software based on blockchain. The software can be used by both large and small institutions – “from the most local involving two people to the most global involving all of us.”

With this open-source, peer-to-peer decision-making network, Democracy Earth hopes political intermediation or political leadership will no longer be necessary. The project is currently building Sovereign, decentralized, and open-source democratic governance that can be used by any organization. The end goal of Democracy Earth is to have liquid democracy, complete ownership of personal data, borderless governance and censorship-resistant voting, debates, and ideas.

Conclusion

Blockchain is here to stay, and it will change how we interact with our environment and even with each other. It has the potential to help us achieve levels of transparency never seen before, make processes quicker, and cut red tape. Industry leaders need to shift their focus and incorporate blockchain in their businesses, which will not just improve how we conduct business but also society itself.

Categories
Cryptocurrencies

Cryptocurrency Exchanges: Don’t open an exchange account before reading this

In the early days of Bitcoin, getting your hands on some crypto meant mining or meeting someone physically and paying cash. However, Bitcoin becoming more popular and other cryptocurrencies coming on the scene meant there had to be a simpler and safer way of getting crypto. The old method of one on one wasn’t going to be sustainable anymore.

Cryptocurrency exchanges provide a safer and simpler way to interact with this asset class. If you’re going to buy, trade, or sell a cryptocurrency, it’s almost guaranteed that you will have to use a crypto exchange.

In this explainer, we’ll discover what a cryptocurrency exchange is, what to know before committing to one, and how a crypto exchange works.

What Are Cryptocurrency Exchanges?

Cryptocurrency exchanges are websites where you can exchange one cryptocurrency for another cryptocurrency or fiat currency. The exchange acts as the intermediary between buyers and sellers of various cryptocurrencies.

Crypto exchanges that let you trade professionally – with access to industry trading tools, will require you to fulfill KYC (Know Your Customer) procedures, i.e., submit your identity credentials in order to register with them. But there are also exchanges that let you make the occasional, simple trade (without requiring sophisticated trading tools) without requiring you to open an account.

How Cryptocurrency Exchanges Work

Cryptocurrency exchanges match buyers with sellers. When a trader places an order, they are authorizing the exchange to trade their coins for the best available price.

To transact on a crypto exchange, you must first open an account with the exchange and go through a verification check to authenticate your identity. Once this process is successful, you need to fund this account before you can buy coins.

To fund your account, you will need to deposit cryptocurrency or fiat currency. Different exchanges accept different payment methods for depositing funds. Most exchanges will accept bank wire, debit/credit cards, money orders, etc. Some exchanges may also accept PayPal or even gift cards. For withdrawals, you can use any of the options provided by the exchange, which may include bank transfer, PayPal, check mailing, credit card transfer, bank wire, etc.

You will then place a ‘buy’ order on the exchange, requesting to buy your preferred cryptocurrency at any amount below the specified maximum price. When you place an order, the exchange will put this in its ‘order book.’ An order book is a list containing all outstanding orders from traders who either want to sell or buy crypto.

The exchange seeks to find matching offers for traders. For example, let’s say you want to sell one BTC at no less than $11,000. The exchange will try matching you with a buyer who’s willing to spend that money for that amount of crypto. If they find one, the sale happens. If no prices match that amount, no transaction takes place.

Makers and Takers

Cryptocurrency exchanges usually designate traders as either makers or takers. Makers and takers are also provided with different trading fee structures. Maker fees are generally lower than taker fees. This is because a maker order is not executed right away, and this contributes to liquidity for the market – which is what any exchange wants. By contrast, a taker ‘consumes’ liquidity’ by placing a market order that immediately gets filled, hence the higher fees.

Types of Crypto Exchanges

There are four types of exchanges and which are explained below.

1. ‘’Traditional’’ Cryptocurrency Exchanges – these exchanges are akin to the traditional stock exchanges. Traders can exchange crypto based on the prevailing market price. These exchanges usually charge a fee for each transaction. Some traditional crypto exchanges allow only crypto to crypto exchanges, while others allow for crypto to fiat exchange. Coinbase Pro is an example of a traditional crypto exchange, as is Kraken.

2. Cryptocurrency Brokers – these are online exchanges that allow traders to buy and sell crypto at a price determined by the broker. The transaction is thus between the buyer and seller and the broker, and not between buyer and seller. If you’re a new crypto trader, this is a favorable option because it’s easy to use, and the broker handles the transaction for you. However, you’ll pay a slightly higher price than the traditional crypto exchange. Coinbase and Shapeshift are examples of this exchange.

3. Direct Trading Platforms – these exchanges offer direct peer-to-peer trading where people across the world can exchange crypto with each other. These platforms do not have a fixed market price; instead, buyers and sellers settle on a price. AirSwap and LocalBitcoins.com are examples of this exchange.

4. Cryptocurrency Funds – these are pools of professionally managed cryptocurrency assets that allow you to purchase and hold crypto via the fund. These funds allow you to invest in crypto without having to store it directly. Cryptocurrency funds are usually for investment purposes only. Grayscale Bitcoin Trust is an example of such a fund.

What Is A Decentralized Cryptocurrency Exchange?

A decentralized cryptocurrency exchange (DEx) is an exchange that operates without any governing authority. That means that the platform is run on a blockchain where traders can buy/sell on a peer-to-peer basis. Since it operates on a blockchain, a DEx does not hold any assets, user info, etc.

A DEx uses smart contracts to generate ‘proxy tokens,’ which are used instead of an asset- and this proxy token is used as the base for trades by users.

What to Look For In an Exchange

Before choosing your ideal crypto exchange, it will help to do a little research. Here are some aspects you should consider:

☑️ Reputation – it’s important to find out what other people say about an exchange. Look at reviews and ask questions on forums like BitcoinTalk, Quora, Reddit, and so on. Also, look at what reviews by reputable industry websites have to say.

☑️ Fees – before signing up for any exchange, be sure to look through the website and understand their deposit, transaction, and withdrawal fees. Different sites have varying fees.

☑️ Payment methods – check the payment options offered by the website. Is it a debit/credit card? Bank wire? PayPal? If an exchange has many options for payment, the better for you. Bear in mind that buying crypto with a credit card requires identity clarification and is slightly expensive because it’s prone to fraud, and it has higher processing fees. Also, buying crypto via bank wire will take longer than other options because it takes time for banks to process.

☑️ Verification requirements – the majority of the big names in crypto exchange will require some proof of identity before you make deposits and withdrawals. Other exchanges might allow you to remain anonymous. Just remember verification might be necessary to protect the exchange against scams – which comes down to protecting you and your holdings as well.

☑️ Geographical restrictions – some exchanges will exclude certain countries from their entire platform, while others will only restrict some services. You want an exchange that offers full access to all user functions and tools that you need in an exchange.

☑️ Exchange rate – exchange rates can differ substantially from one exchange to another. You can save a lot if you do a little homework before settling for any particular exchange. That said, expect rates to fluctuate up to 10% or higher, sometimes.

Conclusion

Cryptocurrency exchanges allow us to interact with crypto securely. Picking the crypto that matches your specific needs can be a daunting process. Remember to look at things such as fees, payment options, country-specific services, and reputation, etc. before settling for an exchange. Bear in mind too that you’re not limited to using only one crypto exchange.

Categories
Cryptocurrencies

How can Blockchain be applied in various industries?

Ever since blockchain got its first prominent use with Bitcoin in 2009, the technology has no signs of slowing down. If anything, it’s poised to change so many facets of our lives. It will protect our business dealings, simplify property registration, save us from hiring intermediaries, protect our identities, and more.

We already see some of the exciting applications of blockchain. The most obvious one is cryptocurrencies – the borderless, censorship-resistant digital currency. Another application is borderless payments, which are already improving lives via timely money remittances.

So, what blockchain applications are on the horizon? We explain the above mentioned in more detail, as well as list more promising applications of this amazing technology. 

Banks

The banking industry could benefit from blockchain in so many ways. Unlike banks that cease operations at night and on weekends, blockchain never sleeps. By integrating blockchain into banking operations, banks can provide way quicker and more convenient services to customers. For example, with the current banking model, if you deposit a check on Friday at 6.pm, you will likely have to wait until Monday to cash it. If blockchain was in play, though, you wouldn’t take more than 10 minutes before that money hits your account.

Banks could also use blockchain to exchange money between institutions faster and more securely. For example, in stock trading, the clearing and settlement process takes up to three days or even longer for international trading. And the more days the money is in transit, the more risks and costs it is exposed to. If banks employed blockchain solutions, it could save them significant costs as well as save customers a lot of banking and insurance fees.

Cryptocurrencies

Fiat currencies are regulated by a central authority, such as a bank or government. Under this system, a user’s money is technically subject to the whims of either the bank or the government. If the bank collapsed, their money is at risk. If they live in a dictatorial jurisdiction, their assets could be frozen at any time if they were so far as deemed to be a threat to such a system. And if a government is unstable, so is citizens’ currency.

On the other hand, blockchain, the technology that underpins cryptocurrencies, is global, decentralized, and under no one’s authority of control. If someone holds cryptocurrency – those funds cannot be seized or frozen by an authoritarian state. Neither will it devalue in the face of political or government instability. Countries with unstable currencies can also use cryptocurrency as a more stable currency.

Healthcare

The healthcare industry can leverage blockchain to maintain and store patients’ medical records securely. For instance, when a medical report is generated, it can be securely recorded in the blockchain – where patients will have confidence that it will not be altered. The health records could also be encrypted and stored on the blockchain, with only specific individuals having the key to the information – thus ensuring privacy.

Blockchain could also solve the problem of patient identifiers, for which there is none that is universally recognized so far. A unique patient identifier would solve the problem of mismatched patient electronic health records, which sometimes leads to errors in patient care and puts patients at risk. 

Blockchain application in healthcare could also facilitate the seamless exchange of information with reduced costs. Also, the nearly instantaneous processing of requests would mean a more secure and efficient exchange of health records between healthcare providers. 

Smart Contracts

Blockchains can enable the coding of smart contracts. Smart contracts are contracts that self-execute when the specified conditions are met. Smart contracts are just like traditional contracts in that they define the agreements, obligations, rules, and penalties applicable to the parties involved. However, whereas traditional contracts will rely on human execution, smart contracts automatically enforce those obligations.

With smart contracts, the need for intermediaries, chaperones, lawyers, or generally third parties is eliminated. This saves time and the administration fees that would have been utilized for that end. There’s also no room for confusion as a contract’s terms are clear for all parties to see. Also, any party can refer to the contract at any time.

Cross Border Payments

The traditional remittance system is not up to par with today’s fast-paced world. It takes days for recipients on the other side of the world to receive money. There are also several intermediaries involved who all get paid a fraction of the total amount, creating an expensive and frustrating experience. Also, it’s prone to human error and open to illegal activities such as money laundering.

The blockchain could solve these problems substantially. It could provide a cheaper, faster, and more secure payment system. It could also instill transparency and hence help stamp out the illegal flow of money.

Governance

Blockchain technology could be used to ensure full transparency in voting, elections, or any other kind of poll taking.

Utilizing blockchain solutions for voting processes carries the potential to eliminate fraud as votes are recorded on a public blockchain, making them impossible to alter in any way. Also, votes are publicly available for everyone and election candidates to see – eliminating possible litigation scenarios and allowing countries to move forward after the election season.

Also, the automated process means fewer elections personnel will be needed, thus saving resources. It would also mean people can conveniently vote from anywhere, thus bolstering election turnout. 

Supply Chain Auditing

Today’s customer wants to know if companies do indeed mean what they say when they make ethical claims about products. Blockchain could easily provide us with proof about the backstories that come attached to the things we buy – from food to medicine to clothing to minerals and more.

With an immutable, public, and time-stamped record-keeping, we could begin to see more accountability and transparency in supply chains. For example, it would be easy to see the supply path of ‘ethical’ diamonds and confirm if they are, after all, ethical.

This also applies to food supply chains. Nowhere is the supply chain more contentious than in food. Blockchain would show us the origin of food from farm to table so that customers can confirm, for instance, if eggs are organic as claimed by the supplier. This would help bolster customer confidence and help stamp out food fraud.

Internet of Things (IoT)

Internet of things is a network of physical devices embedded with actuators, sensors, internet connectivity, etc. All these features are supposed to enable such objects to collect, exchange, and act on data, which then leads to improved system efficiency.

Blockchain-based IoT devices are already around us. For example, we have the Ethereum BlockCharge, which is used to charge electric vehicles as well as CryptoSeal, a tamper-proof seal for ensuring drug safety.

Blockchain will play a major role in IoT. It will help provide security and protect against hackers. Also, its protection against data tampering will prevent rogue actors or devices from disrupting a home, a factory, or a transportation system.

Identity Management

Today, there’s a growing need for better identity management. The ability to verify your identity is a prerequisite to accessing online financial services. But how can we be sure that personal data is safe from online security risks? Current remedies for this problem are faulty at best. Blockchain technology can provide a method to prove who you are, while also granting us the possibility to digitize personal documents.

Developing universally agreeable digital identity standards is a challenging process. Apart from the obvious technical challenges, such a solution requires cooperation between governments and the private sector. Factor in, too, the need to navigate the legal labyrinths of different countries. The decentralization, security, and borderlessness of blockchain would provide solutions to these problems and pave the way for the creation of a digital identity standard.

Property Registration

Registering property has got to be one process that many would agree is burdensome and time-consuming. Between having to go to the local county’s office and having the property manually entered into the central database, it can prove an arduous task. And in the case of a property dispute, claims of ownership must be checked against the database.

This process is not just susceptible to fraud; it’s also costly and prone to human error. Even the tiniest mistake could make tracking property ownership inefficient. Blockchain-based property registration could eliminate the need to scan documents and having to physically track down physical files. Storing ownership information on the blockchain could instill more confidence in owners that their property deed is accurate and unalterable.

These are just some of the current and promising applications of blockchain. Blockchain has tremendous potential to change how we do a lot of things – whether it’s business, personal data handling, how we send money, and so on. One thing that’s clear, though, is that with blockchain, everyone is held to the highest degree of transparency and accountability. This is one of the pillars of this technology – and one that could help us construct fairer practices and hence, societies.

Categories
Crypto Daily Topic

Are Bots Manipulating the Crypto Market?

Cryptocurrency nowadays is a far cry from the time it was introduced to the world. With nearly 3,000 cryptocurrencies and more investors moving in to cash on this digital asset, cryptocurrencies are more popular than ever.

As a result, crypto traders are continually looking for ways that can help them execute trades quicker and more efficiently – especially considering the unpredictable nature of cryptocurrencies. Bots have been one of the answers to this, and while they may be handy for some traders, they also manipulate the market and can prove annoying for human traders.

In this article, we will be exploring what exactly bots are, how they manipulate the crypto market, and how you can respond to them as a trader. 

What is A Bot?

A crypto trading bot is a software program that’s designed to analyze market trends and execute trades automatically. They are essentially robots that replicate what human traders would do in various market conditions.

One of the reasons bots have really caught on in crypto markets is the well-known volatility and unpredictability of cryptocurrencies. For instance, a trader could go to sleep with their holdings in a favorable trading position only to wake up and find they have plummeted significantly – all in a matter of hours.

Unlike humans who sleep, bots don’t. Crypto trading bots work around the clock to maintain full control of a trader’s holdings position. What’s more, a bot can process information and make trades much faster and more efficiently than any human ever could.

Bots have gradually become a strong presence in financial markets. They are especially popular with high-frequency traders because they can detect and take advantage of tiny pricing discrepancies.

As cryptocurrencies have become popular, so have cryptocurrency trading bots. Today there are many types of trading bots – some being free and open-source and others available for a subscription fee from specialized companies.

Types of Bots

There are various types of cryptocurrency trading bots. Arbitrage bots are one of the most popular. These bots analyze crypto prices across various exchanges and execute trades taking advantage of the price differences.  Arbitrage bots also take advantage of how slow some exchanges might be in updating the price of specific cryptos, for example, Bitcoin.

Other types of bots test out potential trading strategies by utilizing historical market data. Still, others have been programmed to make trades in response to changes in prices or trading volume.

How Do Crypto Trading Bots Work?

Bots use application program interfaces (APIs) to process the relevant information in an efficient manner. Then, with the data that has been processed, these bots will generate both buy and sell orders for the trader based on how they have interpreted the data.

Such data will include information such as market volume, price movements, current orders, etc. Bots are customizable, and as such, a trader can configure them to analyze even more complex data. Crypto trading bots work in several ways – some through browser plugins, OS clients, trading servers, and others infused in cryptocurrency exchange software.

The Uncanny Relationship between Bots and Crypto Markets

The crypto market seems to be the perfect environment for bots to grow and expand their influence. Unlike traditional markets that close in the evening and on weekends, the crypto market is open for trading 24/7 – and nowhere could automated trading be optimal.

Also, the number of crypto exchanges has exploded in recent years, providing excellent opportunities for arbitrage trading. It can be difficult and extremely time-consuming, keeping up with all the exchanges to exploit these opportunities. As such, many traders employ bots.

Bots can make crypto markets more liquid and efficient – thanks to their rapid and voluminous execution. But this can also make the markets more volatile.

Bots are influencing a large percentage of crypto exchange trading volumes. Bots’ activity can manipulate the markets by inducing traders to buy at a higher price or sell lower than originally planned – which is very often the case with limit orders.

They can also influence market orders by presenting bot orders of negligible quantities close to the market price before the first real order of any significant volume is observed. These are the bots tricking you into placing market orders that will be filled instantly – but most of which will be filled against the order at a worse price.

Bots can also be an annoyance when you’re placing a bid, and it gets outmatched instantly – and especially if you’re placing an initial order based on what you thought to be a market ‘mispricing.’

How to Deal With Bots

So, how do you deal with bots? Some traders would try to outdo the bots by placing buy orders that are slightly higher than the bot’s bid price, or placing a sell order at a slightly lower price. Although this strategy may work for a one-off trade, it may not be sustainable in the long run –especially if you’re a high-frequency trader. Such little annoyances will eventually amount to considerable losses in the long term.

As such, it’s better to submit the bid price you had originally intended. If the market is volatile, then your order will still be filled, although it will take a bit longer.

Alternatively, you could take time and observe the behavior of the order book. Often, bot orders show up and then quickly disappear, or move around the book if there’s a constant adjustment of prices. By doing this, you could understand the intention of the bots and gain a more accurate perspective of how and when to place your order.

You could also get yourself a bot. While they can be frustrating for the average trader, bots can be a useful aid, especially for those who can’t afford to stay glued to the screen all the time. Also, they can process information and make trading decisions faster. After all, they don’t seem to be going anywhere, and they only become sophisticated with time.

Conclusion

Now that you know what bots are and how they can manipulate the market, you’ll be able to identify certain market movements that seemingly come from nowhere and respond to them accordingly. You can even buy yourself a bot and take advantage of their 24/7 trading ability, their efficiency, speed, and so on. Whatever you do, being aware of bots’ existence and their influence will help you make more informed and better trading decisions.

Categories
Cryptocurrencies

How Exactly Does Blockchain Work?

Anyone who’s heard of cryptocurrency has most probably heard of blockchain. If you ask most people, they’ll tell you blockchain is cool. But they probably won’t tell you much beyond that. That’s because not everyone understands how blockchain works.

Not that it’s a hopelessly complicated concept. On the contrary. It’s just a groundbreaking technology with many firsts that might take some getting used to. In this article, we break down what’s blockchain, its history, how it works, and the properties that make it so revolutionary.

What is Blockchain?

The concept of blockchain is credited to computer scientist Stuart Haber and physicist W.Scott Stornetta. In a 1991 white paper, the two wrote a white paper that proposed the idea of time stamping and using private key signatures (based on cryptography) on submitted data.

This idea inspired the work of many other computer scientists and cryptography enthusiasts – leading to the creation of the first blockchain application – Bitcoin.  

‘Blockchain’ can be defined in several ways. Some people may understand it as a literal chain of blocks – though not in the real sense of those words. Others would understand it as a decentralized digital diary or ledger. (Decentralized means everyone can have access, and no single authority makes the rules.)

Both are correct. In this context, ‘block’ is essentially transaction data stored on a ‘chain,’ which is the public database. Every block in the blockchain contains several digital pieces of information, which we’ll detail below:

☑️ Information about transactions including date, time, and the amount of cryptocurrency in the transaction

☑️ Information about the participants of transactions, i.e., a digital signature (not their real name)

☑️ Distinct information that distinguishes it from other blocks, known as a ‘hash.’ (a hash is a string of letters and numbers generated by a ‘hash function.’ A hash function is a mathematical function that converts random letters and letters into an encrypted text of fixed length.)

A single block on the blockchain can only store up to 1MB of data. Depending on the size of transactions, a block can hold a few thousand transactions.

How Blockchain Works

When a block is validated (that is, the transactions in a block are verified), it is recorded on the blockchain. But for a block to be added on the blockchain, four things must happen: 

A transaction must take place.  

That transaction must be verified. After you pay for goods in a store with crypto or you send cryptocurrency to your loved one, that transaction must be confirmed as accurate and legitimate. Unlike with other public records of information like Wikipedia or your local library where there’s someone in charge of verifying new data entries, the blockchain relies on a network of computers for that task.

Verifying means checking if the transaction is as you said it was, in regards to the details of the purchase, time, amount, and participants. 

The transaction must be stored in a block. After a transaction has been confirmed as legitimate, it gets the approval to join a block where there are many others like it.

The block is given a unique identifier called a hash. Once all transactions of a block have been verified, it’s given a distinctive code that will differentiate it from all other blocks on the blockchain. Then, that block is added to the blockchain. 

When a block is added to the blockchain – it becomes a public matter of record available for anyone to see. A quick look at Bitcoin’s blockchain, for instance, will show you traction data along with the info about when (“Time”), where (“Height”) who (“Miner”) added the block to the blockchain. 

The blockchain network is maintained by network participants. These participants are also called nodes and is composed of a myriad of interconnected computers spread across the globe. Every node has a copy of the blockchain, and all participants are equal in authority. 

Therefore, blockchain transactions take place within a global, peer-to-peer network. Its peer-to-peer characteristic makes it decentralized, borderless, and censorship-resistant. (Censorship resistant means anyone can interact with the blockchain on the same terms as anyone else, and no one person can singly modify the content on the blockchain.)

A central part of many blockchains – including Bitcoin, is mining, which relies on computers to run a series of hashing algorithms to “mine” or process the most recent block. Each blockchain uses a different type of hashing algorithm. For example, Bitcoin uses the SHA-256 algorithm. ‘SHA’ stands for Secure Hash Algorithm. The SHA-256 takes an input of alphanumeric characters of any length and converts it to an output of 64 characters (256 bits). 

Once a block is mined, the miner broadcasts it to all miners (nodes) in the network. They then confirm its validity before adding to it to their copy of the blockchain. They will also include the hash from the previous block onto the new block – hence the name blockchain. 

The model of producing new blocks by running a series of hashing algorithms is called Proof of Work (PoW). PoW is the model used by Bitcoin, the first application of blockchain and the world’s first cryptocurrency. PoW, however, uses extremely high computing power and hence, electricity – leading to the development of other models meant to improve on it – for example, Proof of Stake (PoS). 

The Principles of Blockchain

Blockchain has three main inherent characteristics that have made it such a revolutionary technology. These characteristics are as follows:

  • Decentralization
  • Transparency
  • Immutability 

Decentralization 

On a blockchain, each participant in the network has access to the whole blockchain. No one participant has control over or regulates its information. Also, every participant can validate the records on the chain.

You can also transact directly with other users on the blockchain – send money, receive money, etc. without an intermediary.

In the same way, the blockchain is also architecturally decentralized such that there’s no one single or even several points of failure. For an attacker to gain control of the blockchain, they would have to gain control of more than half (at least 51%) of the network – which is almost impossible.

Transparency

Blockchain technology came with an unprecedented level of transparency. If speaking from a cryptocurrency viewpoint, for example, all transactions are recorded on the blockchain and identified by the owner’s public address. In cryptocurrency, this is what is referred to as pseudonymity, i.e., while their public address is open information, their real identity is not disclosed.

In real-world blockchain applications, for instance, the supply chain, every single step of the process is available for all to see. This introduces transparency never before seen in the world.

Immutability

In the context of blockchain, immutability means that once something has been recorded on the blockchain, it cannot be changed or altered.

Blockchain achieves this via a cryptographic hash function – which is taking an alphanumeric input of any length and giving it an output of a fixed length.

The immutability of blockchains means it can be applied to many situations to encourage accountability when people know that they can’t manipulate information or accounts.   

Conclusion

The technology behind cryptocurrencies is interesting and revolutionary. It’s decentralized, transparent, and immutable nature is what makes it so unique. It’s what has made Bitcoin a household name and pushed cryptocurrencies to the fore. The next time you’re talking about blockchain, hopefully, you’ll be doing so with much more confidence.

Categories
Crypto Daily Topic

Top Tips to Secure Your Bitcoin against Theft

Bitcoin inspires all sorts of motivations – from noble ones to less noble ones. It’s an asset class that’s targeted by scammers at an incredibly high rate. Each year, individuals and crypto exchanges lose millions of dollars to such theft.

But that doesn’t mean Bitcoin or other cryptocurrencies are a security nightmare. It all really depends on how careful you are – and the measures you take to secure your Bitcoin assets. Let’s look at some easy steps you can take to protect your holdings.

Use Long and Complex Passwords

The keywords here are ‘long’ and ‘complicated.’ Even if your password is complicated enough, it’s still an easier hack than a long and complex one. For instance, a hacker would more quickly guess “pas$w0rd” than they would “Hell0Thi$isMyPas$Word”. Also, a single uppercase letter is not enough to cushion you against hacking. At the very least, make sure your wallet and account passwords meet these criteria:

  • Have lowercase letters and uppercase letters, numbers, and symbols
  • Have at least 40 characters or more.
  • Is not in obvious sequences, for example, 12345 or abcdef
  • Is not a common word or obvious character replacements
  • Is not in repeated letters/numbers or keyboard patterns like “444”, “ttt” or “cvbnm”

Now, the longer and stronger password is, the harder it is to remember. There are a few resources you can use to prevent this from happening, including a password management software or secure offline storage, like an encrypted USB drive.  Also, remember never to use the same password for more than one account. A single security breach could result in a hacker getting access to all your funds.

Enable a 2-Factor Authentication (2FA) On All Your Crypto Accounts

With a 2FA, you’re required to use two authentication factors to verify your identity. One identifier is your password, and the other could be a phone call, a biometric factor, etc. That said, you need to watch out for 2FA’s that are still vulnerable – e.g., phone calls or text messages. Hackers have devised a new trick of calling up phone companies and successfully impersonating customers, which makes a phone call or text message 2FA insecure. Instead, you could enable a 2FA via:

An authenticator app, like Google authenticator –which automatically generates 2FA codes for your account every 30 seconds, and is entirely free,

or:

A universal second factor (U2F), which is like an encrypted USB that you can insert into your device as a form of 2FA. Some trusted U2F’s include FIDO and YubiKey.

Enable IP and Wallet Whitelisting

Whitelisting is a security feature that allows you to create a list of trusted IP addresses that can interact with your funds.  Ensure your crypto exchange has these security settings:

  • IP whitelisting – which allows only authorized users to use your IP address to authorize trades, sending of crypto, or paying for things through your exchange account.
  • Wallet whitelisting – in which you share with the exchange your wallet’s public key. After that, only you will be able to withdraw funds from the exchange to your private wallet.

It’s worth noting that not all exchanges have enabled whitelisting options, so make sure to ascertain that before you sign up for any wallet.

Use a Reliable VPN on Public WiFi

Public WiFi connections in restaurants, hotels, airports, etc. are an easy target for hackers.

If you must access your crypto account on a public network, it’s highly advisable to use a reputable Virtual Private Network (VPN) such as ExpressVPN, NordVPN, Tunnel Bear, or VyprVPN. This precaution will prevent your account login information, i.e., passwords, private key, and recovery phrases from being intercepted. A VPN is an extra layer of encryption that will also conceal your identity, location, and IP address.

Separate Your Trading Funds from Your Savings

If you’re a regular trader, separate your trading funds from the rest of your funds. Keep the rest of your funds in a cold storage, e.g., a hardware wallet or a paper wallet.

This precaution is essential because storing all your funds on your exchange renders them vulnerable to hacking, phishing attacks, etc. There are many stories of hackers successfully getting away with lump sums of crypto from crypto exchanges – so be careful.

Back-Up Your Backup

Backing up your back-up means having a second line of defense in case you forget your account or wallet details.

You can do this by first encrypting a flash drive and then adding a text file of information on all your passwords, private keys, and seed phrases. To encrypt a flash drive, simply right click on the drive in your “My Computer” window and select “encrypt,” follow the instructions, and set up a password.

The second step is storing the flash drives in separate and safe places, like a safe deposit box. For an added layer of security, you could even split your private key into two flash drives, i.e., one half in one drive and the other in a second drive. That way, even if someone manages to get hold of one flash drive, they can’t access your crypto. Make sure you don’t forget the passwords, however.

Encrypt a “Digital Will”

Treat your crypto holdings like any other asset – you need to ensure they go to your beneficiaries when you’re gone. But, leaving a will for your crypto assets for your loved ones requires a bit more planning than that for traditional assets. So how do you go about it? While you will eventually have to talk to an estate planning lawyer, you can get started with the following steps:

  • Ensure your beneficiary knows the location of at least one of your encrypted flash drives.
  • Ensure they have the password to decrypt it
  • Include in the flash drive a “digital will” – a file that lets them know how exactly to access your Bitcoin.

Some people may find it challenging to understand how to handle cryptocurrency. To make it easier for your inheritor(s), try writing down the instructions in a manner that a crypto novice would understand. Let details include how to access your wallet, exchanging of cryptos to traditional currency, etc.

Don’t Brag About Your Holdings

Finally, when it comes to cryptocurrency, discretion is key. You’re much safer that way. There are a lot of people who have been targeted in extortion to ransom attacks. Often, these people were known traders, investors, or just people who couldn’t keep quiet about their hoard.

One common ploy is for extortionists to offer to buy crypto at a price way higher than the market price, and suggest a face to face meeting. Once the person arrives, they ambush them and strong-arm them into transferring the funds without payment.

It’s better to remain tight-lipped about your crypto holdings. And just to be extra safe, consider splitting your cryptos into more than one wallet to mitigate the risks of any such occasion.

Just like you would take steps to protect your other valuables – you should (and even more so) take steps to protect your cryptocurrency. Securing your crypto shouldn’t be a daunting task. Follow this guide and get started on safer interaction with your cryptocurrency today. Also, remember to do more grounded research on best practices to secure your crypto – and you’ll be good to go.

Categories
Cryptocurrencies

What Are The Real-Life Applications Of Cryptos?

The word Bitcoin first came to light a decade ago when Satoshi Nakamoto mailed cryptography nerds a technical white paper of what he called the new electronic cash system.” A decade later, it has become a household name, a pioneer in what seems like the next technology-inspired global revolution. The cryptocurrency itself and its anchor blockchain technology are now household names. But questions still abound about what Bitcoin really is and its real-life applications.

Chances are you are either familiar with the term Bitcoin or have interacted with this crypto technology at one point. You probably heard the interesting but cautionary tale about a cryptography nerd that paid for two Pizzas with 10,000 BTC just about the time the digital currency was gaining momentum.

Today, one Bitcoin is valued over $7,500, and at one time, it hit the highs of $20,000. The once worthless digital coin has now become a major topic in the global finance arena. Central bank heads and governments are rushing to tame the coin that they consider a threat to the government-controlled currencies. Some like China have banned Bitcoin use within its borders.

Note that while these political and policy challenges have contributed significantly to Bitcoin price volatilities, they have done little to negate its penetration into the global economy. And in this guide, we will be looking at some of the real-life applications of the Bitcoin digital currency. Here are a few:

Purchasing food and property:

You, too, can use bitcoin to pay for Pizza. Unlike in 2010, however, you don’t need 10,000 BTC to pay for it. The massive Bitcoin popularity has seen several fast food companies innovate their payment systems to include Bitcoin. The move has also seen the birth and adoption of the Pizzaforcoin technology that processes Bitcoin and 50 other cryptocurrency payments in the fast foods industry.

The bitcoin revolution has spread way beyond the fast-food industry and into the global eCommerce industry. Here, the ever-increasing number of online shops like Overstock and Microsoft will ship different products and process your Bitcoin payment option. Propy.com – an international real estate company – has started accepting Bitcoin payments whileMyCOINreality.com is also advertising homes that you can purchase using Bitcoins.

Inventive middlemen like Gyft are also making it possible for you to buy from popular eCommerce stores like Amazon and Target that don’t accept Bitcoin payments via the digital currency – albeit indirectly. To achieve this, Gyft helps you convert your bitcoins to gift cards that you can use to shop.

Paying for social and professional services

People around the world are also using bitcoin to pay for social/ entertainment and professional services. One of the online industries most impacted by bitcoin payments is the sports betting and casino industry that has grown tenfold since the launch of bitcoin. The primary driver of the explosive growth witnessed here is the fact that most of these bitcoin processing companies support anonymous betting, deposits, and withdrawals.

Traditional online casinos were highly regulated, taxed, and limited to the nationality of members that they can accept in their casino. Bitcoin casinos don’t report your winnings to the tax authorities, aren’t bound to a specific jurisdiction, and will process registration for individuals from virtually any part of the world.

Interestingly, you can also use Bitcoins to settle payments for different professional services. Lucerne University – a vocational art and science institute – in Sweden was among the first to process bitcoin payments for tuition. Ever since King’s College in New York, Cumbria University in the UK, and the European School of Management and Technology in Berlin have since started accepting Bitcoins. Law firms, hospitals, and accountancy firms have also joined the bandwagon.

Salary payment:

Japan has, on several occasions, and different global platforms been hailed for having the most progressive cryptocurrency laws. Here, bitcoin and a handful of other cryptocurrencies are accepted as a legal property that can be used in place of fiat currencies in monetary transactions throughout the country.

New Zealand would, however, make history as the first country to okay the payment of salaries, goods, and services and adequately regulate the bitcoin taxation process. Here, companies get to pay their employee salaries and goods and services via bitcoin while obeying the different tax laws like the Pay As You Earn (P.A.Y.E) deductions and other withholding taxes.

Alternative to inflation-stricken global currencies:

In Bitcoin, Satoshi Nakamoto saw the solution to all the inherent limitations of the fiat currencies, chief among them inflation. The inflation menace in almost every instance caused by having too much money in circulation, which effectively translates to a loss of the currency’s value. To arrest this and make Bitcoin inflation-proof, Satoshi limited the number of Bitcoins that will ever be created to 21 million coins.

All over the world, failed and failing nations like Zimbabwe and Venezuela have been witnessing cases of hyperinflation that make their currencies worthless. At the peak of inflation in Zimbabwe, for instance, saw the country’s inflation hit over 200 million percent. In Venezuela, inflation towers way above 10 million percent, and nothing seems to work – not even the devaluation of their Bolívar currency. The situation in the country is so dire that residents are using the bolivar notes to makes bags for sale in and outside the country.

In both of these countries, the tech-savvy and much of the elite class have already turned to bitcoin and other cryptocurrencies as a means of preserving their cash. While the rest of the country turns to the US Dollar and currencies of neighboring countries, this elite class has turned to bitcoin transactions. In Harare, Zimbabwe, for instance, there has been installed several cryptocurrency ATMs for Bitcoin and Litecoin aimed at providing the citizenry with highly reliable and trustworthy financial exchanges.

Sending cash home:

There is a staggering number of expatriates working all over the world. And they all have one common problem – finding a secure, efficient, and cost-effective means of sending cash home. Most avoid banks primarily because of their exorbitant fees, and also due to the heat, most of the institutions turn their way in the form of scrutiny by the host country governments. But they also don’t want to risk their cash by trusting these rather unconventional, unreliable, and equally pricey online payment methods.

Most of these individuals have, therefore, turned to bitcoins. The only time most of these will have to interact with their host country’s financial institutions is when converting their cash to bitcoins. Sending cash home in the form of bitcoins has gained track in recent years because the transfers are free. International bitcoin transfers are also safer and instantaneous, unlike bank transfers that often take as much as five days before the cash reflects on the home country’s bank accounts.

Trade and digital asset investments:

The global perception of Bitcoin and blockchain technology has tremendously improved, as evidenced by favorable bitcoin policies in most economies. However, most of these countries are yet to acknowledge the digital currency as a legal tender. Crypto operations have thus been left on the fringes of unregulated online trade. It, therefore, would be right to say that crypto trade on exchanges accounts for the largest form of crypto application in real life. In most cases, the traders on these platforms seek to exploit the highly volatile nature of digital currencies by profiting from their regular price fluctuations.

When Bitcoin first premiered in these crypto exchanges, it was valued at no more than a few cents. The forces of demand and supply would, however, see it skyrocket and hit $20,000 at its peak in early 2018. Today, one BTC is valued at over $7,500. Either of these figures and valuations represent thousands of percentage value growth in a short ten years.

Investment analysts have gone on to label it the best performing investment product, overtaking the traditionally hailed real estate and money markets. There also is a general feeling that all factors held constant; Bitcoin’s value will continue to soar. This has the in effect, created the next most popular form of real-life application of this coin – Bitcoin investments.

Unlike bitcoin trade, where traders buy the coin with the intent of selling it as soon it reports a small percentage jump in price, investment refers to a long term buy and hold strategy. Bitcoin investors will, in this case, buy and hold on the coin for the longest time with the intention of drawing maximal profits from its long term and consistent value growth.

Pay for travel and accommodation:

Apparently, you can book for your local or international air flight or accommodation and pay with Bitcoins. Travel companies like Cheapair.com make it possible for you to purchase air tickets and make accommodation bookings that you pay with Bitcoins. They will also connect you with cruises, tour guides, and even international cruises that accept bitcoin payments.

Donate to charity:

If you are passionate about charity and would like to donate to charitable courses, you don’t necessarily need to go through the troubles of converting your bitcoins to fiat currencies. The world isn’t short of not-for-profit organizations that accept bitcoin and other crypto donations. The most popular today, include The Water Project that builds clean water solutions in Sub Saharan Africa using pooled funds, Common Collections that donates pooled Bitcoins to refugees and underprivileged global communities, and even Julian Assange’s WikiLeaks that advocates for more transparency from governments and corporations by leaking what they consider classified information.

Buying and selling art

For the longest time, the art industry was dominated by the super-rich, who used art as a store of value. The landscape is, however, changing and transforming into a more welcoming niche where virtually anyone can buy and sell art. But did you know that you can now initiate art transactions using Bitcoin? Companies like Bitpremier.com have already created an online platform that connects art sellers and buyers willing to transact using Bitcoin.

Paying for VPN or domain name:

Different internet companies are also alive to the use of Bitcoin and, therefore, accept bitcoin payments for various services. NameCheap, a domain registration company, will, for instance, let you buy and renew the domain name for your blog or website via bitcoins. And if you are trying to avoid trackers and keep your online activities private, Express VPN lets you subscribe for their premium services with bitcoins.

Pay for monthly bills:

Your post payphone service provider is also keen on digitizing their payment systems. AT&T, for instance, started accepting Bitcoins as a payment method for users seeking to settle their phone bills.

Conclusion

A decade ago, Bitcoin was no more than an idea on a technical white paper that only cryptography nerds could decipher. And when the online community started appreciating its monetary value, 10,000 BTC could only buy two Pizza. Ten years later, it has become the center of attention for financial institutions, governments, and central bank heads that consider it a threat to the traditional banking and financial systems. Countries like China have banned its use within its borders, while others like the United States have resorted to suppressing its influence in the country. However, none of these strategies has stood in the way of bitcoin morphing into a globally accepted digital currency.

Categories
Crypto Daily Topic Cryptocurrencies

Hyperledger Fabric – A blockchain based enterprise solution

Blockchain is the future. Yes, the technology powering cryptocurrencies has incredible potential to change how institutions and industries work – and our very lives. When you’re talking about radical transparency in supply chains, no more annoying red tapes, and contracts without a horde of lawyers – you’re talking about blockchain technology.

These are just examples of what blockchain is capable of. It’s a revolutionary technology that could be used for good. And no entity or organization recognizes this more than Hyperledger – a global coalition of forward-thinking organizations whose aim is to advance blockchain.

It’s one of the most exciting organizations in the blockchain sphere – and whose work is incredibly important. But what is Hyperledger? Let’s dissect everything about it – from members to its architecture to its exciting projects, to companies that are already utilizing its platform. 

What is Hyperledger?

Hyperledger is an umbrella network of institutions that seeks to support the collaborative development and improvement of distributed ledger systems so that they can support global business transactions.  The project was founded by the Linux Foundation in 2015, with the founding members announced in February 2016. Hyperledger calls its design ‘’The Greenhouse for Enterprise Blockchains” – as it aims to incubate and develop practical blockchain-based solutions and applications to today’s challenges

The project is backed by a global alliance that includes over 200 leading organizations from the blockchain technology, finance, technology, software, academia, system integration, manufacturing, Internet of Things (IoT) and more fields. They include big names such as Accenture, Airbus, American Express, Cisco, Consenys, SAP, Huawei, Samsung, Microsoft, Oracle, Ripple, YaLE, UCL, University of Cambridge, and more.

The Hyperledger Architecture

Hyperledger’s architecture utilizes the following business components:

☑️ Consensus layer – which deals with creating agreement on the priority of transactions, as well as the accuracy of transactions contained in a block

☑️ Smart contract layer- which takes care of processing transaction requests and authorizing valid transactions

☑️ Communication layer – which deals with peer-to-peer communications

☑️ Identity management service – the function that maintains and validates the identity of users and maintaining trust on blockchain

☑️ API (Application Programming Interface) – a software that facilitates external applications and users’ interaction with the blockchain.  

What Hyperledger Is Not

When talking about Hyperledger, it’s important to get it right about what it’s not. Hyperledger is not a company, a cryptocurrency, or a blockchain. Hyperledger is something of an open hub for pushing enterprise blockchain development. The platform does not endorse any cryptocurrency. Its focus is on blockchain technology and how to harness it for the good of the world.

Its website tells us: “Not since has the web itself has a technology that promised broader and more fundamental revolution than blockchain technology. Blockchain can be used to build a new generation of transactional applications that establishes trust, accountability, and transparency at their core, while streamlining business processes.”

Hyperledger wants to ensure that blockchain thrives, stating, “Only an open-source, collaborative software development approach can ensure the transparency, longevity, interoperability, and support required to bring blockchain technologies forward to mainstream adoption.”

In short, the project is about bringing minds and brains together to further the blockchain idea. It’s not about commercial incentives or a get-rich scheme. That’s why Hyperledger has no plans for developing a cryptocurrency. Executive Director Brian Behlendorf made this clear from the start, saying, “You’ll never see a Hyperledger coin. By not pushing a currency, we avoid so many of the political challenges of having to maintain a globally consistent currency.” (source: https://www.bitcoininsider.org/article/43420/wtf-hyperledger)

Hyperledger Projects

The Hyperledger ‘greenhouse’ incubates and promotes a range of industrial blockchain technologies, frameworks, tools, interfaces, and applications. As of November 2019, Hyperledger projects are as follows:

Hyperledger Aries

This is the youngest project by Hyperledger. Its goal is to advance the use-case of blockchain to provide identity solutions. It does this by providing an open-source, interoperable tool kit for creating, transmitting, and storing genuine identities. It relies on another Hyperledger project – project Ursa, for cryptographic support to achieve security and safety for identity credentials.

Hyperledger Avalon

Avalon is the project’s implementation of the Trusted Compute Specifications published by the Ethereum Enterprise Alliance. Avalon is intended to provide safe and trusted off-chain computing resources to improve the scalability of public blockchains, all without compromising on the privacy accorded by these blockchains. 

Hyperledger Besu

This is the first public blockchain project to join the Hyperledger fold. It was formerly known as Pantheon, a project by the blockchain company ConsenSys. Besu is an Ethereum client (software that executes Ethereum’s protocol) that allows users to create decentralized application (DApps), smart contracts, and mine ether. The project is keen to separate concerns between consensus algorithms and other blockchain features.

Hyperledger Burrow

Burrow is a permissioned Ethereum smart contract machine that handles transactions and executes smart contracts on the Ethereum Virtual Machine.

Hyperledger Caliper

Caliper is a framework meant to measure the performance of multiple blockchain solutions. It contains several performance indicators such as Transactions per Second, transaction latency, resource consumption (CPU, memory, etc.), and so on. The resource is meant to be used by various Hyperledger projects as they roll out frameworks.

Hyperledger Cello

This is a tool designed to be the operational dashboard for Blockchain – to minimize the effort applied while creating, managing, and using blockchains. It can be used as a reference tool by blockchain developers.

Hyperledger Explorer

This a dashboard utility module that lets users create various user-friendly applications on which others can view, monitor, search, organize, or query various artifacts and developments in blockchain. It includes details such as name, chain codes, details of blocks, transaction data, and other relevant information on the blockchain network.

Hyperledger Fabric

Hyperledger fabric is a framework that acts as a foundation for creating blockchain-based products, solutions, and applications. Its components, such as membership and consensus, can be used on a plug and play basis. It fills the privacy and confidentiality gap that makes traditional blockchains less than ideal for enterprise-level blockchain solutions.

Hyperledger Grid

This a set of tools that allows developers to select the most optimizable components for developing supply chain blockchain-based solutions.

Hyperledger Indy

This is a distributed ledger that provides tools, libraries, and components for decentralized identities to address issues of identity management. Indy can be used solely but is interoperable with other blockchains.

Hyperledger Iroha

Iroha is a distributed ledger software that infrastructural and IoT projects can easily incorporate into their systems. It features simple construction, a crash tolerant consensus algorithm, and other characteristics that make it easy to integrate into such systems.

Hyperledger Quilt

This is a Java version of the Interledger protocol that allows payments across any payment network, whether with fiat or crypto. It has an implementation of all core functions required to send or receive payments. 

Hyperledger Sawtooth

The Sawtooth project aims to keep ledgers truly distributed and make smart contracts more secure. It is designed for use across many fields, including IoT and finance. Its dominant characteristics include being both permissioned and permissionless and using the Proof of Elapsed Time (PoET) consensus algorithm.

Hyperledger Transact

Hyperledger Transact is a library that provides a standard interface for writing distributed ledger software – in order to simplify the task for developers.

Hyperledger Ursa

Ursa is a shared cryptographic library that seeks to assist developers not to duplicate cryptographic work and hopefully increase security for future developer applications.

Real-Life Applications of Hyperledger

Hyperledger is already in application across industries – from food to diamonds to healthcare. Companies are using the platform to achieve more transparency, eliminate fraud and streamline processes. Here are examples of such companies:

Everledger is a company that uses a blockchain solution based on the Hyperledger platform to inject more transparency in the diamond supply chain – and thus help prevent fraud and illicit trading. The diamond community shares concerns over stone’s origins and authenticity – and this is where Everledger comes in. It traces the journey of every stone from mining to the consumer so that customers are assured of the integrity of their diamonds.

DigiPharm is a company that aims to promote fair pricing in the healthcare sector. It has built its platform on the Hyperledger Fabric protocol to enable seamless implementation of fair pricing agreements, lower costs, and help remove long-standing barriers that prevent patients from accessing quality healthcare. 

HealthVerity is a platform that creates, aggregates, and exchanges healthcare and consumer data.  It has integrated the Hyperledger Fabric protocol to better manage consumer and patient preferences in a way that best complies with changing privacy requirements.

E-Food is a food traceability program based on the Hyperledger platform that traces all quality and logistics activities on the supply chain. It enables a ‘food to farm’ approach to making food supply and production more transparent – enhancing customer trust and preventing food fraud. 

Conclusion 

Hyperledger has taken a rare and noble path – one for advancing the blockchain idea without monetary incentives. Its projects already demonstrate the ability to transform industries by making it easier to adopt and utilize the technology for the benefit of both businesses and the most important player in it all – the customer. We can only hope that more companies across the board will take up the Hyperledger idea and deliver blockchain benefits to the grassroots.

Categories
Cryptocurrencies

Breaking Down SegWit – A step by step guide

SegWit is one admittedly complex concept in the blockchain world. Most crypto veterans probably still have no idea what it is or what it’s really about. And for those just now entering the blockchain sphere – it can be confusing even to begin wrapping your head around it.

Whichever the case, it’s essential to get it right – especially if you’re planning to interact with Bitcoin and other cryptocurrencies such as Litecoin.

The good thing is we help you take care of this in this article. So let’s discover what SegWit is, how it came to be, what it holds for the crypto market place, and more.

What is SegWit?

Segwit is the name given to a Bitcoin protocol upgrade developed in 2015 and implemented in August. 23, 2017. It was designed as a solution to the scalability of Bitcoin and other cryptocurrencies with a similar model, like Litecoin.

Bitcoin confirms a new block every 10 minutes, with each block only able to hold a certain number of transactions. Bitcoin’s block size is only 1MB – and this limits the number of transactions that can be confirmed for every block. As a result, the Bitcoin blockchain only processes an average of about seven transactions per second (TPS). This pales in comparison to other payment systems like Visa and PayPal, which handles 1700 TPS and 193 TPS, respectively.

SegWit’s bright idea is to increase the block size on the blockchain by removing digital signatures from transactions. When certain parts of a transaction are removed, it frees up space for more transaction throughput on the chain.

Segregate here means to separate, and witnesses are the signatures. So, SegWit is shorthand for “segregated witness,” which means to separate signatures from transaction data.

The SegWit idea originated with Bitcoin developer Pieter Wuille and was developed by him together with other developers, resulting in it being implemented as a soft fork in 2017 on the Bitcoin network. This upgrade brought a number of benefits for the blockchain network – including improving transaction speeds and increasing block capacity. It also solves the so-called transaction malleability issue – which we’ll discuss below, right after we deconstruct the ‘soft fork.’

What Is A Soft Fork?

Any software needs updates to improve its functionality or fix performance issues. In the cryptocurrency world, such updates or changes are known as forks.

A soft fork is a blockchain update that doesn’t split the chain into two.

In other words, a soft fork is an upgrade that is backward compatible with the previous software. A soft fork does not need nodes in the network to upgrade so as to follow the same network since all blocks on the ‘new’ blockchain follows the same consensus rules (a set of rules that all nodes usually enforce to validate a block and its transactions). In other words, a soft fork is backward compatible because old nodes will still recognize the new blocks on the upgraded blockchain.

A soft fork requires a majority of miners (nodes) to activate it so that it becomes operational. SegWit is one such type of a soft fork – it’s compatible with the old version of the Bitcoin blockchain.

What is Transaction Malleability, and Why is Fixing it Important?

Transaction malleability is a flaw in Bitcoin’s code that allowed bad actors to potentially change transaction signatures. Changing here means altering the unique ID of every Bitcoin transaction before it’s verified on the network. 

If someone tampers with a transaction signature, it could cause a transaction between two parties to be corrupted. Now, we know records on the Bitcoin blockchain are immutable, i.e., they can never be changed or altered. This resulted in invalid transactions being stored forever on the blockchain.

Signatures are the only way a transactions’ unique ID can be modified. SegWit came along and removed the need for a signature to be on a transaction. Even if someone alters the signature, the unique ID remains the same. The signature will still be checked, but this time not when calculating a transaction’s fingerprint, or identifier.  

SegWit’s Implementation Issues

After SegWit went live, its implementation was anything but immediate. Even today, the protocol is yet to be fully adopted by network participants. This is due to several reasons – including the different motivations of different users on the network. It’s also because it’s not mandatory, and some participants are okay with the original Bitcoin protocol.

Another reason is that there are different participants in the Bitcoin ecosystem playing various roles – so implementation of any new protocol is not exactly automatic. For example, the Bitcoin network relies heavily on wallets in which users will store their private and public addresses.

There are also crypto exchanges and other players in the ecosystem who need to upgrade their systems and hence ‘facilitate’ any changes in the network. For an upgrade to be adopted, all these organizations need to embrace it, and this doesn’t always pan out favorably.

A new software update would change the way transactions are carried out on the network. This might be good news for Bitcoin believers – but not necessarily for corporate interests. Consider, for example, the investment in billions of some of these companies. There is high motivation to maintain the status quo and not ‘rock the boat.’

There is also the question of wallets that were not able to support the protocol immediately. It took a while before some of the most widely used wallets – like Trezor and Wallet, could enable it.

There’s also the issue of miners. SegWit was designed to go live if a supermajority of miners signaled support for it. However, the larger portion of the miner community refused to activate the protocol. This is because SegWit was incompatible with a mining optimization software known as AsicBoost that they were using.

The miners’ refusal led to an interesting showdown. Bitcoin enthusiasts rallied around an idea called User Activated Soft Fork (UASF) – which meant they would activate the protocol on their own Bitcoin nodes if miners did not. The UASF would have split the Bitcoin network into two – one with SegWit and another without. The resulting outcome was not going to be favorable for anyone – which is probably why a few days before the UASF ‘deadline’, miners caved in and activated the protocol.

SegWit’s Adoption Challenges and Current Status

SegWit’s “backward-compatible” status, i.e., ensuring network participants who haven’t upgraded to it can coexist with those who have, means some participants have not been in too much of a hurry to adopt it.

Most Bitcoin-businesses, as well, would rather focus on customer acquisition than implementing not such necessary technologies. Rusty Russell, a blockchain developer at the blockchain company Blockstream, echoed this to the crypto news website Coindesk in 2018. He said that the priority for startups was “optimizing for growth and not implementing cool new tech.”

Implementing SegWit is also quite an involving task – both time-wise and financially. Founder of the crypto exchange Gemini, Tyler Winklevoss owned to this in a Reddit Q&A earlier this year. He said retrofitting wallets to accommodate SegWit was a “very tricky procedure” that required designing “a new hot wallet from the ground up.”

Nevertheless, SegWit has, over time, gained traction, thanks to Bitcoin increasing in value and a subsequent increase in transaction fees. For this, users are more inclined to use efficient, SegWit-enabled solutions. Businesses have noticed this shift and are now being forced to adapt.

For instance, in October of 2019, Bitcoin Segwit had reached usage rates of 56.82%, and Litecoin Segwit had hit 75%. These are encouraging figures that point to increased adoption of the protocol in the future.

Pros of SegWit

Solves the issue of transaction malleability

Facilitates faster transactions on the blockchain since waiting time is reduced 

Makes bitcoin transactions cheaper – faster transactions mean lower transaction fees

Helps Bitcoin and other cryptocurrencies achieve better scalability

Reduces the size of each individual transaction 

Helps new and exciting developments like the lightning network

Cons of SegWit

SegWit’s idea relies on eliminating some data off the blockchain. Some Bitcoiners believe keeping data off the blockchain is in itself a failure – like admitting the bitcoin model can’t stand on its ‘own feet.’

Miners now get lesser transaction fees for every individual transaction

SegWit’s implementation is a complex process that wallets have to do on their own. Some may not have enough resources to do it or may not get it right the first time

The implementation means more resources being used overall – owing to the increase in block capacity, transactions, bandwidth, and so on

The off-chain containing signature data will need to be maintained by miners as well. Unlike the blockchain where they get block rewards and a fraction of transaction fees, there is no reward for maintaining SegWit

Some in the Bitcoin community believe it’s a short term fix to a long term problem. They argue that it doesn’t really solve the scalability problem and that only changes to the blockchain size and changing how transactions are processed on the blockchain will really help Bitcoin to scale

The protocol has caused divisions in the Bitcoin community, leading to ‘forking wars,’ with the hard fork Bitcoin Cash resulting out of this

Conclusion

SegWit is a fundamental change to the Bitcoin ecosystem and one that sets the stage for further upgrades down the road. Removing the need to include identifying information on transactions on-chain brings several benefits such as more and faster transactions, fixing the thorny malleable transactions issue, and more.

But despite it being a promising, innovative solution – its adoption has been rather slow. Some people welcome it as an improvement to the world’s most popular cryptocurrency, while others think it highlights Bitcoin’s shortcomings. However, recent statistics show a marked improvement – something encouraging for its proponents. And from the current trend – its adoption looks set to go only forward. Let’s wait for what the future holds for both camps.

Categories
Cryptocurrencies

Cryptocurrency Risks You Need To Watch 

Ten years after the first cryptocurrency was launched, thousands more have filled the scene. Today, they are a digital asset class that either confounds or fascinates many. The latter makes them an attractive investment option – and indeed, many have become rich from trading in cryptos. 

However, the crypto world can prove murky. Thanks to some of their inherent characteristics like being intangible, decentralized, and incredibly volatile, cryptocurrencies are fallible to unique risks that anyone hoping to interact with them should be aware of.  

In this article, we explore some of these risks so you can stay safe while interacting with this digital asset class.

The Future is Uncertain 

Cryptocurrencies are known for their wild and unpredictable down and upswings. The crypto market is thus an unstable market marked by speculation and uncertainty. Trading in cryptocurrencies could set you up for huge losses – or huge profits, depending on market events. Consider, for example, how Bitcoin achieved a high of $20,000 in 2017 – from a paltry $700 at the beginning of the year. And as of November 2019, it’s trading at $7617. All these figures are nowhere near stable or predictable. 

And in 2018, the total market capitalization of cryptos fell from a massive $183 billion to a low of $100 billion. 

These fluctuations mean you shouldn’t rush all in to invest in cryptocurrencies – especially with money you can’t afford to lose. The same applies to transactions in crypto. Let’s say you’re purchasing something expensive with crypto. What if the price drops before you close the deal? You will have to fork out more crypto than you had planned for. The takeaway is: practice due diligence before trading in, or transacting with cryptocurrencies. 

Cold Shoulders

Governments, businesses, and institutions are yet to fully embrace cryptocurrencies. Some businesses are wary of the currency due to its history of instability. They are thus reluctant to accept it as a means of payment. 

What’s more, many governments around the world are either openly hostile towards it or just plain indifferent. As a result, people and businesses are ambivalent or outright mistrust it. 

For example, China has long banned banks from engaging in any activity that encourages the survival of cryptocurrency in the country. And in other countries such as Russia, using crypto to pay for things is illegal.  

The Entry Is Wide, But the Exit Is Narrow

Since Bitcoin successfully busted on the scene, it’s become almost impossible to keep up with every other cryptocurrency that gets introduced virtually every week. As of now, the number is nearing 3,000. There is a low barrier for entry for cryptos – which creates a wide entry for new ones to enter the market. 

However, most of these coins start with a frenzy and end up fizzling out, or devaluing. People that rushed in to invest in these cryptos are left stuck with valueless coins in their hands, with no one willing to buy them. 

Extortion and Manipulation 

Cryptocurrencies are a very appealing asset class – thanks to their sophisticated technology and the potential to make you rich under the right conditions. For this very reason, they are susceptible to all manner of social engineering and fake news such as fear, doubt, and uncertainty.  

Crypto beginners, along with the naïve, can easily become prey to these tricks, misinformation, cyber fraud, market manipulation, and other risks. 

Another area of extortion is Initial Coin Offerings. Some cryptocurrency projects have run away with investor money after these sale events. 

Hype and Noise 

There’s a lot of noise surrounding cryptocurrencies. From social media to news headlines to crypto forums, everyone is now ‘expert.’ 

A lot of people buy into the noise instead of doing their own research. What if prices crash when you’ve put substantial money into an overhyped cryptocurrency? The cryptocurrency market can give you handsome returns – but only after you make informed bets backed by research and patience.

Theft Hovers Above

Stories abound of crypto hacks that led to substantial losses. The crypto community is still reeling after the massive hack of 850,000 bitcoins from Mt.Gox – which led to the exchange closing shop and filing for bankruptcy. Another case is when hackers made away with 7,000 bitcoins from Binance. 

These are only examples of the hack all too familiar in the cryptocurrency industry. If you have crypto holdings, they are always prone to hacking, phishing, stealing, or other ill-intentioned activity. Passwords can be stolen or hacked. Your hardware wallet can be corrupted or stolen. For this, it’s vital to employ extra caution when dealing with cryptocurrency. 

Human Error 

‘Man is to error’ is true with cryptocurrencies. Thanks to their intangible nature, a simple thing as forgetting your password could lead to a loss in crypto funds. Losing hardware, spilling a drink on your paper wallet, transposing numbers, etc. are enough to create losses. Think of an exchange taking place, and you enter the wrong public key. You could lose thousands of crypto. 

Technological Risks 

The computational complexities and high energy consumption associated with some cryptocurrencies such as Bitcoin are also their limitations. Although Bitcoin and some mainstream cryptocurrencies have proven resilient, such aspects could backfire on others. 

Also, the decentralization of genuine blockchains cushions them against certain risks, like having a single point of failure. However, not all cryptocurrencies are truly decentralized as they claim. For this, investors should be on the lookout for cryptocurrency projects that claim to be decentralized, yet are really not. 

Forking Wars

Forking is a specter that’s always hanging over some cryptocurrencies. This can lead to a loss of confidence in the market and cause price falls. Forks can also erode market share, valuation, and interfere with the adoption of crypto. 

Forking can also lead to factions – with one supporting the original currency and other supporting the fork, as was observed with Bitcoin and Bitcoin Cash in 2017. This may significantly erode trust in either currency.  

Conclusion

Cryptocurrencies have made an indelible print on the world already – and they’re here to stay. Investing in cryptocurrencies can make you a fortune but under the right conditions. The first thing is to understand the perils associated with them before you start using them. Before you dip your toes into the murky waters of cryptocurrency, we hope this list of ‘crypto risks’ will be your lighthouse.

Categories
Cryptocurrencies

Is The Lightning Network Bitcoin’s Cure-All?

Scalability was always a thorny issue for Bitcoin since day one. When Satoshi Nakamoto first proposed the cryptocurrency, the very first comment by James MacDonald featured this comment “We very much need such a system, but it does not seem to scale to the required size.” A decade later, scalability is a concern that the Bitcoin and other mainstream cryptocurrencies have to grapple with.

What exactly is scalability? Well, Bitcoin has only ever been capable of processing an average of 7 transactions per second (TPS). This was okay at the beginning, but as the cryptocurrency gained more use and acceptance, congestion on the network increased. As a result, transactions took longer to be processed, and transaction fees went up.

If Bitcoin has any hopes of becoming a fully viable alternative to current payment systems – let alone the ‘world’s currency’ – as many Bitcoin believers envision, it will need to solve the current salability issues it faces.

To put this into perspective, compare Bitcoin’s current meager 7 TPS and Visa’s average of 1700. In the face of this dismal scalability potential for Bitcoin, the cryptocurrency’s enthusiasts have been hard at work reimagining the system and how it can be improved. There is one proposal that has caught the attention of the Bitcoin community and one which holds potential. This is the Lightning Network.

What is the Lightning Network?

The Lightning Network (LN) is based on this premise: there’s really no need to record every single transaction on the blockchain. As such, LN is a second layer technology on Bitcoin’s blockchain that allows two users to use a micropayment channel between each other – with the hopes to scale Bitcoin’s transaction processing.

By removing transactions from the main blockchain, LN is expected to remove the backlog of transactions and reduce or get rid of transaction fees altogether. It will drastically speed up transactions, positioning Bitcoin for everyday use.

How Does the Lightning Network Work?

The Lightning Network comprises an off-chain layer on Bitcoin’s blockchain. It features multiple payment channels that allow two parties to open a payment channel and conduct transactions between them. Two users can open a payment channel that will allow them to shift funds back and forth between their wallets.

These transactions are processed differently from the standard transactions on the main blockchain, being only updated there once the two parties open and close a channel.

To open a payment channel, the two users need to set up a multi-signature wallet and deposit some funds into it. This is the first transaction, and it’s called the funding transaction. Funds stored in the multi-signature wallet can only be accessed upon both (or more) parties providing their private keys. This means a party can only access and/or spend the funds with the consent of the other.  

The two users can conduct unlimited transactions between themselves without having to let in the main blockchain on their activities. This approach considerably scales up transactions’ speed since they don’t need to be approved by all nodes on the blockchain network.

The private channels between parties combine to form a web of lightning nodes that can channel activity among themselves. This web, or network, is the Lightning network.

The ingenuity of the Lightning Network is that once it achieves mainstream acceptance, users will not have to open a new channel to interact with others. They will be able to transact with ‘new’ users via existing channels – that is, channels with users with whom they already have a relationship. The network will execute this by automatically finding the shortest path.

Finally, the Lightning Network is being tested for another exciting feature – the ability to conduct cross-chain transactions of crypto swaps – that is, being able to exchange one crypto to another. This may render crypto exchanges – as we know them, obsolete.

Will You Pay Fees for Using the Lightning Network?

Yes, users will be required to pay fees on the Lightning Network. The fees will comprise routing charges for routing transaction details between lightning nodes, plus Bitcoin’s transaction fees to open and close payment channels.

At the moment, there are zero fees on the network owing to very few lightning nodes. However, if the project succeeds, charges are set to increase, but only slightly. In any case, if the fees became too expensive, a user has the option to move back to the main blockchain.

Implementations of the Lightning Network

The concept of LN was first proposed by Joseph Poon and Thaddeus Dryja in 2015. Currently, there are four major teams developing the concept.

Each is operating on the BOLT specification – which allows them to connect with each other as a unified network rather than separate groups competing with each other. The BOLT specification has been developed by the blockchain technology companies Block stream, ACINQ, and Lightning Labs – to allow each company’s products to interact with the others. These are the implementations and groups behind LN’s current exploration:

1. C-Lightning

C-Lightning is being developed by Blockstream. It’s coded in the C programming language and is created to only operate on Linux, with the possibility to run on Mac if you modify some coding and parameters.

This implementation supports lightweight nodes that you can run from the computer chip Raspberry Pi, allowing you to connect with other users without necessarily being online. As such, people can more conveniently adopt and contribute to the LN.

C-Lightning also features a wallet that lets you manage funds, whether online or offline.

Another exciting feature of C-Lightning is you can transact anonymously over the TOR network, so you don’t have to worry about privacy issues.

2. Éclair

Éclair is being developed by ACINQ, a French company. It’s very much like C-Lightning, with the only differences being in the coding and user interface. You can operate Éclair on Windows and also with the Raspberry Pi acting as the network node.

Éclair also has a mobile wallet for Android that you can use as a regular Bitcoin wallet and the Lightning Network for cheap and instant transactions. However, it’s advisable to not send large amounts of crypto on the wallet as its development, just like the Lightning Network, is yet to go mainstream.

Éclair is also compatible with C-lightning and Ind, another LN implementation that we’ll look at next. This means users can connect with another user(s) on either network.

3. Lightning Network Daemon (LND)

LND is under development by Lightning Labs. It’s written in the Golang programming language and can run on Linux and Windows. It’s compatible with both C-Lightning and Éclair as well as the Litecoin Lightning Network.

LND also features a desktop wallet that allows users to open a payment channel and shift funds between each other.

4.Lit

Lit is being developed by the Massachusetts University of Technology under their Digital Currency Initiative. Lit functions fairly the same as the other LN implementations, except it’s designed to support all SegWit coins as well, including those that may be developed in the future.

However, Lit does not support interoperability with the other LN implementations since it supports more coins than indicated by the BOLT specification.

MIT is currently developing a solution known as LitBox that will allow users to conduct transactions without needing to be connected to the internet.

Lit is also currently developing a multi-hop routing channel, the lack of which has made it lag behind other LN implementations. Since Lit is being developed by a small, non-commercial-driven team, its progress is slow, and at the moment, it has little real-world utility.

Benefits of the Lightning Network ;

The Lightning Network is still actively in development. The concept looks great on paper, but whether it will work as envisioned remains speculative at this point. If the network were to succeed, Bitcoin users can expect several upsides coming with it. Here are some of them:

Faster transaction speed. You can expect transactions to be much faster, thanks to the elimination of the need for validation of all nodes in the network. Also, this will be a massive step for cryptocurrencies’ ability to compete with the current financial set up in payment processing.

Transaction fees. LN developers and enthusiasts are banking on the network to contribute to the reduction or elimination of transaction fees, as transactions will be chiefly taking place outside of the main blockchain.

LN may prove suitable for micropayments – like paying for coffee, drinks, shopping, and so on. This is because it has an ideal environ for the transfer of small currency values. Also, it will allow for transactions to take place between devices without the need for human intervention, which reduces error and saves time.

Scalability. This is the most anticipated solution of the LN – which is touted to potentially facilitate at least 1 million transactions per second.

Atomic swaps. Provided that two blockchains feature the same cryptographic hash function (and most do), users will be able to send funds from one blockchain to another without the need for an intermediary. This is not just cheaper, but faster.

Security and Anonymity. The LN technology might be the thing to finally bring true anonymity to cryptocurrency. The majority of cryptocurrencies, including Bitcoin itself, are pseudonymous – meaning you can conduct transactions without revealing your identity, but transactions can still be traced back to you. LN will enable transactions to take place off-chain, making them impossible to trace.

Problems with the Lightning Network

The lightning network is a technology that’s still being explored. As such, it still experiencing ‘teething’ problems. The following are some of them.

Lightning networks are meant to be decentralized, like the blockchains, they aim to improve. However, they could instead lead to a centralized network that characterizes the traditional banking system in which banks and other financial organizations regulate transactions. Influential businesses will have more open connections than other users, resulting in their lightning nodes being centralized hubs on the network. And failure at such a hub could feasibly crash the network.

LN does not really solve the transaction fee problem. Bitcoin fees will undoubtedly rise in the future, Lightning Network or not. If these fees increase, LN will be rendered obsolete as it would become cheaper to transact on the main blockchain. Thaddeus Dryja admits as much: “Bitcoin’s transaction fees could go up again and hinder the lightning network’s adoption among merchants.”

Lightning network nodes are required to be connected to the internet at all times to facilitate transactions. This renders them vulnerable to hacks and thefts. Also, offline storage, which is the safest for cryptocurrencies, is not possible on a lightning network.

Going offline would present a new set of problems for the Lightning Network, like the Fraudulent Channel Close. The fraudulent channel close means one party could easily close a payment channel and take crypto funds for themselves when the other is away. Although there’s a given window of time when the other party could contest the closing of a channel, it could expire if either party is offline too long.

The “centralized” inclination of the lightning network means funds are concentrated in specific nodes within the network. In a scenario when such a node went offline, it could lead to a downtime of the entire network, cutting off user’s access to their funds.

To open and close a payment channel, you need to do so on the main Bitcoin blockchain. This requires manual work and yet more fees.

When is the Lightning Network Coming?

The cryptoverse is eagerly awaiting this groundbreaking technology to fully come into form. It’s worth noting the concept targeted Bitcoin at first, but it’s currently being explored for more cryptocurrencies, including Zcash, Litecoin, Stellar, Ether, Ripple, and more.

So far, Bitcoin has been tested on Éclair and LND networks with success. It’s also a good sign that the Lightning Network’s specifications have been published. This means developers can apply the rules and implement LN in their preferred programming languages.

Still, the technology is very much in its nascent stages. As of now, the average user cannot really send and receive payments via the network. Moreover, the implementations are still being dogged by bugs – leading developers to warn users not to send real money over the network – yet.

It’s important to note that the technology’s code is very complex and requires rigorous proofing. If the Bitcoin community, and indeed the whole world, is to adopt the technology, it must prove to be safe, reliable, and a veritable upgrade from the blockchain.

Currently, there is no official launch date for the Lightning Network, with each implementation taking a different approach. With that, experts predict that the network may take from several months to two years before going live.

Conclusion

The Lightning Network sounds exciting. It has the potential to improve Bitcoin and the entire cryptocurrency market as we know it. Think instant payments, anonymity, and reduced fees – LN could herald a new beginning for the crypto ecosystem.

However, Bitcoin and crypto fans have a while to wait before the technology can really live up to its promise. It also remains to be seen whether it will live to the promise, to begin with. We can only wait to see what exciting developments and updates the implementations have in store.

Categories
Crypto Daily Topic

NANO vs. BAT: The coins to watch in 2019 and beyond

Are you considering investing in cryptocurrencies? Read on to understand just why NANO and BAT should form part of your portfolio.

The meteoric rise of digital assets over the past couple of years has often revolved around the top cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, LiteCoin, Dash, etc. With thousands of other cryptocurrencies still trading in the market today, you would be ill-advised to think only the most popular coins that you already know about the matter.

The best thing about the creation of tens of thousands of cryptocurrencies when blockchain technology was at its peak, was the variety. Almost every asset that reached the market brought unique features, offered differing options to users and investors, and aimed to dominate the blockchain space by making the world a better place. While not every crypto asset made it this far, in this post, we will be comparing two of the most promising tokens for investment in 2019 and beyond.

Why NANO and BAT stand out

Nano and BAT are relatively comparable by market cap. At the time of writing of this report, Nano was priced at $0.909 with a market cap of $121.16 Million and a supply of 133.25 Million while BAT was priced at $0.266 with a market cap of $361.00 Million and supply of 1.36 Billion. However, from a utility perspective, the two assets vary significantly because they were both created to serve fundamentally different purposes in the market.

If you are looking to find the better of the two tokens – perhaps one that best suits your investment profile, you have come to the right place. In this post, we will compare the two assets based on what each brings to the market, their strengths and weaknesses, as well as the investment opportunities each has to offer. 

Both Nano and BAT have stood strong even in the face of a massive cryptocurrency wipeout that began in early 2018 and killed over 70 percent of all the cryptocurrencies that once traded in the global market. Given that the two have commendable technical specifications and strong development teams and present impressive utility to users, they both offer great investment opportunities.

The basics of Basic Attention Token (BAT)

The world today is run by advertisers. Look at Google. Facebook, too, while it sells itself as a social platform, it mines people’s data to stay rich. Basic Attention Utility, or simply BAT, is a token that was created as a genuine utility to deal with the ills that individuals and businesses in the world of digital advertising have to put up with today.

The creators of this cryptocurrency were inspired by the need to address numerous problems that plague both consumers and publishers in the industry. The biggest of these issues being the economics and organizational dynamics imbalance that benefits only a few players in the industry at the expense of many stakeholders.

In what the creators of BAT call “electronic pollution” in their Whitepaper, individuals are subjected to unnecessary inconvenience and high costs whenever they attempt to make any headway in the digital advertising arena. These inconveniences and costs often come in the form of high data costs, long load times of content, device battery drainage, privacy breaches, and malvertisements (ads that spread malware to users).

Mobile users, in particular, are the worst hit by electronic pollution served by the corporations dominating the advertising space. As user privacy continues to become a major issue of discussion, advertisers are relentlessly pushing the envelope coming up with shrewd ways to harvest user data and often use it against them. Cases of user data and device batteries drained by ads have been so prevalent in the past that many users have resorted to using ad-blocking software.

How BAT works

When users are so fed up with ads that they resort to blocking them, it hurts the publishers, gives the industry a bad name, and prevents legitimate advertisers from generating income even from the remaining ad-viewing users. Before the launch of BAT, the creators of this ad-focused token first created the Brave browser that is open-source and focused on user privacy. It was designed to block off invasive ads and browser trackers as well as accurately measure the user’s attention anonymously in an effort to reward publishers and users what they truly deserve.

The BAT token came soon after the Brave browser, and it runs on the Ethereum blockchain platform. Derived from the user’s attention or ‘mental engagement,’ it makes the users just “targets” for advertisers, but also active players in the advertising and publishing economy by granting them access to a portion of the advertising budget in BAT. Users can purchase content for their friends and even donate to publishers and content providers using BAT. This is how BAT has been able to promote an equitable and fair exchange of value.

Why BAT?

The BAT price has shot up by 150% from its lowest in December 2018 to its current 0.2616. It has never been able to get back to its peak price of $0.86, attained in January 2018. The token’s current market cap is $365 million, with a $65.90 million trading volume as of November 18, 2019. This places it at the 29th spot in the cryptocurrency market.

BAT is most attractive to investors and users who value online content or understand the stakes in the digital advertising world. These are:

☑️ Advertisers: The BAT incentivizes advertisers to integrate the coin in their list of ads. This enables them to receive specific data and a range of analytics regarding their ads and the users they target. Since users’ systems are equipped with attention measurement tools and machine learning algorithms that extract clear and precise advertising and content data, advertisers get deep insights into how their ads are doing and what they need to do to get better returns.

☑️ Publishers: Content creators and publishers are hugely incentivized to create content of greater value, and to expand their publishing platforms to reach wider audiences and earn more. Better still, publishers and advertisers get accurate user feedback when they hand-pick ads they like to see or are relevant to them. Some of the top publishers who currently accept BAT and work with its platform tools are Vimeo, Vice, and The Washington Post.

☑️ Users: If you would like to hop on to the BAT wagon, you can download and use the Brave Browser. You can then interact with the platform and use BAT tokens in a give-to-receive scheme. When you view ads, you get compensated with a certain amount of BAT tokens for your time. You can accumulate and choose what to do with these tokens – from making payments to gifting publishers.

What is Nano?

Unlike BAT that runs on the Ethereum blockchain platform, Nano is a standalone cryptocurrency. It was developed as an alternative to fiat currencies and to bring crypto into the daily lives of ordinary people. However, unlike Bitcoin, Nano is designed to carry out transactions much faster with a more seamless, faster, and flexible Direct Acrylic Graph (DAG) platform.

Nano was launched as RailBlocks (XRB) in December 2014 and is defined as a ‘trustless, feeless, and low latency’ crypto token developed especially to deal with various issues that have held the cryptocurrency industry back, primarily the weaknesses plaguing Bitcoin. Yes, it is accurate to say that the Nano was created as an antidote to the blockchain platform in general, and Bitcoin specifically.

One of the main reasons why many crypto investment reviewers consider Nano a good investment is what happened after the 2018 crypto crash. This was a result of many factors, but many governments banning cryptocurrencies was one of the greatest contributors. The crash was the biggest and first-ever ‘filter’ of the cryptocurrency market that filtered out the chaff from the grains.

This was a strange time when the prices of digital assets massively inflated across the board and then suddenly crashed. While many cryptos did not recover after this, the Nano recovered, and by September of 2018, its price had stabilized. To this moment, the coin is in a good position, gradually growing and showing signs of maintaining it.

How the Nano works

The Nano works using a very simple principle: It stores the data of incoming and outgoing transactions in individual designated blocks of an account, a kind of personal blockchain for the account holder. The main advantage of this setup is that the account balance is securely, quickly and conveniently updated after each transaction. The network does very little work in the process, and this explains why this platform runs smoothly and uses minimal power to process transactions.

The general concept of the Nano cryptocurrency is focus on scalability. The underlying layer that provides security for the platform comes second. The team that developed it succeeded in all fronts – necessitating fee-less transactions while providing all the benefits that dominant cryptos such as Bitcoin have to offer.

To make their coin a better alternative to Bitcoin, the creators of Nano designed it to use a hybrid consensus that combines Proof-of-Stake (PoS) and Proof-of-Work (PoW) algorithms. This combination is aptly named ‘delegated Proof-of-Stake, and it solves three of Bitcoin’s biggest problems in the following ways:

☑️ Nano is scalable: Bitcoin’s biggest problem is that it is very limited and not scalable. Each block in its chain is limited to holding 1 megabyte of data, and one block of transactions can be mined only once every 10 minutes. This limits the Bitcoin network’s speed to a maximum of 7 transactions per second.

☑️ Low latency: The average confirmation time for a transaction on the Bitcoin network is 164 minutes! Nano uses novel architecture dubbed ‘block-lattice,’ which assigns every individual their own blockchain or ‘account-chain’ rather than just a single chain for all transactions on the platform.

☑️ Power efficiency: One of the excuses that some governments use to restrict and even outrightly ban Bitcoin is the fact that mining it uses a lot of electricity. The latest statistics show that the Bitcoin network uses approximately 79.79 terawatt-hours (TWh) of power every year. The Nano platform promises to solve this power problem as it is more power-efficient compared to the blockchain network.

Nano Performance

Nano boasts of a market cap of 122 million and a unit price of $0.919 as of November 18th, 2019. Its trading volume of 3 million and availability supply of 133 million places it on the 45th slot on the global cryptocurrency ranking, way below that of BAT.

The most attractive feature that Nano presents is its development team, which has proven its commitment to creating a project that will save cryptocurrencies even from governments. The team is constantly engaging the cypherpunk community and has previously been described to be “notoriously active” and “very communicative with the community – both on the Telegram and Discord channels,” according to the Cryptorated magazine. 

In summation…

If you are looking to invest in an asset that has demonstrated that the future of payments is crypto, and addresses the core issues that even Bitcoin is still grappling with, then Nano is your go-to asset. The trying times of early cryptos and cryptocurrencies crash of 2018 were the most trying time for both BAT and Nano, but they both survived and are thriving relative to the performance of other assets on the market.

Therefore, as you consider either of the two coins, consider which one best suits your profile, what returns you expect out of your investment, and, more importantly, weigh the opportunities based on how far in the future you look forward to earning your returns.

Categories
Crypto Daily Topic

Lightning network: A major hurdle in the path of crypto regulation

The very first public critique of Bitcoin right after Satoshi Nakamoto proposed it was made by James A. Donald. He said that while such a system (Bitcoin network) was very, very much needed, the way he understood it, “it does not seem to scale to the required size.” Sure enough, over a decade after its launch, Bitcoin is being plagued by scalability problems – apparently its biggest challenge. But there is another less discussed one: taxation.

For a long time since its rollout, Bitcoin was used primarily by enthusiasts and speculators more as a store of value than a medium of exchange in everyday payments. Bitcoin has a serious scalability problem for two main reasons: the blockchain technology on which it runs limits the amount of information that a single block can contain to 1 megabyte, and a block of transactions can only be added to the chain every 10 minutes. These limit Bitcoin’s processing speed to about 3.3 and 7 transactions per second (TPS). In comparison, Visa does an average of 1,700 transactions per second.

Enter the Lightning Network

Today, more people are adopting Bitcoin to make everyday payments, largely because of the development of the Lightning Network. Popular Bitcoin apps such as Fold and Bitrefill that are designed to make it cheaper and easier for users to make payments with Bitcoin have integrated the Lightning network in their payment systems.

What is the Lightning Network?

The Lightning Network is an additional layer on top of the blockchain network on which Bitcoin runs that is designed to make transactions between nodes faster and cheaper. It is implemented to be a solution to Blockchain’s scalability problems.

How does it work?

The Lightning Network creates a temporary communication channel between two nodes, much like how the Bitcoin Network does, allowing them to carry out as many transactions as they need. When the transactions between the two nodes are completed, the channel is closed, and the outcome communicated to the underlying Bitcoin network. Transactions carried out on the Lightning Network will, as a result, cost only a fraction of a cent while taking a load off the Bitcoin Network.

There is a problem, though. While the Lightning Network significantly improves user’s Bitcoin transaction experience, lowers the costs of transactions, and improves the overall Bitcoin Network speeds, it presents a serious challenge when it comes to taxation.

Bitcoin’s taxation problem

Under the US law, the Internal Revenue Service (IRS) considers Bitcoin and other digital currencies ‘intangible property’ and as such, are subject to capital gains taxes. Everywhere else in the world, cryptocurrencies are rightfully regarded as money that can be used as legal tender in exchange for goods and services.

The United Kingdom treats Bitcoin as a foreign currency, while Germany does not subject it to capital gains tax. Even Switzerland, a tax haven, levies various taxes on Bitcoin, including income taxes, wealth taxes, and profit taxes.

Since Bitcoin payments are taxable transactions, it is vital that users accurately track capital gains accrued when they use it. However, there is a serious problem because its transactions are peer-to-peer, meaning that there is no middleman, such as a bank, between the parties involved in the transactions. Governments have always had an easy time regulating, monitoring, and taxing transactions because of middlemen.

With the widespread adoption of cryptocurrencies and the introduction of efficiency platforms such as the Lightning Network, more people are choosing to make regular payments for goods and services with Bitcoin and other cryptocurrencies.

The problem here is that cryptocurrency users are generally reluctant or find it too bothersome to report taxable Bitcoin transactions to tax authorities, more so for small transactions such as buying a cup of coffee or paying for software. Keeping detailed records of every Bitcoin transaction can be exhausting as there are virtually no tools on the market that simplify the process or make it easy to report such events to the taxman.

To the minority of people who care a lot about conforming to their tax obligations have three options: painstakingly keep records of their transactions, risk getting in trouble with the taxman, or avoid using Bitcoin altogether. To most people in this category, the tax burden associated with making regular payments using Bitcoin overshadows the potential benefits.

How Lightning Network makes the situation worse

Cryptocurrencies and tax laws have only one thing in common: most people do not know the first thing about them. From a cultural and worldview perspective, these two subjects are polar opposites.

Bitcoin was created and is largely accepted as a solution to financial control by governments, exploitation by banks, and abuse by corporations. Cypherpunks, who form the majority of individuals who lead the embrace of cryptocurrency, use it to make a political statement against authority. By using Bitcoin, they are happy to escape the rules and regulations that define the traditional financial world.

In October 2019, the Internal Revenue Service, in its attempt to catch up with the users of cryptocurrency, published its first guide on how cryptocurrency holders can calculate taxes owed on their holdings. The agency admits that the world of cryptocurrency ‘has grown more complex over the years.’ As the general public increasingly adopts the digital currency, IRS’s attempts to come up with regulations and guides on how individuals can remit taxes is a game of playing catch up, to say the least.

The Lightning Network makes it easier for ordinary folk to make payments with Bitcoin, but not to keep records of them. In the eyes of many people all over the world, tax laws are a symbol of the excessive and unnecessary regulations imposed by politicians. Technologies such as the Lightning Network are a savior that finally enables them to take advantage of the benefits of decentralization of digital money, transactions with no regulations, and living in a free society rather than under the foot of a central power of the elite.

Is there a possible solution in sight?

Governments all over the world, including the Lawmakers in the US and China, have realized that outrightly banning Bitcoin is pointless. Governments are slow to find ways to bring cryptocurrencies into the tax bracket and presently have to rely on the goodwill of the citizens to keep records of their transactions and to diligently report and pay their taxes.

However, some industry leaders are making reasonable propositions that may just work. For instance, Coin Center is pushing a bill in the US that would exempt Bitcoin transactions less than $600 from capital gains taxes.

The most viable solution to the Bitcoin taxation problem, according to industry experts, is in policy level and not technical. While regulating Bitcoin wallets may seem like a simpler way for governments to make the taxation problem more manageable, a more practical solution would involve exempting more payments from the burden of taxation rather than attempting to regulate all payments across the board.

Categories
Crypto Daily Topic

Solving Blockchain’s Scaling Problem

Blockchain was conceptualized the first time in 2008 with the launch of Bitcoin. However, it took almost a decade to be fully appreciated as an invaluable public ledger with the potential to disrupt virtually every modern industry. That was the year when the price of Bitcoin got close to $19,900 from a low of $978 at the start of the year, and Ethereum went above $850 from just over $8. At its peak value, Bitcoin’s market cap stood at $320 billion – higher than the total value of all M3 UK currency in circulation. This was before the infamous 2018 cryptocurrency crash of January 2018.

Predictably, the massive cryptocurrency explosion was followed by a big crash, from which many cryptocurrencies that had successfully launched ICOs (Initial Coin Offerings) never recovered. During the preceding explosion, blockchain technology was hyped as the most revolutionary since the internet, and many industries started figuring how it could work for them. From transportation and health industries to banking and voting, the promises and claims that the new technology brought may have set people’s expectations a bit too high too fast.

While famous investors, economists, and even finance professionals warned that the rapid rise of the cryptocurrency prices was a bubble that would ultimately burst, a world driven by vague expectations and hunger for profit failed to listen. Most people read the most subtle signs they wanted to see – such as the listing of bitcoin futures by the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) in December 2017 as a stamp of approval that Bitcoin and cryptos, in general, were ripe for investment.

Weaknesses of blockchain come to light

The rise in the popularity of blockchain and the rapid adoption of Bitcoin, Ethereum, and other cryptocurrencies brought blockchain’s most significant problem to light: it is expensive and can barely work on a large scale. When Bitcoin’s price soared to almost $20,000, its network quickly became overloaded, transactions took as long as a day to confirm, and transaction fees shot up to as much as $60 per transaction.

The world may not have been wrong to believe that blockchains presented a massive opportunity for the human race, but it was at this point that many started having doubts about whether Bitcoin was the currency of the future.

The blockchain technology was introduced to the world just at the right time when we were dealing with the aftermath of the 2008 financial crisis. However, in its current state, it cannot deliver on these promises on a global scale because it has one glaring weakness: it just cannot scale.

To see why this is such a concern, it is necessary to understand how blockchain works.

Blockchain is basically a list of ‘blocks’ of ordered data, in the case of cryptocurrency transactions, ‘chained’ together as a linked list. The blocks, once added to the chain, cannot be modified, which means that the list is add-only. There are specific rules that are followed before a block of data is added to the chain known as ‘consensus algorithm.’ In the case of Bitcoin, it is Proof-of-Work (PoW), while Ethereum is presently switching to Proof-of-Stake (PoS).

Due to this nature, blockchain has no single point of failure or control, its data cannot be altered, and the trail of changes made on the platform can be easily audited and verified. However, these benefits do come at a cost because blockchain is slow, and its immutable database has a very high redundancy rate. This is what makes it very expensive to use and virtually impossible to scale to a global scale.

Blockchain’s need to scale

The evolution of the entire blockchain ecosystem has been rapid over the past couple of years. The widespread implementation of blockchain systems for public use has been a significant vote of approval that the world is ready for it. However, the increasing adoption of these systems has brought to light the need for better design or alternatives.

The consequences of the increase in the number of daily transactions on a blockchain network have shown that block difficulty increases, thus increasing the average computational power required to mine a block of transactions. This translates to increased electricity consumption.

Another problem that prevents blockchain from scaling is that an increase in the number of transactions increases the size of the blockchain, making it harder to set up new nodes on the network to help in maintaining the complete blockchain network and to process and verify transactions. Therefore, the systems get not only slower and more expensive, but also unsustainable for such use cases as making regular small payments.

Potential solutions for blockchain scaling

There are numerous real-world uses of blockchain that have shown just how necessary the technology is for the future of humanity. Aside from payment processing and money transfer, it can also be used in monitoring supply chains, digital identification, digital voting, data sharing, tax regulation, and compliance, weapons tracking, and equity trading, among others.

One area that shows great promise and has accelerated the need for blockchain to scale is dApp or distributed apps that run on the blockchain network.

Over the past year, many developments have been proposed to resolve the platform’s scalability problems  – even implemented in some industries. So far, it shows great promise.

Here are some of the most sustainable ideas that blockchain platforms can implement to scale

☑️ Increasing the number of transactions in a block

A blockchain network would scale better when the number of transactions in a block is increased. This can be achieved by either increasing the block size or compressing individual transactions.

Bitcoin’s block size is limited to 1 megabyte. There was a lot of controversy in 2010 through 2015 on whether this size should be altered to accommodate more transactions to help the network scale.

Blockchains can also implement more efficient hashing algorithms that better compress the data to be added to the block. Algorithms that generate shorter signatures would go a long way to reduce the size of the block, and using better data structures to organize transactions may not only reduce the size of the block but also improve the privacy of its content.

☑️ Increasing the frequency in which blocks are added to the chain

The Bitcoin network adds a block of transactions every 10 minutes, while Ethereum does so in about 7 seconds. This duration is a function of the block difficulty level in a Proof-of-Work consensus. Since the frequency in which a new block is added to the chain significantly affects its transaction rate (TPS), reducing this time would significantly increase the network speed and reduce delays.

However, this rate of adding block cannot be arbitrary. Increasing the frequency would mean an increase in the block orphan rate (the rate at which mined blocks are not added to the blockchain due to competition) and an increase in the network bandwidth.

A change of such magnitude would require a hard fork of an existing blockchain platform. Since this is not backward compatible, it would not work for Bitcoin, Ethererum, or other established blockchain systems.

☑️ Implementing alternative communication layers between nodes

There is constant communication between nodes on a blockchain platform depending on the protocol it implements. For instance, in the Bitcoin network, transaction information is sent twice: the first time is in the broadcasting phase of the transaction, and then after the block is mined.

The Lightning Network is an excellent example of a second layer payment protocol that runs on top of the Bitcoin blockchain. It enables faster transaction speeds between nodes by opening a payment channel that commits funding transactions to the underlying layer without broadcasting to it until the final version of the transaction is executed. This is presently touted as the best solution to Bitcoin’s scalability problem.

☑️ Adopting better consensus and verification methods

At the time of writing this post, Ethereum is in the process of switching its consensus mechanism from Proof-of-Work (PoW) to Proof-of-Stake (PoS) to mitigate its scaling problem. Bitcoin uses the oldest yet most difficult to scale PoW. PoS is not only sustainable in power consumption but also results in higher block addition frequency to the blockchain and, ultimately, better scaling platforms.

Other than the blockchain consensus, a blockchain platform can scale better when better storage architecture that saves space is implemented. Blockchain takes up a lot of storage space because each node is required to have the whole blockchain state in order to verify new blocks. Since the size of the block increases with time, the platform would scale better if nodes could only store parts of the chain required to verify current blocks.

Bottom line

Different blockchain platforms have implemented various strategies in an effort to make their platforms scale better. The bottom line, however, remains that blockchain’s scalability problem persists as no solution has proven to be effective without compromising any of the top features that make blockchain a transparent, secure, and truly decentralized ledger system. However, considering how far the world has come in developing this new technology, we remain optimistic that there will come a solution that will finally make a global-wide blockchain system practical and seamless.

Categories
Cryptocurrencies

9 Best Cryptocurrency Wallets in 2019

Unlike fiat money, cryptocurrencies do not have a central authority or a designated place where you can safely keep them. But just like with real money, you need to store your crypto funds somewhere safe and secure.

Cryptocurrency wallets are the answer to the “how do I interact with my crypto coins safely?” question. A cryptocurrency wallet lets you trade, store, buy, sell, and swap cryptocurrencies in a safe way.

It can be difficult identifying the crypto wallet that suits your personality and needs. Whether you’re the laid back guy or girl that likes to check into cryptoverse once a week, the savvy trader who’s always on top of the market, or the HODLer, we have compiled a list of the top cryptocurrency wallets that are reputable, secure, and convenient to help you navigate the crypto world as safely and rewardingly as possible.

We based our criteria on supported cryptos, security, recovery options, and more. Read on for the top 9 cryptocurrency wallets in the market today.

Top Cryptocurrency Wallets

Ledger Nano X

Ledger Nano X is the latest hardware wallet offered by crypto solutions company, Ledger. The wallet won the “Consumers Innovation Honoree Award” during its launch – stirring the attention of crypto enthusiasts. 

The wallet’s screen is designed to display all the details of your transactions at once. It has two buttons, which will control the entire operation of the hardware wallet. The Nano X is also Bluetooth enabled, enabling you to pair it with your iPhone or Android and check your balance, send and receive crypto, and add accounts – all with a few taps on your phone. 

Ledger Nano X has an in-built rechargeable battery, so you don’t have to worry about tagging along the USB cable everywhere with you. It will also allow you to store up to 22 coins and ERC-20 tokens with its live version and is compatible with other crypto wallets ranging from MyCrypto, MyEtherWallet, Magnum Wallet, Yoroi Wallet, AdaLite, Trinity, Galleon, OWallet, LisKish and more. 

As of November 2019, Nano X supports a cool 1338 crypto assets, from the most popular ones like Bitcoin, Tether, Ethereum, Litecoin, Ripple, Ethereum Classic, Cardano, to other less known ones like Pundi, Quant, Aeternity, RHOC, CA, and so on.

The device is equipped with a state-of-the-art security chip – the CC EAL5+ – making it nearly impossible for your cryptos to be stolen. 

Ledger Nano X allows users to connect it via two ways: USB and Bluetooth. Currently, it’s compatible with 64-bit computers (Windows+, macOS, and Linux), as well as iOS 9+ and Android 7+. 

Also, Nano X allows you to recover your crypto account even if you lose your device. Its 24-word recovery phrase, a.k.a seed phrase, is a list of words that stores all the info you need to recover your wallet.

Ledger Nano S

Listing two wallets from the same company might seem an overkill, but Ledger’s products deserve space on this list simply because they both go toe to toe with the best in the market.

Ledger Nano S is the older sibling to Nano X but has qualities that help it maintain its revered place in the wallet market.

Nano S’ screen lets you see everything at a go, with two buttons that let you control it. Your wallet is protected with a secure chip always locked by a pin code. That and its offline status secures your private key from prying eyes and internet vulnerabilities.

Customers can choose from either matte black, saffron yellow, lagoon blue, transparent, and jade green colors. Nano S can support 1100+ cryptocurrencies and tokens, including Bitcoin, Bitcoin Cash, Ethereum, Bitcoin Gold, Litecoin, Waves, Ark, Stealth, Horizen, and more.

Just like Nano X, Nano S is compatible with other crypto wallets such as Yoroi, MyCrypto, MyEtherWallet, Fairy Wallet, Beryllium, VeForge Vault, OWallwt, Neo Wallet, Kin Laboratory, and more.

You can connect Ledger Nano S to the computer via a USB 2.0 port, and the system is compatible with 64-bits computers (Windows 8+, Mac 10.8+) and Linux. It’s also compatible with Android 7+ smartphones.

The wallet doesn’t need to be charged – it uses your PC’s power when you plug it in.

KeepKey

Launched in 2015, KeepKey is one of the most recognizable crypto wallets. The wallet uses advanced security technology to protect your funds from theft and hacks. Even if someone gets hold of your wallet and installed it in a modified software that’s not designed by KeepKey, the device wouldn’t let them proceed.

Part of the reason KeepKey is popular is that it’s embedded with a cryptocurrency exchange – ShapeShift – making it possible to trade crypto coins and tokens right on the device. 

KeepKey supports 12, 18, and 24 recovery phrases to enable you to recover your cryptos in case the device is spoiled, stolen, or lost.

KeepKey wallet supports eight cryptocurrencies – namely Bitcoin, Bitcoin Cash, Bitcoin gold, DASH, Dogecoin, Ethereum, Litecoin, and Digibyte. It can also host 46 ERC-20 tokens, including Decentraland, Edgeless, FisrtBlood, Gnosis, District0X, Dai, CyberMiles, and more. Also, users can interact with 1000 more cryptos via KeepKey and MyEtherWallet integration.

KeepKey is compatible with Windows, Mac, and Linux, and you will find the KeepKey Client app on either of the platforms via Google Chrome. iPhone and Android users can access KeepKey by installing the MyCelium app available on Google Play and Apple’s App Store. If you want to use a phone to operate KeepKey, you have to connect to your phone using an OTG adapter cable.

Exodus

Exodus wallet is a desktop and mobile wallet that gives users the whole crypto experience – from sending to loved ones to paying for things to HODLing to trading right within the software. It has a simple design that even beginner traders will find it extremely easy to navigate. Its versatile design with real-time display of digital assets; and a customizable portfolio that allows you to change themes, background color, and other features has endeared it to the crypto community.

As of November 2010, the wallet supports 102+ crypto coins and tokens, including Bitcoin, Bitcoin Cash, Bitcoin Gold, Ethereum, Ethereum Classic, plus other little known ones like Genesis Vision, Salt, Otum, Leopring, Aragon, Storj, Decred, TrueUSD and more.

Exodus is a perfect option for users who trade regularly or want to trade on the go. It’s also very convenient to log in to your account and pay for things. And if you lose access to your assets, it provides the option of a seed phrase that will generate your wallet address and private keys.

The wallet doesn’t store any of your information online – including your passcodes and private keys. This is a good thing because it keeps your crypto safe from hackers, but it also means it’s your sole responsibility to protect your account.

Being a software wallet, you don’t need extra hardware like OTG or USB cables to access your wallet. All you need to do is install it on Windows, Linux, or Mac and get to interact with crypto in no time.

CoolWalletS

CoolWalletS is a hardware mobile cold storage introduced in 2016 by the Taiwanese company CoolBitX. With the mobile wallet, you can store, swap, send, and receive crypto at the single touch of a button. The wallet is integrated with Binance DEX and Changelly crypto exchanges, so you never miss any trading opportunity. 

If you’re looking for a discreet (which is a no-brainer when it comes to your private keys), portable, lightweight, and sleekly designed wallet, the CoolWalletS is your go-to option. The wallet is ‘cool’ enough to look exactly like a credit card – so no one will be the wiser to the fact that you’re transacting with a crypto wallet. 

CoolWallet utilizes a high-end security solution – Secure Element (SE) to store your private keys – making it virtually impossible for your coins to be stolen. The secure element is also capable of verifying if your device has been tampered with- by verifying its integrity. CoolWallwet also uses passcodes, a touch ID, and a 2+1 factor authentication (with facial recognition) – which in our opinion sums up to pretty foolproof security. 

On top of that, CoolWalletS is waterproof, shockproof, and temperature resistant – meaning you can get away with quite a lot with your wallet still intact.

The wallet provides support for Bitcoin, Ripple, Ethereum, Bitcoin Cash, Horizen, ICX, stable coins, and ERC20 tokens, with BitDegree, Formosa Financial, Metal, Cortex, USD Dollar, JoyToken and others. 

CoolWallet utilizes Bluetooth Low Energy (BLE) to facilitate connection to your smartphone or tablet. Currently, it supports iOS 9.1+, and Android 5.0+, with at least the BLE version of 4.0. 

Indacoin

Indacoin is a mobile-based crypto wallet offered provided by UK-based Indacoin Limited, the company that runs the Indacoin crypto exchange. Launched in 2013, the wallet allows users to instantly buy crypto with the use of their credit or debit card. As well, you can exchange and manage cryptocurrency from right within the wallet with the use of a single app. However, the wallet does not support selling crypto as of now.

Russia and Turkey users can use Indacoin to withdraw crypto to a debit or credit card. Users from other countries only have the option of crypto-based withdrawals.

The wallet features an intuitive and easy to use interface that makes it stress-free to buy, receive, swap, or trade crypto on the go. The wallet provides support for 100+ cryptocurrencies, including big hitters like Bitcoin, Ethereum, Ripple, Bitcoin Cash, Tether, Litecoin, Binance as well as other less dominant ones like IOTA, Bumbacoin, Chesscoin, CondenSate and so on. 

To ensure users’ safety, Indacoin only accepts 3D-secured cards like MasterCard and SecureCode and Visa Verified. Indacoin also does not store your card details – a move that protects your personal data. Purchases are also verified via a verification code sent via SMS to your phone. 

Indacoin is available for Android 4.1+ and iOS 9.0 and later versions. 

Trezor 

Trezor is almost an instantly recognizable name in nearly every crypto setting. That’s because it was the first-ever wallet to store crypto offline, and it has so far maintained the reputation of being one the most secure hardware wallet out there. Trezor is available in two models: Trezor One and Trezor Model T. The difference between the two models is Model T lets you control it via a touchscreen while One uses two physical buttons.

Both models let you view the status of your transactions on the display. You don’t need a battery to power them since they will be powered by your PC when you plug them in.

Trezor supports 1000+ coins, with big-timers like Bitcoin, Litecoin, Stellar, EOS, DASH, ZCash, Monero and also others you probably haven’t heard of, like Seele, Revain, FunFair, GNY, Unobtanium, Fusin, Tael, Ruff, Numerai, Insolar, Polis, DADI and so on.

The wallet is also compatible with other crypto wallets, including Exodus, Magnum, Bloks.io, AdaLite, and Yoroi.

Trezor provides the option of creating a seed phrase that protects your private key in the event of theft, loss, and destruction. It supports BIP39 phrases – which it doesn’t store nor remember. This way, even if someone gets their hands on your wallet, your account remains safe. As a further protective measure, Trezor’s hardware case is ultrasonically welded in such a way that it cannot be restored after breakage. 

The device is compatible with both computers and smartphones. If you have Windows 7 and later versions, macOS 10.11+, Linux, and Android, you can get Trezor and try it out.

Guarda

Guarda is a non-custodial web, desktop, mobile, and Chrome Extension wallet that allows you to buy, sell, receive, send, and store crypto. Introduced in 2017, the wallet is one of the few that allows so many functionalities for crypto in ‘one roof.’

The web and desktop wallets can be used on any device running on Windows, Linux, or macOS, while the mobile-based wallet allows Android and iOS users anywhere, anytime. Its inbuilt crypto purchase function lets you buy crypto using both crypto and fiat currencies. Besides, it features an exchange that lets you effortlessly swap coins from one currency to the other.

All Guarda’s wallets are non-custodial – meaning you are entirely in charge of your addresses and private keys. Also, your personal information is not out there in the hands of a third party, and you won’t be subjected to intrusive Know Your Customer procedures.

Guarda requires you to save a backup file each time you create or import a wallet. You get logged out of the account if there’s no activity for a particular period. All backups are secured through the cutting edge Advanced Encryption Standard (AES), so your sensitive data is always safe and secure. What’s more, you can configure the mobile version wallet to require Touch ID/Face ID unlock.

You can even import private keys From Guarda’s own wallets or other exchange, desktop, or web-based wallets. There’s also a dedicated menu that lets you connect to Ledger Nano S and view your transactions on the Nano S wallet on Guarda. 

You can create your own ERC20 tokens via the wallet’s Guarda Token Generator – another exciting functionality of this wallet.

Guarda supports over 40 major blockchains and 10,000+ tokens. Household names like Bitcoin, Ethereum, DASH, Litecoin make the list. So do other little known ones like Groestlcoin, ReddCoin, Maker, Gulden, Expanse, Gemini dollar, and so on.

Coinbase

Coinbase wallet is an app wallet provided by the crypto exchange Coinbase that offers your state of the art security for your crypto. With Coinbase, you can store tokens bought from other exchanges or Initial Coin Offering events. Users can also interact with Ethereum-based decentralized applications (DApps) on its DApp browser.

Cooinbase is a separate product from the exchange – meaning you don’t have to have an account on the exchange to access and use the wallet. Anyone from anywhere with any IOS or Android device can download and install it.

It’s important to distinguish between the Coinbase wallet and the exchange wallet on Coinbase.com. The exchange wallet will store your private keys on Coinbase’s servers, while the wallet app lets you store your private keys on your device. Also, with the app, you can easily move cryptocurrency from its existing wallet apps like Metamask, MyEtherWallet, and others.

With Coinbase Wallet, your private keys are secured with Secure Enclave – a high-end security feature that enables your wallet to remain intact even if it were hacked. On top of that, the wallet employs biometric technology to prevent unauthorized success.

Another remarkable feature by the wallet is always keeping you up to speed with the current price of cryptos in your local currency. Over 100 fiat currencies are supported – including EUR, GBP, USD, AUD, and CAD.

Currently, the Coinbase wallet lets you manage Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, and all ERC-20 tokens. You can also store cats, monsters, art, and even ERC721 digital collectibles all in one beautiful gallery.

The wallet lets you back up your private keys on Google Drive and iCloud. Some people are skeptical about how safe those options are, but with a strong, unique password and multiple-factor authentication, we think they can be considered safe.

You can operate the wallet on iPhone, iPad, and iPod Touch as long as the device supports version 11.0 or later versions. For Android devices, you need to have at least the 6.0 version or later versions. The Coinbase wallet app is available for download on Google Play and iOS App Store. 

Conclusion

If you’re serious about crypto, you need to get a safe, secure, and robust crypto wallet. Each of these options provides one of the best experiences possible of interacting with crypto. Of course, you should get the wallet that best suits your needs, your personality, and how regularly you interact with crypto. Also, ensure to buy your wallet directly from the company’s website, just to stay safe. 

Categories
Cryptocurrencies

Personal vs. Hosted Wallets: Don’t Buy any Crypto before Reading this

If you’re crypto user, you may have heard of the expression “Not your keys, not your coins.”  This phrase summarizes the debate among crypto users about which is a superior crypto wallet – personal or hosted. It originates from the idea that if your crypto is stored in a wallet whose crypto key you don’t possess, then you can’t truly claim ownership over those coins. 

Difference between Personal and Hosted Wallets

A cryptocurrency wallet is necessary if you want to store, trade, or spend crypto. There are many crypto wallet providers in the market that can help you interact with crypto safely and securely. Some crypto newbies get confused about whether these providers offer personal or hosted wallets.

A personal wallet, also known as a non-custodial wallet is one that allows only one person to know and possess the private key – the owner. Also, the wallet provider does not control your crypto holdings.

By contrast, a hosted wallet, a.k.a a custodial wallet allows a third party to know your private keys without revealing them to you. The provider controls your crypto – i.e. sending, receiving, and storing it on your behalf. Thinks of a hosted wallet as akin to a bank – it stores your cash and will not give you the keys to access the vault, but it has promised to avail the money to you upon request.

The Caveat

Both wallets may look like and function the same way, but the ramifications of using either are polar opposites. For example, the question of who is responsible if crypto funds are lost or stolen falls on whoever held the keys.

However, crypto holdings that have more than one private key present the conundrum of who is liable in case of loss. (Some wallets require more than one party to hold the private keys. One key could belong to you, the other to the hosting service, and the other to a trusted third party. Such wallets are known as multi-signature wallets.) It’s important that before you commit to anyoneany one wallet provider, you clarify if it’s you, or your wallet provider, who controls the keys.

Now, both types of wallets come with their perks, but each one also comes with its cons. Let’s take a look at each’s benefits and disadvantages below.

Pros and cons of personal wallets

Pros of Personal Wallets

You have full control over your crypto funds. You won’t have to submit a request every time you wish to send or spend them

You get to choose your fees – either the default fee or a higher fee depending on how fast you want a transaction to be

Your funds are safe from hacking, phishing attacks, and other vulnerabilities associated with the internet (which is where most hosted wallets are stored)

You are not subject to any Know Your Customer (KYC) procedures. (KYC is the process of verifying the identity of a customer and assessing their suitability for services)

You can store your coins offline, which is a far safer storage option especially for large coin holdings

Cons of Personal Wallets

Losing your private key when you had not backed it up means your crypto funds are lost forever.

Your funds are at risk of being stolen if your device, e.g., mobile or computer, is compromised by a virus or other type of malware

Pros and cons of hosted wallets

Pros of Hosted Wallets

Your wallet provider can help you recover your funds if you make a mistake, e.g., sending funds to a wallet that’s no longer supported, forgetting your login details, and so on

Some wallet providers allow you to transfer funds free of charge to users of the same wallet

You can access your funds more conveniently whenever you want to send or transact in crypto

Some hosted wallets provide a backup fund, like insurance, to compensate customers if your cryptos are lost as a result of a mistake on their end.

Cons of Hosted Wallets

Some wallet providers are known to freeze/ confiscate customer funds as a result of perceived illegality on the customer’s end

You can be subjected to KYC procedures which may reveal too much of your personal information

Some wallet providers will charge you extra fees as a way for them to gain profit

Your wallet is susceptible to hacking, resulting in your KYC information and funds being compromised

Conclusion

Now that we’ve dissected the meaning behind hosted and personal wallets and the perks and shortcomings of both, it’s up to you to determine if “Not your keys, not your coins,” rings true after all. The fundamental difference between personal and hosted wallets is that in one type, you’re in full custody of your crypto, while in the other, the coins are indeed yours, but you don’t have complete control. Before you decide on a wallet, do your research and determine which type of wallet meets your needs.

Categories
Cryptocurrencies

A Simple Guide to Cold and Hot Wallets

Cryptocurrency wallets are software or devices that allow users to send, receive, and store cryptocurrency.  Most cryptocurrencies have designed their own wallets, e.g., Bitcoin has the Bitcoin wallet, Ethereum has the Ethereum Wallet, and Litecoin has Litecoin-QT. However, there are some companies that design third-party wallets that allow you to store more than one type of cryptocurrency. If you want to interact with any cryptocurrency, i.e., sending, storing, and spending, a cryptocurrency wallet is necessary.

There are two broad categories of wallets: hot and cold wallets. In this explainer, we delve into what makes a wallet hot or cold, the pros and cons of each, and how to stay safe when handling crypto – whether you’re using a hot or cold wallet.

What Are Hot and Cold Storage Wallets?

The terms hot and cold wallets are used to describe the medium that is storing a cryptocurrency. Hot wallets are purely online-based, while cold wallets are offline-based. In other words, hot wallets are connected to the internet, while cold wallets are not.

A hot wallet is hosted online through platforms that offer these storage services. A user entrusts their public and private keys to the platform, which then secures and manages it for them.  Many hot wallets are free – all you need to do is sign up and start using the service. It’s advisable not to store huge amounts of cryptocurrencies in a hot wallet – they are vulnerable to hacking. Also, you should research intensively before committing to one type of hot wallet. This is due to the following reasons:

☑️ Some hot wallet providers are not providers at all – they are scam projects looking to rip off oblivious users

☑️ Different hot wallet providers provide different user interface experience

☑️ Some hot wallets are designed to work in tandem with other apps or to support only certain cryptocurrencies

☑️ Different hot wallet providers have varying levels of expertise, commitment to safety and security, and different end goals

☑️ Some hot wallet providers are willing to continuously upgrade their model to keep up with changing hacking tricks, while others are not

Cold wallets are considered the safest crypt wallets because they are immune to cyber-attacks and other on line hazards.

Just like with hot wallets, you should consider the following factors before committing to any cold wallet:

☑️ The wallet shouldn’t be too hard to use – choose a wallet that doesn’t need a lot of practice before you can get it right

☑️ The wallet should be convenient – while all cold wallets are more suitable for long term storage and HODLing, some provide more convenience in terms of size, being discreet, etc.

Types of Hot Wallets

Hot wallets fall mainly into two categories: cloud-based wallets and multi-signature wallets. What sets these categories apart is the number of keys that control the crypto account.

Cloud wallets store cryptocurrencies using any device that has an internet connection, including a smartphone or computer.

Multi-signature wallets, also known as multi-sig wallets, are wallets that require more than one key in order for the transaction to proceed. This makes it difficult for hackers to access the information or execute a brute force attack on the wallet (which is guessing multiple private keys until you find the right one.)

A multi-sig wallet may, for example, issue three private keys: one held by the host, the other by the user, and the other one by a third trusted party.

Types of Cold Wallets

There are two types of cold wallets, and these are hardware and paper wallets.

Hardware wallets are physical devices that keep your private keys on a hardware device with the look and functionality of a USB device. Some developers provide hardware devices that are compatible with several web interfaces, but not interacting with the internet at all. In the same way, hardware devices let you conduct online transactions without having your private key interact with the internet whatsoever.

Paper wallets, on the other hand, are generated by printing out your private key and storing it offline. A software program creates them offline and is then deleted afterward to erase any trace of the key.

Cold or Hot Wallets?

New crypto users often ask themselves this question: Which is better, cold, or hot wallets? Well, that depends on your needs.

If you’re going to be interacting with your crypto often, e.g., by active trading or paying for things regularly, then it’s best to operate an easy-to-access hot wallet. However, it’s highly recommended that you don’t keep large sums of crypto in a hot wallet since if it gets hacked, you will lose all your cryptos. In other words, store small sum, for-daily-use cryptos online, and keep the rest in cold storage.

In terms of security, cold wallets win hands down. They are safe from viruses, hacking, and other types of malware. Some developers even design them in such a manner that even if you plug them in a computer that has malware, it remains unscathed. However, cold wallets are susceptible to getting lost, a fire, water, or theft. The lesson here is to keep your cold wallet in a secure, private place safe from prying eyes, fire, water, and wear and tear.

As we’ve so far mentioned in this article, hot wallets are susceptible to internet hazards like hacking, phishing, scamming, and so on. Online wallet providers may put in place the most stringent security measures, but even that has been known to fail. The most foolproof measure to secure your online-based cryptos may be insurance. Some sites like Coinbase and Binance have insured their clients’ crypto assets in case of loss or theft, which is reassuring.

Based on this information, the decision to use hot or cold storage is entirely yours. However, you should first know the advantages and disadvantages of each type of wallet before deciding upon either. Here are the perks of hot and cold wallets together with their cons.

Pros and cons of hot and cold wallets

Pros of Hot Wallets

Most of them are free

They offer quick access to your cryptocurrency

They are easy to use

Cons of Hot Wallets

They are susceptible to cyber fraud and cannot guarantee full safety

Your funds can be permanently lost in the hands of your wallet provider.

Pros of Cold Wallets

They are secure and robust methods of storing crypto assets long-term

They are immune from cyber fraud

You don’t entrust them to a third party – you are in full control of your funds

Cons of Cold Wallets

They can be expensive, depending on the model

They are not ideal for day-to-day use or for making micropayments

They are susceptible to loss, theft or external damage

They are not convenient for trading purposes

Best Practices for Keeping Your Wallet Secure 

Whether you settle on a hot or cold wallet, you can save yourself a lot of heartache by taking some safety precautions:

  • Keep as little cryptocurrency as possible in the wallet that you use frequently
  • Use applications such as Google Authenticator to enhance security for your online wallet
  • Disable any automatic updates for your hot wallet
  • Don’t access your hot wallet via public Wi-Fi
  • Enable multiple-factor authentication for your wallet
  • Backup your wallet and keep the backups in several safe locations
  • Update your software regularly

Conclusion

If you’re looking to invest, trade, or make transactions using cryptocurrency, a crypto wallet is essential. A good wallet can be the difference between safely keeping your coins and losing them. The most important thing to remember is that hot or cold; your wallet’s safety largely depends on you. Also, remember to take your time and go over the available options before deciding to settle on any particular wallet.

Categories
Cryptocurrencies

The Supply Structure of Cryptocurrencies

Cryptocurrencies are unlike any other asset in several ways. One of these is their deflationary nature. Just like fiat currency, cryptocurrencies will decline in value if their supply exceeds demand. Different cryptocurrencies use different tactics to combat inflation – from burning coins to destroying, to limiting mining rewards so that fewer coins are released into circulation. Others have a fixed supply cap so that their supply is always less than their demand – preventing their devaluation. 

Cryptocurrencies can be grouped into three supply classes based on their supply cap and the deflationary tactics they employ so that their supply never exceeds demand. Majority of cryptocurrencies fall under the following supply classes: 

  1. Finite supply with no emission
  2. Finite supply with controlled emission
  3. Infinite supply with uncontrolled emission

Emission, a.k.a emission curve, emission rate, or emission schedule is the speed at which a cryptocurrency’s coins or tokens are released into circulating supply. The majority of cryptocurrencies are designed so that new coins are released on a regular basis – which is referred to as controlled emission. 

Others have been designed so that no further release will ever take place (no emission), while others are designed while leaving the emission question open-ended. In other words, such cryptocurrencies have uncontrolled emission. 

In this explainer, we discuss some of the well-known cryptocurrencies to shed light on these supply classes and the anti-inflation approaches they employ. 

Finite Supply with No Emission

In this category, we discuss three popular cryptocurrencies that have a finite supply with no emission – namely NEM, Binance Coin (BNB), and Ripple (XRP).

☑️ NEM – New Economy Movement is a blockchain network whose native currency is XEM. The NEM blockchain was launched in 2015 with the goal of building a “new economy based on the principles of financial freedom, decentralization, equality, and solidarity.”

XEM is particularly very popular in Japan, where it’s hailed as second only to Bitcoin. The crypto has enjoyed top-ten status in the largest cryptocurrencies by market capitalization – for instance, being seventh in 2017. As of November 2019, the crypto is occupying the 28th position. 

The crypto has a fixed (finite) market supply of 9 billion. And transactions are validated through harvesting.

Harvesting in NEM is similar to mining in Bitcoin – serving the same purpose of validating transactions and creating new blocks in exchange for the native coins. The cryptocurrency introduced the proof of importance consensus mechanism – which essentially means granting voting power based on how many coins a user owns and how many transactions they have made. Thus, whoever gets to harvest a block is determined by randomly selected big stakeholders on the XEM network. 

☑️ Binance Coin (BNB) – BNB is the native currency of the Binance platform. Binance is a crypto exchange – currently the largest in the world by market volume. Binance coin was initially launched on the Ethereum blockchain but has since been moved to Binance’s own blockchain – the Binance Chain.

Binance coin’s supply is capped at 200 million tokens. The crypto cannot be mined, as all coins were pre-mined before the Initial Coin Offering (ICO). 100 million tokens were offered to the public during the ICO, 80 million given to the founding team, and 20 million to angel investors. 

Today, BNB is used by traders on the Binance platform to pay for trade transactions like trading fees and withdrawal fees. The coin can also be traded for other crypto coins. Users on Binance exchange receive a 50% discount for the first year, a 25% discount the following year, a 12.5% discount rate the third year, a 6.75% rate in the fourth year, and no discount then onwards. 

As the discount rate decreases, so will the value of the crypto-coin. To counteract this devaluation, Binance utilizes a process known as “The Burn.” The platform will burn tokens based on the performance of the trading platform until 50% of the crypto is destroyed. The aim of this burning will be to stabilize the price of BNB overtime. After 50% is burned, only about 100 million tokens will remain.

☑️ Ripple (XRP) – XRP is the native currency of the Ripple platform. The Ripple platform was created with the aim of using blockchain technology to improve payments, remittances, and currency exchange. This would be achieved by making these processes quicker, cheaper, and faster. The XRP token acts as the in-between between currencies. Since it doesn’t discriminate against any currency, it becomes a bridge between one currency to another.

The Ripple cryptocurrency – abbreviated as XRP, is the third-largest crypto by market capitalization. The maximum supply of XRP is 100 billion tokens – all of which were mined pre-release. According to Ripple, no more coins will be created.  

Over time, the supply of cryptocurrency will decrease. Ripple achieves this by destroying the XRP tokens after they facilitate transactions. At the time of issuance, Ripple founders awarded themselves 20 billion tokens. In 2017, the company placed 55 billion tokens into an Escrow account – selling 1 billion tokens every month for the next 55 months. If all coins are not bought, the remaining tokens will be returned to the account for sale after the 55 month period. 

Finite Supply with Controlled Emission 

In this category, we will discuss the most recognized cryptocurrency that fits the limited supply with controlled emission – or whose creation is a regulated process. 

Bitcoin is the pioneer cryptocurrency. At the time of this writing, its market cap is $156 billion, commanding more than half the total crypto market. Bitcoin’s supply is capped at 21 million, and the release of new Bitcoins is achieved through a process known as “mining.” 

The bitcoin network has been programmed to award “blocks” every ten minutes to miners who are, in turn, awarded free Bitcoins for their effort. The block rewards are halved for every 210,000 blocks mined. 

At inception, miners received 50 coins for every block mined. It was then halved to 25 coins, then to 12.5 coins, with the next halving – in May 2020, bringing them to 6.25 coins. If the Bitcoin network remains intact and the halving process maintains the same formula, Bitcoin will reach its max supply in 2140. 

Infinite Supply with Uncontrolled Emission

Cryptocurrencies in this supply category have no supply cap, and their release into circulation is not a fixed variable. We’ll use the most popular crypto falling in this category – Ethereum. 

Ethereum is an open-source blockchain that enables people to create decentralized applications. Launched in 2015, it’s a result of the movement towards eliminating third internet parties from monetary transactions.  

The platform enables the creation of smart contracts and decentralized applications without the possibility for downtime, fraud, or third-party interference. (Smart contracts are computer nodes that allow the exchange of anything of value. Ethereum allows agreements between parties to self-execute when specific conditions are met – hence “smart contracts”)

Ether (ETH) is the native currency of the blockchain platform, and it’s used to fuel transactions on the network. It currently has no capped market supply, with its developers having a “we’ll figure it out as we go” approach. ETH miners originally received 5 ETH as block rewards, but this was reduced to 3 ETH after the Byzantium update to the Ethereum blockchain in October 2017. The reduction in block rewards is in an effort to reduce inflation and devaluation of the currency by reducing the amount of newly released ETH.

However, discussions are in place in the Ethereum community to introduce a hard cap on ETH. Vitalik Buterin, one of the key developers of the network, suggested this in April 2018: “In order to ensure the economic sustainability of the platform under the widest possible variety of circumstances…I recommend setting a MAX_SUPPLY = 120, 204, 432 of ETH…” However, discussions by ETH developers and enthusiasts about the subject are yet to yield fruit as of November 2019.

Conclusion 

It will be very intriguing to see the evolution of crypto supply models adopted by new and yes – existing cryptos as we go forward. Will the crypto market be more favorable to flexibility, as in the case of infinite supply with uncontrolled emission, or certainty – as in the case of cryptocurrencies such as Bitcoin? Will it matter at all? Whatever the case may be, the cryptoverse is set for some interesting times ahead. 

Categories
Blockchain and DLT Crypto Daily Topic

Smart Contracts: A new phase of contracts

When the first cryptocurrency – Bitcoin, came into existence, it brought with it more than a digital medium of exchange. Blockchain, the technology underlying it, has brought with it more possibilities that can revolutionize entire industries and even society itself.

Smart contracts are one of the most interesting and explored applications of blockchain technology. Today, Ethereum is almost synonymous with smart contracts – and that’s because it’s the most successful blockchain in providing a platform for people to create smart contacts. In this article, we discover what exactly smart contracts are, their current standing in today’s world, their strong and weak points, and more. But first, where did this whole concept of smart contracts emanate from?

The History of Smart Contracts

The concept of “smart contracts” originated in 1996 with Nick Szabo, a computer scientist, legal scholar, and cryptographer. He defined smart contracts as “a set of promises, specified in digital form, including protocols within which the parties perform on these promises.” As for why “smart,” he explained: “I call these new contracts “smart” because they are far more functional than their inanimate paper-based ancestors.”

Szabo went on and refined the concept over several years – releasing new literature on the subject. He described the concept of establishing contract laws via e-commerce protocols between strangers on the internet.

But the idea of smart contracts remained that – just an idea, until 2009, when Bitcoin, the first cryptocurrency emerged, along with blockchain technology. Blockchain provided the environment where smart contracts could now be implemented.

Nowadays, smart contracts are mostly associated with cryptocurrencies, whose underlying technology is blockchain. And although Bitcoin broke the ground for smart contracts, it has limited support for the function. Today, the Ethereum blockchain is the most popular platform for creating smart contracts.

What Are Smart Contracts?

A smart contract is a protocol that allows you to exchange anything of value in a transparent, self-executing, and undeniable way without the need for a middle man. Smart contracts are indeed the reason why the blockchain is referred to as decentralized because they allow us to execute trackable, unalterable, and safe transactions without the involvement of a central authority.

Smart contracts have all the information about a transaction, and they self-verify and self-execute once all the conditions have been met. Unlike traditional contracts, smart contracts are purely computer-generated. A programmed code delineates the obligations, rules, and penalties of the involved parties – the parties involved can even be people who have never met but who are nevertheless bound by the agreement.

With smart contracts, a party cannot deny their involvement at a later date. 

Jeff Garzik, the owner of blockchain technology company Bloq, describes smart contracts as such: “Smart contracts guarantee a very, very specific set of outcomes. There’s never any confusion, and there’s never any need for litigation.”

Objects of Smart Contracts 

Any smart contract has three integral parts to it. Also known as objects, the three integral parties are as follows:

  • Signatories – who are parties subject to the contract and who agree or disagree with the terms set out – using digital signatures
  • Subject of agreement – this object has to exist within the smart contract’s environment.
  • Specific terms – these are the obligations expected of all parties and the rules, rewards, and penalties associated with those terms. The terms must be mathematically described using a programming language suitable for the particular contract’s environment.

How Do Smart Contracts Work?

Smart contracts are essentially deterministic processes – which means their end behavior is entirely dependent on initial input. They execute agreements if and when certain conditions are fulfilled. As such, smart contracts work on the “if…then” premise. It’s important to note that smart contracts are not legal contracts, but pieces of code running on a blockchain.

Smart contracts running on the majority of blockchains are akin to a vending machine. You simply input your cryptocoin into the vending machine (in this case, the blockchain ledger). If your input satisfies the code within the smart contract, the smart contract executes the terms of the agreements set out in it.

For instance, “If Person A completes task 1, then payment from Person B is delivered to Person A.” Based on this protocol, smart contracts allow for the exchange of any kind of value, with each contract duplicated many times over and stored on publicly distributed ledgers. Once that happens, data encryption is employed to ensure the full anonymity of the participants.

Features of Smart Contracts

Smart contracts have inherent characteristics that are unique to them, and that set them apart from conventional contracts. These characteristics are as follows: 

Distributed. Smart contracts are replicated and distributed across all the nodes in a blockchain network 

Deterministic. Smart contracts only execute the actions they were instructed to, provided the conditions are met. Also, the outcome is the same, no matter who executes it

Autonomous. Smart contracts self-execute themselves by automating all sorts of tasks

Immutable. Smart contracts are unchangeable after being executed. As such, we can say they’re tamper-proof

Customizable. Before they’re deployed, smart contracts can be coded to suit specific preferences and needs

Trustless. Thanks to their automated process, parties can transact via smart contracts without knowing or trusting each other

Transparent. Smart contracts take place on a publicly available ledger. So, anyone can verify the details of a transaction

Potential Applications of Smart Contracts

Smart contracts can be used to improve and streamline processes across a wide chain of industries. Here are some examples:  

☑️ Elections

Since they are publicly verifiable, trackable, and irreversible, smart contracts would provide a fool-proof, secure system, allaying all concerns about elections rigging. Also, smart contracts would enable voters to vote online, allowing them to make their voice heard from whatever location they’re in. 

☑️ Management

Today’s business operations are riddled with back-and-forth verification and approval processes that slow down productivity. A blockchain ledger acts as a single source of trust as well as streamlines communication and work processes thanks to its accuracy, transparency, and autonomy.

☑️ Automobile

By using smart contracts, it could be easier to determine whose fault it was in an accident – the sensor or the driver, in self-driving cars. Also, automobile insurers could know how to charge rates depending on where, and under which conditions customers were operating their vehicles.

☑️ Real Estate

Smart contracts would help real estate agents cut on advertising costs. Since the blockchain is publicly available, all you would need to do is pay with cryptocurrency and encode your contract on the ledger. On the ledger, your services are open for everyone can see, helping you cut on advertising costs and so on.

☑️ Healthcare

Smart contracts could improve the healthcare industry in so many ways. Firstly, personal health records could be encoded and stored on the blockchain with a private key available to only the relevant parties. Receipts of delivered services could be stored on the blockchain and sent to insurers as proof of delivery. Smart contracts would also make it inherently easier to perform general healthcare management tasks such as regulation compliance, result testing, and managing health care supply inventories.

☑️ Insurance

With smart contracts, it would be easier to fulfill insurance claims when certain conditions are met as per the client-company terms of agreement. Also, smart contracts would come in useful in times of disaster by allowing people to claim their money in a timely fashion. Details like the degree of damage or loss can be recorded on the blockchain and compensation decided upon accordingly. 

☑️ Internet of Things (IoT)

IoT technology enables everyday devices to be connected to the internet in order to improve their usefulness to us. These devices could be connected to the blockchain to track all the products and processes in action.

And in e-commerce, Blockchain technology combined with IoT would enable the location and possession of products so that the right product gets delivered to the right person.

☑️ Mortgaging

Smart contracts would eliminate the need for middlemen and lengthy processing usually involved in mortgage agreements. Also, all details and information could be stored in a location where anyone can verify at all times.

☑️ Employment Contracts 

Smart contracts could help reinforce employer-employee contracts. The terms, conditions, and expectations on either side would be made clear, helping to improve fairness. Moreover, smart contracts can be used to streamline salary processing and avoid delays. They can also be used to improve transparency by preventing companies from altering an employee’s contract once they’re hired. 

☑️ Supply chains

The supply chain – the flow of goods from production to the final user is a central part of many industries, and it involves a lot of work verifying and tracking products. Smart contracts can remove the need for this as every detail is available on the blockchain, where everyone can track the location of commodities at any time. And if an item is lost in the process, smart contracts can be used to identify its exact location.

Besides, smart contracts bring transparency to the whole supply chain so that no party can default or breach the contract terms.

Blockchain platforms That Support Smart Contracts

The following blockchains are some of the most popular platforms facilitating the creation of smart contracts. Of course, Ethereum is the most recognized of them all because it was built almost solely as a smart contract platform. NEM, the blockchain supporting the cryptocurrency XEM, is also popular because it allows users to create smart contracts with Java, one of the most widely used programming languages in the world. These are the go-to blockchains for smart contracts in 2019:

Pros and cons of Smart Contracts

Smart contracts provide several benefits to users. From watertight security to saving on costs to accuracy, the following are the advantages of using smart contracts:

Pros of smart contracts:

Autonomy

Smart contracts allow you to eliminate the need for third parties, e.g., lawyers, facilitators, guarantors, etc. – granting you full control of the agreement process.

Time-efficient

Smart contracts remove the need for intermediaries and the lengthy processes involved in traditional contracts. Everything is executed in a timely fashion, which avoids delays.

Precision

The code that is the smart contract is written in a detailed manner outlining the obligations, rules, and penalties pertaining to the agreement. As such, the smart contract becomes a comprehensive agreement that accomplishes everything upon execution. This precision helps ensure there can be no room for miscommunication or misinterpretation. And in case of any error, it’s easy to track exactly where it occurred.

Safety

Smart contracts are protected with high-level cryptography, which provides the highest safety standards. It’s extremely difficult to hack smart contracts – so users can be sure their documents are safe and secure. 

Efficient

Owing to their accuracy, security, and time-saving qualities, smart contracts provide a high level of efficiency that helps the parties involved realize more value-generating transactions.

Paperless

Since smart contracts use computer codes, the use of paper is eradicated. This saves on stationery costs and also helps companies reduce their carbon footprint and contribute to environmental protection.

Storage and Backup

Smart contracts are accurate to the tiniest of details. All the details of any transaction are stored on a public ledger, and any of the signees can access them at any time. And in case of any dispute regarding the terms of agreement, the parties can refer to the public ledger.

Saves money

As smart contracts only involve the signatories to the agreement, there’s no need for intermediaries and third parties like lawyers, witnesses, etc. Thus, the money that would have been used to pay these third parties is removed from the equation.

Trust

The properties of transparency, autonomy, and security of smart contracts generate confidence in their execution. They eliminate any chance for manipulation, bias, or manual errors. Also, their undeniable nature significantly removes the need for litigations since every detail is clear on the blockchain.

Speed

Smart contracts run on computer codes and exist on the internet. There is no need to process or verify documents manually or correct every little detail. As a result, they can complete transactions very fast. 

Cons of Smart Contracts:

Smart contracts also have their own share of challenges. Most of these challenges arise from the fact that they are still an evolving technology. Some of the challenges are:

They Are Vulnerable

Smart contracts are still a young technology. For example, the code that makes up the contract has to be perfect and bug-free. However, mistakes can still be made that would allow bugs into the network – which would be exploited by scammers.

Government Regulation

The novelty of smart contract technology leaves a lot of questions unanswered. How will governments regulate these contracts? How will they be taxed? What happens when the contract can’t get to the subject of agreement?

Immutability

The unchangeable nature of smart contracts can be advantageous in some situations, but not so much in others. For instance, hackers made away with millions of ether (ETH) after they hacked a decentralized autonomous organization (DAO) in 2016. This was possible partly because developers were unable to fix the code. This is what eventually led a hard fork that gave rise to a second Ethereum chain – Ethereum Classic. Had it been possible to fix the code, this situation would have been mitigated.

Uncertain Legal Status 

Smart contracts do not fit into the current legal framework in many countries. Most contracts today require parties to be at least a certain age and be properly identified. The anonymity and lack of intermediaries make those requirements a challenge.  

Limited Use

For now, smart contracts can only be used to agree on assets of digital value. This poses a challenge when it comes to transacting in real-life assets.  

Examples of Real-life Uses of Smart Contracts

While most governments and the banking establishment have an ambivalent attitude to cryptocurrencies, the technology behind – blockchain, and smart contracts have had a more welcoming reception. Smart contracts are now being implemented across various industries. The following are examples of real-life applications of smart contracts:

Inmusik is a streaming platform that uses smart contracts to decentralize revenues and properly allocate revenues to the rightful contributors. Powered by blockchain technology, the company can facilitate fair and lucrative payouts for artists, collaborators, labels, and also incentivize music listeners by offering rewards to music listeners.

Ascribe is a digital platform that uses smart contracts to facilitate secure ownership of digital work by the rightful artists. The blockchain technology enabling this allows artists to track where their work is published on the web so that they can claim their rightful publication fee.

Tracr is a blockchain-based project that helps improve the diamond industry’s supply chain by monitoring the production and traceability of diamonds, reducing compliance costs, and improving visibility in the chain. It also helps to enhance privacy and security in regards to handling sensitive data in the chain.

Applicature is an agency that uses smart contracts to protect patients’ privacy, reduce healthcare transaction costs, and improve healthcare protocols. Patients have access to a secure and transparent record of their health information, and practitioners get rid of go-betweens and red tape in data conservation and compliance procedures.

The Future of Smart Contracts 

Smart contracts are still an evolving technology. Their future lies in detangling some of the issues that have held smart contracts from achieving mainstream acceptance. Some of these are the question of their legal status, regulation, and the ‘final’ nature of their transactions. 

Still, blockchain enthusiasts see the technology making a significant impact on law, the merchant industry, credit, accounting, etc. It’s possible that we’ll begin seeing smart contract templates – which are legally enforceable smart contracts. We’ll also start seeing accountants utilize smart contracts for real-time auditing as well as the merging of smart contracts into a hybrid of paper and digital content where transactions are verified on the blockchain and corroborated by physical copy.  

Conclusion

Smart contracts have the potential to change how we carry out daily transactions. They can help increase trust, save money, and revolutionize entire industries by introducing more transparency and facilitating accountability. For now, crypto and blockchain enthusiasts are keenly watching smart contract technology evolve further, and if after all, the technology will manage to transcend the current barriers to its full-scale adoption across different facets of businesses and society.

Categories
Crypto Daily Topic

Golem: The Disruptive Blockchain You Haven’t Heard About

The first-ever cryptocurrency – Bitcoin, brought along with it a host of possibilities that couldn’t be imagined before. The technology behind it – blockchain, is now being incorporated into various facets of our lives – from letting people share monetary value to hard drive storage and now, thanks to Golem, a way to let people share computing power.

Golem is a global, open-source, and a decentralized supercomputer that combines the computing power of machines in its network – from PCs to data centers. The idea is to capitalize off of idle computing power by letting users rent processing power to other users and being paid for it. The Golem concept was in development for three years before being launched in the Ethereum blockchain.

How Golem Works

Golem’s end goal is to build a distributed and decentralized supercomputer by connecting computers around the world via its blockchain.  Golem users will be able to rent their spare computing power to other users who will, then, pay with the Golem Network Token (GNT). The network will allow you to perform such tasks as artificial intelligence (AI), Computer Generated Imagery (CGI) rendering, simulating neural networks, machine learning, DNA sequencing, scientific computing, simulation building, and more.

The interesting coincidence is that Golem has built its decentralized computer on the decentralized Ethereum network – making it a decentralized supercomputer on a decentralized computer. So how will users transact on the Golem network?

Now, the user buying computing power is the requestor, and the one renting it out is the provider. Let’s assume the requestor’s task is the same class as one of the task templates that Golem provides. If it isn’t, they would have to write their own code for the task using the task definition framework provided by the network.

The provider receives all the broadcasted task offers and chooses the best one based on each one’s reputation. They then send the price and the computing power info to the requestor. The requestor then assesses the provider’s reputation to determine if to go ahead and work with them. If everything checks out, the provider receives the appropriate resources through the InterPlanetary File System (IPFS) and initiates the computation on the task computer. (IPFS is a peer-to-peer file and data sharing system in a distributed file network.)

The task manager then passes this info to the appropriate node for verification of the results. (The requestor may also decide to run the info via numerous nodes). Lastly, the payment system is notified through an Ethereum smart contract, allowing the funds to be transferred from the requestor to the provider. The reputation of both parties relies on each one’s execution in the transaction: the provider sending accurate results and the requestor paying promptly.

The Golem Network Token

The Golem Network Token is the native currency of the Golem network and is the medium through which requestors pay for renting computing power. The token can only be used to transact in Golem’s products and services. 

GNT has a total supply of 1 billion. Its Initial Coin Offering took place in November 2016, during which 820m coins were distributed. It has an impressive record of raising 820,000ETH (around $340m) in 20 minutes. Another 120m was held by the Golem project, and the rest of 60m was distributed among Golem’s team members.

The token cannot be mined. You can earn it by sharing your free processing power. The more power you share, the more you GNT you earn.

Supercomputing and Golem’s Plan

Supercomputing is one of the modern age’s most crucial innovations. New technologies such as machine learning, CGI, artificial intelligence, and scientific computing require a lot of processing power.

The Golem whitepaper has planned four key network supercomputing milestones for the network in the following progressive order: Brass, Clay, Stone, and Iron. The network first released Brass – which includes Blender and LuxRender, two software programs for CGI rendering.  Later releases are scheduled as follows:

☑️ Clay – which includes the Application Registry and Tak API

☑️ Stone– which includes the Certification Mechanism and Transaction Framework. Users will be able to use this release in a Software as a Service model (SaaS)

☑️ Iron – this release will feature more security and stability and will allow developers to design applications that can run outside the sandbox

As of now, the network is still in the Brass stage. As a result, disappointed fans have accused it of “over-promising and under-delivering.” Others contend that a slow and secure approach is crucial for a project of such an ambitious scale.

Could Golem Profit Off Of Artificial Intelligence and Supercomputing?

Golem could definitely make money as a hosting solution – if it works as planned. The company could make money by hosting digital supercomputers and AIs. Let’s say, for example, a government institution with spare computing power. It could rent its extra power through Golem.

Meanwhile, a new tech company that needs a supercomputer could use one through Golem – by renting the institutions’ extra computing power. This would be a convenient and cost-efficient alternative to buying or renting.

Unfortunately, there is no indication that the network is offering these services as of yet. It’s worth mentioning though that the Golem website suggests the possibility of hosting decentralized apps (DApps) – which could provide a suitable environment for the above services.

These decentralized apps would find a ready market. For instance, a filmmaker in Australia who wants to add CGI to their movie could use the Golem CGI DApp. A DApp maker in Japan could make money by renting or selling their DApp to the filmmaker using the Golem platform.

Could Golem Profit Off Of AI and Supercomputer DApps?

AI and supercomputer DApps are technologies in a lot of demand across multiple industries these days. A network that can host and avail them to organizations is in for profit.

Industries ranging from game development, data harvesting, intelligence, scientific research, and AI building are all in need of supercomputer DApps.

Meanwhile, AI DApps could find use in autonomous vehicles, hedge fund management, store management, financial investment, online gaming, financial services, robotics, industrial equipment, and scientific research.

Do Supercomputer DApps Have Money Making Potential?

Although at this point, these two are theoretical, they have market potential, especially considering regular apps are already very popular.

Statistics estimates the Apple Store apps generated $120 billion in aggregate revenue by January 2019. It’s worth noting App Store developers made that money with simple entertainment apps. Golem could offer apps with way more utility. Institutions ranging from governments to universities to labs to research organizations could pay a lot of money to use such apps. 

Is Golem A Cryptocurrency worth your time?

Golem stands out for its disruptive technology and potentially lucrative application of blockchain technology than for its cryptocurrency. Also, its cryptocurrency’s value remains hypothetical until the network enables a blockchain supercomputer. 

As of November 20, 2019, Golem is the 93rd most valuable cryptocurrency according to the crypto tracking website CoinMarketCap. It has a coin price of $0.042789 and a 24-hour volume of $2,599, 810. Its circulating supply is 980, 050, 000 while its market capitalization stands at $41, 934, 880. Its all-time high was $1.25 on January 08, 2018, with its all-time low coming to $0.008797 on December 12, 2016.

Essentially, Golem presents this deal to investors: you could make a lot of money in the long run if you’re willing to lose some now. While its cryptocurrency is cheap now, its blockchain holds massive potential. However, individual investors would better hold off for now as there is no indication of the network presently making any money.

Conclusion

Golem is an ambitious idea – and for a good reason. It’s decentralized, open-source, and worldwide supercomputing promise is good news across multiple industries. Whether as a recruiter or provider, many organizations will find the platform extremely valuable. The team’s slowness has been a bit disappointing, though. Will it turn out to be another hyped but hollow proposal, or is the slow and steady pace a winning strategy? The crypto community is watching to see how this turns out.

Categories
Crypto Daily Topic

Bitcoin’s Thirst for Power: Why it Uses a Quarter Percent of the World’s Electricity?

If you thought the report by Nature.com a few days ago that it takes more energy to mine Bitcoin than mining gold of similar value was the most surprising thing you read about Bitcoin this week, you’re in for another surprise!

The amount of power Bitcoin mining consumes has been a growing concern over the years, but it has reached a point where it is plainly alarming. Today, it is estimated that Bitcoin consumes as much as a quarter percent of the world’s electricity supply, according to a tweet posted by James Todaro, the Managing Partner at Blocktown Capital and Columbia University Alumni.

James points out that humanity is justified to devote such a significant amount of resources to an asset because of how important it is to our future. If anything, he implies, Bitcoin as a technology asset is here to stay, and such assets as rat poison, tulips, beanie babies, and others that have already disappeared cannot be compared with Bitcoin.

Why Bitcoin is so power-hungry

You already know that Bitcoin runs on a blockchain network. You probably also know that at the core of its network is the Proof-of-Work consensus, a protocol that requires work in terms of data processing by a computer that takes time in order to validate blocks. Miners, a term that refers to the owners of computers that do the processing work, are rewarded with a certain amount of Bitcoins for every block validated.

Bitcoin’s Proof-of-Work consensus verifies the legitimacy of each block of blockchain transactions added to the chain using complex mathematical processes that uses the computer’s processing capabilities. In the early days of Bitcoin, mining was an easier process that required very little processing power. This is why anyone with a half-decent computer could use it to mine the coins back in the day.

With time, as the Bitcoin network scaled and grew in size, it demanded more processing power to validate blocks of transactions. This meant that the more powerful computers aptly known as ‘rigs’ had to enter the mining scene to meet the platform’s thirst for processing power. Mining Bitcoin became expensive because these powerful machines are not only expensive to acquire, but also use up a lot of electricity. It requires tremendous processing power to validate blocks of transactions in the shortest time possible.

How much power is 0.25% of the global supply?

Current statistics on the Digiconomist Bitcoin Energy Consumption Index show that Bitcoin mining uses as much as 79.79 terawatt-hours (TWh) of electricity annually, which is comparable to the amount of power consumed by Belgium estimated to be 82.1 TWh and higher than that of the Philippines which stands at 78.3 TWh annually.

Going by Digiconomist estimates, the amount of power the Bitcoin network gobbles up is in the upwards of $3.66 billion, but it generates revenue estimated to be $5.72 billion, a cost percentage of 63.9%. This is a lot of investment in a single asset, especially since the global adoption of the Bitcoin is still relatively low. While more people are appreciating and embracing cryptocurrency, and in particular Bitcoin, the uptake is generally gradual. It is estimated that it may take as long as 24 years for half of the global population to start using Bitcoin for regular payments.

While these figures may look scary, it is important to note that the Bitcoin technology platform has merit and is expected to ultimately grow to become the world’s primary form of payment. Considering that Television, the world’s most power-hungry electronic device now used in most households, uses as much as 8% of the total global electricity, Bitcoin’s 0.25% is not a figure to worry about at this point.

Effects on the environment

Bitcoin mining uses electricity that is not always harvested from renewable sources. If the figures on the Digiconomist’s Bitcoin Energy Consumption Index are anything to go by, the Bitcoin mining industry has a carbon footprint of 34.73 metric tonnes (MT) of carbon dioxide (CO2), a figure comparable to the carbon footprint of Denmark. It also produces as much as 10.62-kilo tonnes (KT) of electronic waste that is made up of discarded electronic devices that rarely ever make it back to recyclers.

In many ways, Bitcoin is like gold. It cannot be arbitrarily created, and its supply is limited. It was easy for the Nature magazine to compare Bitcoin mining to gold mining, not just because of the amount of resources it requires, but also because it takes increasingly greater effort as more of it is mined. Since the supply of Bitcoin is limited to 21 million, it will get to a point when miners will have unlocked all the available supply, unless its original protocol is altered to allow for more.

Presently, about 18 million Bitcoins have been mined, leaving just under 3 million left to be mined. It will cost more in terms of electricity consumption to mine the remaining quantity compared to what has already been mined. As such, it is expected that Bitcoin mining rigs will continue to demand more power until the last coin is mined sometime in the year 2140 if the bitcoin network protocol remains unchanged between now and then.

Conclusion

In 2015, Adam Hayes published a paper titled “A Cost of Production Model for Bitcoin,” in which he compares the production of Bitcoin to a competitive market where the miners “produce until their marginal costs equal their marginal product.” Since the marginal costs, in this case, is electricity costs (once the initial costs of equipment and infrastructure have been settled), he concludes that the costs of electricity will determine the future of Bitcoin mining.

It is expected that within a few months to years, Bitcoin will need as much as 1% or more of the total global electricity supply. However, all this will happen only if the energy does not become prohibitively expensive as to cost more than the miners will earn from the Bitcoins they mine.

Categories
Cryptocurrencies

The ultimate guide to cryptocurrency mining

So, can you still make enough money out of crypto mining in 2019? This simple guide tells you everything you need to know about cryptocurrency mining. And acts as the perfect launchpad to a successful crypto mining career.

The concept of cryptocurrency mining is often baffling to people outside cryptoverse and even to some inside it. Cryptocurrency mining, a.k.a crypto mining, is the process by which transactions between cryptocurrency users are verified and added on to the long list in the public blockchain ledger. The same process also introduces new coins into the circulating supply of a particular cryptocurrency.

Cryptomining is achieved via the use of specialized computers. Technically, anyone with a computer and internet can mine cryptocurrency. The only problem in actual success with crypto mining depends on several factors, such as which crypto you’re mining, how powerful your computer is, and the cost of electricity where you live. (More on that later). Depending on all these factors, crypto mining may be more expensive – both financially and time-wise – than anything you’re gaining from it.

Who Are Cryptocurrency Miners? 

Cryptominers are sometimes called the backbone of many cryptocurrency networks. And they’re worthy of this title because they are the ones responsible for issuing new crypto coins, validating transactions, and ensuring the security of blockchain networks.   

Bitcoin miners use specialized computers known as application-specific integrated circuits (ASICs), which are designed for the sole purpose of mining cryptocurrency. ASIC miners are usually designed to mine a specific cryptocurrency. This means a Bitcoin ASIC miner can only mine bitcoin. A Litecoin ASIC miner can only mine Litecoin, and so on. 

As cryptocurrency has increased in value, so have more cryptominers jumped into the bandwagon. As such, crypto mining has become so competitive that it’s no longer profitable to mine alone. Today, most cryptocurrency mining is done by “mining pools” in warehouses that have low-cost electric power. 

Mining pools are made of a group of miners who agree to share block rewards in proportion to the amount of work that each contributed to finding a new block (a block is essentially a collection of unconfirmed transactions plus a set of data about those transactions) 

What Is Hash Rate? 

Hash power, or hash rate, is the measure of the processing power of a mining computer. The higher the hash rate, the faster the next block on the blockchain network is found. The creator of the first cryptocurrency – Satoshi Nakamoto – intended for Bitcoin to be mined via computer CPUs. However, innovative programmers soon discovered they could derive more hashing power from graphic cards and wrote mining software to facilitate this. 

Graphic cards were then surpassed by Field Programmable Gate Arrays (FPGAs), which were soon phased out by ASICs, which packed inordinately more hashing and staying power. Nowadays, all serious crypto mining is done with ASICs, usually in low-cost electricity areas and in thermally-regulated areas. (Data mining centers are thermally regulated because the power ASICs consumes ends up as so much heat.)

What Is The Purpose Of Mining And How Does It Work? 

Cryptocurrency mining is actually another term to refer to a type of validation model known as proof of work (PoW). Different cryptocurrencies utilize different validation models to facilitate their release into circulation. Apart from proof of work, the other more common validation model is proof of stake, which uses a random selection of stakeholders (coin holders) as transaction validators. 

However, in PoW – which is used by cryptos such as Bitcoin, Bitcoin Cash, Litecoin, and others, miners compete with each other to solve computational puzzles to solve the next block. 

So, what is the point of mining at all? Mining is central to cryptocurrencies that rely on PoW TO keep the network functional. There are many intricacies involved with mining, but it has three most important functions which are as follows: 

It issues new coins into circulation.

Unlike fiat currency, which can be issued by the central bank at any time, mining is what facilitates the entry of new crypto coins into circulation. The issuance of new coins is set in the cryptocurrency code, so miners cannot manipulate the system or create new coins out of thin air. 

It validates transactions on the network 

When transactions are sent on the blockchain network, miners include these transactions in their blocks. A transaction is only considered secure and complete once it’s recorded on the blockchain – because that’s when it’s added on the public blockchain.

It secures the blockchain network 

Miners keep the blockchain network secure from attacks. The more miners are on the network, the more secure the network is. The only way to sabotage a blockchain network is for one miner to have more than 51% of the network’s hash power, which is near impossible with the many different miners working on the network across the globe.

How Miners Make Money and Block Rewards

Block rewards refer to the crypto coins that are awarded by a blockchain network to block miners each time they mine a block successfully. These rewards are issued by cryptocurrencies that use the proof of work consensus mechanism. Most miners channel these rewards back to the ecosystem to fuel their mining costs while keeping the rest.

Bitcoin – the first cryptocurrency and the pioneer of cryptocurrency, currently rewards miners with 12.5 BTC for each mined block. In the beginning, miners were rewarded with 50 BTC. Satoshi Nakamoto, the creator(s) of Bitcoin, embedded “halving” – or what’s colloquially referred to as “halvening” in cryptoverse, into the system so that the block reward is slashed into two after every 210,000 blocks have been mined. Bitcoin’s halvening happens after about every four years. 

Another example is Litecoin, which also halves its mining rewards. Litecoin’s halving occurs after every 840,000 blocks. As of November 2019, the block reward for the cryptocurrency is 12.5, having been halved from 25 in August.

The question that bugs many in cryptosphere is this: what happens after these cryptocurrencies’ coins, and others that rely on mining, are all mined? How will miners be rewarded? Well, besides block rewards, these crypto’s protocols have also provided transaction fees as a means of reward. The transaction fees will shoot up once the maximum supply is achieved – in response to increased demand. Thus, new coins may no longer enter into circulation, but miners will still have a payday. 

Cryptocurrency Mining Step By Step

When a transaction is made on the blockchain, e.g., a user sending bitcoin to another user’s address, the transaction must be recorded – that is, the information must be indicated on a new block

  • This block must be secured and encrypted so that it cannot be reversed or modified, and is up for grabs for all miners on the network 
  • To encrypt the block, miners must find the solution to a computational puzzle through trial and error method in a race to find the proper cryptographic hash for the block. 
  • Once a miner finds a new block, it’s verified by other computers in the network in a process known as consensus and then added on the blockchain.
  • If a miner has successfully mined, verified, and secured the block, they are awarded newly created coins.

The Downsides to Cryptomining

Though mining is the lifeblood of certain cryptocurrencies, it comes with its own share of challenges. Some of these are as below: 

Complexity: Cryptomining is not for the uninitiated. Even people with a pretty good grasp of cryptocurrencies and blockchains might find themselves befuddled in the first few days. What’s more, you’ll need to assemble a range of equipment such as a customized mining computer, an ASIC chip, cooling equipment, and so on. 

On top of that, you’ll need to read a lot, keep abreast of what’s happening in the crypto world, and be prepared to make mistakes once in a while.  

Electricity Costs – Mining can prove quite expensive, mainly because it consumes a lot of electricity. The ASIC computers and the massive servers involved usually rake up enormous power bills. Bitcoin mining is especially electricity-intensive – so much that it has raised questions from ecologists who argue that it’s becoming a threat to the environment. 

Current estimates show that the current global power consumption by Bitcoin mining is a minimum of 22 terawatt-hours per year – which is almost the same as the annual power consumption by Ireland. 

Hardware Costs – Mining farms need to spend a lot of money to purchase stronger equipment every other few months as the prior equipment becomes obsolete due to increased mining competition. The cooling systems further add up to the hardware costs. 

Vulnerability: The proof of work model is vulnerable to an individual or an entity gaining control of 51% of the network’s computing power. If this were to happen, it would essentially hold the network hostage. The more dominant mined cryptocurrencies like Bitcoin, Litecoin, Bitcoin, and Monero are safe from this nature of attacks. However, smaller cryptocurrencies that require longer block processing durations and have weaker daily volumes could fall prey easily. 

Conclusion

The concept of cryptocurrency mining is fun, as it can be confusing. This guide should lift part of the mystery surrounding the concept. It has been interesting to see the evolution of crypto mining – from being able to mine from the comfort of your home on your PC to dedicated warehouses solely for mining. The innovation of ideas that have gone into the space is also exciting, and we can only wait to see what more the enterprising mining community comes up with in the future.   

 

 

Categories
Crypto Daily Topic

Ethereum 2.0: Ethereum’s new dawn

Ethereum, the world’s most popular blockchain platform for decentralized applications, is undergoing a revolution, and it promises to be BIG!

If you are savvy with the developments in the tech world, then you probably already know what Ethereum is and why Ethereum 2.0 is a big deal. If you don’t, Ethereum is a blockchain platform proposed in 2013 by Vitalik Buterin, the then young student at the University of Waterloo, to support application development as well as generalized scripting language.

Over the course of two years, Vitalik, together with seven other developers, created Ethereum as a robust smart contract platform on which anyone can develop and run decentralized applications. The project went live in 2015 and has generally fulfilled its promise to become a global decentralized computer on which anyone can run their code at a small fee.

Fast forward four years, and the platform is getting ready for its biggest upgrade leap since it was first rolled out. Ethereum 2.0 has been discussed since mid-2018, and the first phase is expected to be rolled out at the end of 2019. But before going to the details of the upgrade, let’s first review the current position of the Ethereum platform.

Understanding Ethereum

The first stable version of Ethereum, ‘Homestead,’ was released in March 2016. Like Bitcoin, Ethereum is essentially a distributed public ledger but with some significant differences in purpose and capability. While Bitcoin’s major and only blockchain application is of peer-to-peer electronic cash payments system online, the Ethereum blockchain platform is focused on running the programming code of third-party developers published on the platform.

Miners on the Ethereum blockchain earn Ether/ This is a form of cryptocurrency tokens that essentially fuels the network. Other than being a tradeable crypto, Ether is also used by developers on the network to pay for services and transaction fees. 

Just like the Bitcoin network, Ethereum uses a Proof of Work (PoW) consensus system.  In this system, a participant node in the network is required to submit proof that they have done some work in order to receive the rights to new transactions to the blockchain. The ‘work’ in PoW protocol refers to the computer processing time and effort that often uses power. As a result, PoW is not only hard but also expensive.

The switch from Proof-of-Work to Proof-of-Stake

The biggest change in the upgrade of Ethereum from 1.0 to 2.0 is the switch from the work-based PoW to stake-based PoS. PoS (Proof of Stake) is a low-cost, low-energy type of consensus that involves the allocation of responsibility of maintaining the blockchain ledger to a participant node based on their proportion of the virtual currency they hold. With PoW, getting the right answer is easy, but getting the wrong answer is expensive. PoW rewards the miner for finding the right answer while PoS punishes the miner for getting the wrong answer.

The switch from PoW to PoS will not only make Ethereum a more secure platform, but it will also improve its scalability. The new consensus will be less susceptible to the 51% attack, which happens when a miner or miners in a pool take control of more than half of the network’s computational power. With such an ability, malicious attackers will have the power to invalidate even valid transactions and even approve the double-spending of cryptocurrency.

Ethereum is planning a hard fork by the end of 2019 to switch from the current PoW to PoS. The switch will be implemented in three phases to minimize the risks that such development brings.

Phase 0 (Beacon Chain): The Beacon Chain will be a proof-of-stake chain that will be implemented to run parallel to the current proof-of-work chain. In the beginning, the new chain is designed for simplicity and will not support accounts or smart contracts.

Phase 1 (Basic Sharding): Sharding will divide the network across multiple shards to enable the network to process the many transactions on the network concurrently. This is necessary to help transactions to scale.

Phase 2 (eWasm): eWasm is the new rebuilt Ethereum Virtual Machine. It will fully support the proof-of-stake consensus as well as sharding. This phase will introduce accounts and smart contracts to Ethereum 2.0.

Sharding will help Ethereum to scale by partitioning the network’s database into smaller and faster pieces called shards. Each of these shards will have a chain of transactions, and accounts on the network will be assigned to a shard. They will then be able to seamlessly transact with other accounts within and outside the shard.

The planned rollout of the Ethereum 2.0 will be implemented in phases to test every element of the network in a safe environment to uphold the integrity and security of the system. 

Design Goals of Ethereum 2.0

Ethereum 2.0 was developed with five core design goals.

  1. Simplicity: The platform will be less complex compared to the current network. However, this will be at the cost of some network efficiency.
  2. Resilience: The network will stay live even when undergoing major partitions or when large portions of network nodes go offline.
  3. Longevity: All components of the network will be quantum secure. Those that are not will be easily and safely replaced with quantum secure ones when available.
  4. Security: Ethereum 2.0 uses cryptographic and design techniques that facilitate greater participation of validators per unit time.
  5. Decentralization: The network will allow for a typical consumer laptop with O(C) resources to validate (process) O(1)  shards (this includes system-level validation).

What the rollout of Ethereum 2.0 means

Vitalik shared a broken-down overview of what network users should expect during and after the transition from Ethereum 1.0 to Ethereum 2.0. Here is a summary of what you should expect:

☑️ It may be possible to move ETH from the new to the old network for a short time.

Since it may take a couple of years for the new PoS platform to be fully merged with the older PoW platform, users may be able to move their crypto back and forth within this time. However, during the transition period, the transfer of ETH between the old and new chains will be disabled largely due to the complexities involved in creating a two-way bridge between the two chains.

☑️ A complete transition from Ethereum 1.0 to Ethereum 2.0 is expected by Jan 03, 2020.

The switch from PoW-based to PoS-based consensus will be officially launched on December 4th, 2019 and is expected to take a month. To avoid any hiccups, all developers, stakeholders, and major Ethereum clients are expected to have completed the transition during the switchover month.

☑️ You need to have 32 ETH to be a master node

To be eligible to stake or perform the functions of a master node, you would need to own 32 ETH on the network. The new economic model of the Ethereum network suggests that validators will be able to earn between 4.6% and 10.3% in annual returns. You can use the ETH 2.0 Calculator available on the Telegram app to estimate net returns based on the adjusted dynamic rewards scale.

☑️ It will be more expensive to recall data on the Ethereum blockchain

If you are a DApp developer, recalling and accessing data on Ethereum 2.0 will incur increased transaction costs. This is because of the changes in how the Ethereum state (the full account of transactions) is stored on the PoS network. However, there are ways in which developers can minimize these costs.

☑️ Ethereum will no longer be able to execute transactions atomically

The upgrade will break the ability for Ethereum transactions to occur all at once. To developers, this means it will no longer be possible to execute transactions between two or more applications such that when they fail, they can recover the entire series of transactions. Ethereum 2.0 will break up transaction loads into different shards, unlike the current network, which has all the dapps on one shared chain.

Ethereum 1.0 has the capacity to process roughly 25 transactions per second (TPS). The old PoW consensus clearly is not capable of taking the blockchain platform mainstream. For comparison, Visa has the capacity to process 24,000 transactions per second.

During the transition period, Ethereum 2.0 is expected to be capable of only half the total speed of transaction processing speed of 1,024 shards. Depending on the number of shard chains and the shard block sizes, this can translate to as much as 15,000 transactions per second. This limit is put in place to enable simpler and faster communication between shards in the early stages of Ethereum 2.0.

Ethereum 2.0, even after launch, will remain a work-in-progress. The hard fork will be a major leap in the lifetime of the network, and while it is expected to go smoothly, there is always a risk in implementing something new. As such, users and stakeholders are advised to stay updated on the upgrade.

Categories
Crypto Daily Topic

Why Crypto Spells the Death of Government Fiat Money

For most of human history, money has been used not only as a measure and exchange of value but also a tool for elites and governments to oppress and control those who had less of it. The phrase ‘money is evil’ has been coined in every language largely because the precious currency that revolutionized humanity has also been at the center of world wars, enormous government indebtedness, inflation, depression, and even the rise of tyrannical states all over the world.

Blockchain, the first distributed ledger technology that gave birth to Bitcoin and cryptocurrencies, promised the end of elite and government-controlled money. The mysterious inventor of blockchain Satoshi Nakamoto buried an Easter egg in the genesis block of Bitcoin that reads:

Chancellor on Brink of Second Bailout for Banks.’

The notation, which was the cover story of The Times on January 3, 2009, is believed to have been instilled in the Genesis Block of blockchain possibly to timestamp the beginning of a new financial system out of the control of the banks, corporations, wealthy families, and governments among others.

Crypto getting more love than ever before

In its whitepaper published on bitcoin.org, Bitcoin claims to be “the first decentralized peer-to-peer payment” system that “has no central authority or middlemen” because it “is powered by its users.” This is what makes this currency very powerful.

In the beginning, governments were the most afraid of cryptocurrency largely because they could not control it. However, as more cryptocurrencies were created, bought, and sold and used to store and exchange value, everyone’s perception gradually leaned towards appreciating it as money.

Since the age of cowrie shells, man’s relationship with money has changed very little. Its value has always depended on how everyone who uses it sees it, and not what the issuer wants it to be valued.

However, since the 16th century, when the gold standard of money was introduced, and banks arose to monopolize its issuance and control, perception of money has changed a lot. This explains why banks and governments were the first to dismiss cryptocurrency and why they have been the slowest to embrace it.

There is a simple reason why cryptocurrencies will be the future of money: they are already in use, and everyone sees their potential now. Just the other day, the price of Bitcoin spiked after China, which had banned bitcoin and heavily regulated cryptocurrencies and blockchain had a dramatic shift in perception after it called Bitcoin “a success” and urged its banks to step up their development of blockchain applications to “embrace digital finance.” This is a clear sign that cryptocurrency adoption has reached a critical point, and no power can roll it back.

Exploitation: the old currency strategy

Throughout history, man has relied on exploitative and collaborative strategies to scale socially as societies grew beyond tribes, kingdoms, empires, cities, and countries.

The exploitative strategy often rewarded the most violent individuals with sociopathic tendencies in society. However, such societies rarely ever thrive for a long time.

The collaborative strategy rewarded individuals who are empathetic and generous. Societies that valued such individuals often prospered, proving that this is the optimal strategy to grow a group of people and to scale a society.

However, considering that every growing society has to eventually grapple with the scarcity of resources, and will need more labor to support itself, even societies that initially arose due to their empathetic and generous nature in most cases fell to the exploitative vices.

The problem here is that the ‘leaders,’ ‘rulers,’ and other central entities tasked with equal distribution of such resources (money in the present-day case) will eventually monopolize and abuse it. This is the case with government-issued money everywhere in the world today.

Government-issued money is also referred to as fiat money. The monetary system used in the world today is a faded shadow of the gold standard monetary system where the value of a country’s currency was directly linked to the value of the gold they held in reserve.

Since most countries already depleted their gold reserves in wars and whatnot, most paper money in circulation is minted by those in charge of governments, and ‘value is created out of thin air.’

Money is no longer primarily a measure or exchange of value but a tool to impose regulatory control. Everywhere in the world, governments of the day have been observed to change inflation rates for personal interests, use government money to finance surveillance on its people, and exploit its people through hefty unavoidable taxes, interest rates manipulation, price and wage restrictions, and capital controls.

Collaboration: the new currency strategy

There is a good reason why banks and governments are on top of the list of cryptocurrency deniers: a new kind of money that promises to distribute wealth and cannot be controlled by a central authority would mean the death of the old exploitative financial strategy. Money that is ‘owned’ by everyone is naturally a threat to entities that thrived in the legal monopoly of money creation.

Cryptocurrency is decentralized in nature, meaning that the creation of value is done transparently on a blockchain or similar platform in such a way that everyone can trust the system. Cryptographic tools that make digital money a reality empower ordinary people to verify and carry out transactions on the platform without the need for a third-party ‘middlemen’ such as banks.

With the new decentralized digital money, the rules of incentivizing everyone are clearly spelled out: collaborators are rewarded, and exploiters are punished. The consensus rules of blockchain platforms are designed to eliminate the chances of monopoly and centralization and to enable free-market competition that nurtures creativity and collaboration.

As proof of this free market and creativity nurtured by blockchain, there have been thousands of cryptocurrency tokens developed and distributed since Satoshi Nakamoto first introduced Bitcoin to the public in 2009. In the global market, government-issued and distributed currencies are competing openly to win over users, and this has spurred all kinds of innovations as each currency does its best to improve its features and make itself the most formidable money of all.

The dark side of cryptocurrency

One of the reasons that governments give for attempting to control and even ban cryptocurrency is that it can and has been used in criminal and illicit transactions. While they often conveniently fail to point out that cash is also used in these transactions, it is true to say that digital money has had its fair share of headline-grabbing bad publicity.

The anonymity that cryptocurrencies accord its users in transactions is one of their core strengths. Unfortunately, this has also turned out to be one of its greatest pitfalls. This is because the privacy of transactions without a middle-man has enabled criminals to commit crimes and evade identification by law enforcement. As cryptocurrencies become more popular and stronger, proponents of fiat money argue that it will become even more difficult for authorities to fight crime.

Price manipulation and financial fraud are serious problems that often plagued fiat financial assets. Unfortunately, cryptocurrencies are not immune to them. The new markets are also at risk of shrewd traders and hackers known to work together to manipulate financial instruments to their advantage at the expense of everyone else. It is a consolation, however, that fraud and price manipulation is much more difficult in the cryptocurrency markets.

The future of money

Governments still have full control of fiat currencies.  A decade after Bitcoin became public, some governments have attempted to regulate cryptocurrencies in an effort to maintain their control but have eventually given up and even attempted to introduce some form of fiat cryptocurrencies that they can still control.

When Bitcoin and other forms of cryptocurrencies become widely accepted globally, there is a good chance that the entire banking system, as we know it, will be rendered irrelevant. Presently, banks and financial institutions are on the race to become blockchain-compliant to the extent of issuing their own fiat currencies, but it is unclear how far their efforts will go.

The future of money is a subject of debate and speculation. The concept of a global financial system without banks as middlemen sounds wonderful, but no one can predict how it will work. How will savings earn interest? Who will be responsible for distributing your wealth to your dependents when you pass on? How will an asset transfer failure due to a technical glitch be resolved? Who will be called to the rescue if one genius psychopath takes control of an entire cryptocurrency network?

There is no way to shut down cryptocurrencies. As more people understand how these currencies work and appreciate the benefits they bring to the masses, the value of existing currencies will rise, and individuals and businesses will embrace its use. Ultimately, all monies in use in the world will be digital money, and we can only hope that by then, humanity will have devised new forms of government free from exploitation that works well with decentralized forms of currency.

Categories
Crypto Daily Topic

Will DAG Replace Blockchain as the Future of Crypto?

Blockchain has been a breakthrough technology, but would you believe it if I told you a new kind of DLT that promises to render it useless is almost ready for production?

Blockchain has been great thus far. It brought us cryptocurrency and was the technology that set the pace for a myriad of industry-disrupting innovations. If you know what blockchain is, you probably also know that it is a kind of distributed ledger.

And if you heard this for the first time, a  distributed ledger is a database that is shared and synchronized in real-time across many different users, sites, institutions, and physical locations. A distributed ledger is said to be decentralized because it is not ‘owned’ or ‘controlled’ by one entity. Decisions on a decentralized system are essentially made as a contribution by all the members who share it. Because of this, every transaction on the database has public ‘witnesses,’ making the whole system transparent and trustworthy. 

Blockchain is not the only technology that makes use of distributed ledgers. Another newer and less recognized technology is Directed Acyclic Graphs or simply DAG. This new kid on the distributed ledger bloc is dubbed the ‘third-generation blockchain’ because it is developed to cover the shortcomings of blockchain, which limits its adaptive scalability.

Blockchain vs. DAG 

How do blockchain and DAG relate? Well, if blockchain were a staircase, DAG would be a tree. While the former is a list of blocks, the latter branches out from one transaction to another.

Distributed ledger technology (DLT) does not refer to just blockchain technologies. DAG is another type of DLT that works differently from the blockchain. Most industry experts agree that DAG is a rival technology to the blockchain that offers solutions to some of the major shortcomings of the latter, while others view it as an enabler that only works better in different applications.

While both blockchain and DAG are ledgers that stores records on a distributed ledger, they are very different in structure, and uses contrasting consensus techniques.

A blockchain is an ever-growing chain of blocks of transactions ordered in a linear and chronological manner in such a way that each of them contains a timestamp as well as a link to a previous block. DAG, on the other hand, is a newer kind of distributed ledger that offers all the benefits blockchain offers but with better performance and greater scalability.

In mathematics, DAG refers to a graph that flows in one direction and with no cycles that connect other edges. There is no way to move to every point of the graph, starting from only one end because its edges go only one way.

Picture a collection of transactions where every transaction is linked to one or more transactions. The image below compares blockchain’s ‘chain of blocks’ to DAG’s graph of transactions:

Difference between blockchain and DAG

You should see that in the second formation, transactions are:

  1. Directed: This means that the links all point in the same direction. Earlier transactions are linked to later transactions.
  2. Acyclic: There are no loops in the formation of the transaction. This means that a transaction cannot loop back to link to itself after linking to a later transaction.
  3. Graphical: The mesh formed by the connection of transactions are essentially nodes in a graphical network. The nodes connect to each other via links.

In summation, DAG is a ledger of records of individual transactions that link to multiple newer transactions, whereas blockchain is a linear formation of blocks of validated transactions.

Since there are no blocks transactions in a DAG network, it is ideal for use in data processing, scheduling,  data compression, and finding routing navigations.

Shortcomings in blockchain consensus

In our analogy, we equated the blockchain network to a staircase where a DAG network is a tree. Most cryptocurrencies today use the blockchain network. Therefore, when one block of verified transactions is added to the chain, it extends the network in one direction. This means that transactions have to be synchronized one at a time, much like stacking a staircase. 

This is how blockchain maintains consensus, ensures security and trustworthiness of the blocks of transactions without a central authority. It not only guarantees that all the blocks of transactions are the same across all the nodes in the network but also ensures that no block can be easily altered or manipulated by a single node.

While this way of enabling and maintaining consensus has been an ingenious innovation, it has its shortcomings.

To guarantee a consistently good quality chain of blocks, to verify them and to add them to the network takes time and effort. There must be quality checks just to be sure that every transaction meets pre-set rules.

Creating blocks that meet set criteria such as size also takes time, and chances of fake transactions slipping through are significantly reduced when nodes are accorded more time to process transactions and verify blocks. The Bitcoin network takes 10 minutes to process transactions and verify 1Mb blocks while Ethereum takes 16 seconds to complete blocks of varying sizes.

Consensus in DAG Networks

DAG, as a tree, uses a different technique to maintain consensus and security of the records in its network. The network is much like a collection of interlocking branches that grow outwards in different directions. Each transaction in this tree is only required to verify the preceding transaction to be valid itself. A standalone transaction without a valid preceding transaction would be easily singled out by the nodes in the network and removed from the records.

The best part about DAG consensus is that one transaction can confirm multiple transactions in succession. In the process, the transaction output grows much like the fractal’s outward growth of branches on a tree. The higher the number of transactions processed in the network, the higher the number of transactions the network will be able to process.

Benefits of DAG over blockchain

Blockchain technology was a hit and continues to be the greatest DLT technology because it brings transparency, immutability, and trustworthiness to public transactions. DAG has the same benefits and more. While the storage, network bandwidth, and ‘proof of work’ requirements of blockchain increase with the growth of volumes of transactions, with DAG, scaling is not only efficient in power requirements but also in reducing transaction fees.

DAG, as a decentralized ledger, is not limited by lengthy block verification periods and block sizes. A DAG DLT is much faster than a blockchain one, and while it is still relatively new, it has been tested to provide as many as 300,000 transactions in a second according to figures by  Korean DAG startup Fantom.

By completely doing away with blocks, DAG addresses bitcoin’s major disadvantages: scalability, speed, and efficiency. Being a new technology, this DLT remains untested outside development labs, but most industry experts who have had a say about it laud the innovation for its unprecedented speed potential, scalability, and promise to catch up with established blockchain networks.

At present, there are numerous DAG-based projects in development. One of the most famous is a smart contract platform being developed by Fantom that promises to rival Ethereum in just a few months. Only time will tell whether cryptocurrencies and projects running on the DAG will indeed be the ‘blockchain 3.0’ when it matures.

Categories
Crypto Daily Topic

Radix: Why Blockchain could be on its deathbed

Many tech experts believe that blockchain may have been the best thing to happen to humanity since the internet. Considering how revolutionary this technology is, and how disruptive it has been on almost every industry, you wouldn’t be mistaken to agree with them.

However, blockchain has some serious limitations that are not easy to overcome and it was only a matter of time before something better came along. That better thing is already here, and its name is Radix.

What is Radix?

Radix is not a better version of blockchain. It is a new kind of technology that makes trustless and decentralized digital ledgers (DLT) that will ultimately use smart contracts, but without the scaling limitations of blockchain. The Radix platform will be powered by the super fast and highly scalable Radix Engine, which is designed and built to make the creation of on-ledger solutions easier and safer with certain constraints. This is what makes Radix much more superior to blockchain and a safer bet for the future of crypto.

What makes Radix special is that it is a high-throughput platform to develop and distribute decentralized applications, faster and more efficiently than existing platforms.

The network on which it runs, called the Radix Public Network (RPN) is modular and general purpose. This means that the technology the network uses has multiple layer ‘constraints’ that allow for validation of state transitions rather than compute them. It opens up the possibilities of the network to facilitate the development and deployment of all kinds of smart contracts and high-level APIs.

It is designed to be a global computer on which decentralized applications can run efficiently and inexpensively and the company ran a test to prove it.

The Radix Tempo

Think of a blockchain platform, but without blocks. This new platform uses a new kind of consensus protocol known as logical time. It is completely different from those of blockchain and has given birth to its own kind of data structure dubbed ‘Tempo’. 

The Tempo Ledger is made up of three core components:

  1. A connected cluster of nodes
  2. A global ledger database. This is distributed across the nodes.
  3. An algorithm that generates secure cryptographic records of temporal ordered events.

An instance of Tempo is referred to as a Universe. Any event such as a transaction or a message within a Universe is represented by an object referred to as an Atom. All atoms on the network have at least one endpoint destination that is represented by an endpoint address. Such an address is used to route events throughout the network and is derived from a key identity, such as a user’s public key.

The power of Radix

In a live online test, the startup behind Radix simulated the entire 10-year transactions on the Bitcoin network in just 15 minutes. This was about 400 million transactions between 460 million addresses including full signatures and transaction validations across 1,187 nodes in 17 cities around the world. RPN crossed the one million transactions mark in just one minute and recorded a peak speed of 1.4M TPS (transactions per second)!

Radix has been in development since 2011. The developers tout its protocol as the first consistent distributed database with infinite scalability capability – with relative ordering of related events as well as n-1 fault detection. Radix is designed and built to be easy to use and to use minimal resources. Since it can run efficiently even on devices with limited processing and storage resources, it is expected that it will be massively adopted for use with IoT (Internet of Things) networks and devices.

Shortcomings that spell the demise of blockchain

For a long time, the dominant technology the world relied upon to build and deploy distributed ledgers was blockchain. Since the launch of Bitcoin, everyone saw this technology as the savior of mankind – the tech that finally made it possible for everyone on the planet to be on the same page at the same time on almost everything.

However, with the rapid adoption of blockchain, its two main limitations quickly came to light, and proved almost impossible to solve without coming up with a completely different kind of platform. They are:

☑️High risks of centralization: Consensus protocols are the basis of trustless DLT. Blockchain uses very dangerous consensus protocols that place the platform at a very high risk of centralization. If you have heard of the 51% attack, that is just one example. While each consensus protocol carries a certain level of centralization risk, the most secure and most viable are those with the lowest risk.

PoW used in early blockchain networks are not only very inefficient, they are also only as safe as the amount of computing power dedicated to them. This means that the security of a blockchain network is highly dependent on the cumulative power of the nodes on the network and a more powerful adversary would pose a serious threat.

☑️Scalability: While blockchain is a powerful concept with few weak points from which a threat would attack or disrupt its network, it has a serious scalability problem. This technology was a hit largely because it is decentralized and certainly provides data integrity and transactional trust, but it does not scale very well. 

Blockchain 1.0’s scalability problem is what led to the rise of blockchain 2.0 that powers such platforms as Ethereum. However, they too still have scalability problems that holds the platforms back.

In an attempt to overcome blockchain’s PoW risks, industry experts developed the PoS (proof of stake) and DPoS (delegated proof of stake) consensus protocols. While these protocols mitigated the risks and reduced the processing requirements and power intensity of blockchain networks, they are not fool-proof. To date, it is clear that it is not possible to make a blockchain network 100% decentralized.

Technological solutions presented by Radix

Decentralization is the key attribute that adds value to the creation and distribution of data and assets in DLT systems. This is so since it eliminates the need for a trusted third-party and prevents the abuse of power by a central authority. It was only through a distributed ledger that for the first time, people were able to peg value on created digital objects. Cryptocurrencies are so far the most notable products of distributed ledgers and everyone is keen to see how well they will fare in a Radix system.

Radix has three core guiding principles:

  1. True decentralization
  2. Linear scalability
  3. Developer gratification

True decentralization

Radix is a truly decentralized platform with no staking, no masternodes, no coordinator, and no central council. All the current blockchain platforms have some kind of masternodes, stakes, platform coordinators and even governing councils that to some extent ‘own’ the platform. With Radix, there is just a company to administer the platform.

One special way in which Radix eliminates risk of centralization is by use of permissionless consensus system that scales well in both small and large networks. The system is secured by the passage of logical time. This is a property that cannot be faked or bought within the Radix platform. This consensus mechanism is not only incredibly efficient and reliable, but also very power efficient because it does not use more power unless there is a conflict to resolve.

Additionally, Radix does not apply consensus to all events, only those that are in conflict. This feature makes the entire system highly efficient and scalable even at a global scale.

Linear scalability

A truly global decentralized system must have the capability to scale to every single device and be used by every person simultaneously all over the world with no performance bottlenecks. Blockchain cannot offer such scalability.

Radix’s structure makes it easy to fragment and index the data on the platform such that when there is an increase in network demand, more devices can be added to the platform to boost its throughput.

The data on the Radix network is not cut up ad-hocly; the developers of the platform had the foresight to strategize the fragmentation such that devices would have an easy time finding where any piece of data lives in the overall network structure. This eliminates the need of re-indexing every time data is cut up or added to the network and significantly speeds up the performance of the network.

The data structure on the Radix network is pre-cut to 18.4 quintillion shards and key fields are referenced to find where a particular piece of data is on the structure. This ingenious data structure makes the platform highly scalable with no overhead. Both tiny and humongous data sets will find a snugly place to live on the network, meaning that large businesses will find it just as easy to use as an individual does.

Developer gratification

The core mission of the Radix startup is to develop a platform on which developers can build and deploy their decentralized applications (DApps). Much like the Internet has been an enabling technology, Radix aims to offer the very best tools that anyone can use to develop and distribute anything they can think of.

The Radix platform is still under development but this far, it has proven that it can deliver what it promises. The geniuses behind it are imagining a reality where every device with connectivity – smartphones, security cameras, microwave ovens, televisions, smart cars – can join the network and be a part of the consensus mechanism. In all these, the developers should be the biggest winners to spur even greater innovation and to nurture a community in which everyone can believe in.

Blockchain may have ushered in the age of decentralized ledgers, which birthed cryptocurrency, but it has run its course. A blockchain platform cannot be truly decentralized, and there is nothing that can be done to make it scalable enough to be as powerful as a Radix system. It is justifiable, therefore, to conclude that blockchain was the past and will eventually be replaced by Radix, the future of true decentralized digital ledgers.

Categories
Cryptocurrencies

Public and Private Keys: A must read before buying any cryptocurrency 

If you’ve heard of cryptocurrency, you’ve probably also heard of private and public keys, or at least private and public address. You’ve also probably wondered about the concept behind them. This simple guide is all you need to understand the concept and secure your coins. 

Private and public keys are important components of blockchain – the technology behind cryptocurrencies. To understand cryptocurrencies better and stay safe while interacting with them, it’s essential to know the meaning of private and public keys and their role in cryptocurrency. 

Public and private keys are based on cryptography, which simply means the science and art of encrypting information so that third parties can’t understand it. In other words, cryptography enables data to be stored and communicated in a manner that unauthorized parties cannot understand. It’s employed today in private and public keys to make blockchain- and hence cryptocurrency, a safe environment for users. 

Cryptography is mostly famous for being used in wartime, especially by Julius Caesar, the Roman military general who sent encrypted messages to his generals to ensure the enemy couldn’t understand them. Known today as Caesar’s cipher, his cryptography involved shifting each letter of a word three times to the left of the alphabet. 

Today, encryption is all around us, even if we don’t realize it. From our phone apps to our phone screens to our credit cards – all these are encrypted to protect our personal information.  

Symmetric Key Cryptography and Asymmetric Key Cryptography  

Cryptography exists in two forms: asymmetric key cryptography and symmetric key cryptography. 

In symmetric cryptography, the same key is used to both encrypt and decrypt the message. A good example is Julius Caesar’s encrypted messages. The same key, i.e., using three letters to the left of the alphabet, can be used to decrypt or decode the message. Another example is today’s door lock, in which the same key is used to lock and unlock the door. 

The drawback to symmetric key cryptography is somebody can figure it out soon enough. Using the above examples, for instance, it’s easy for someone to steal a key to a door lock. And Julius Caesar’s opponents could figure out the cipher, eventually.

Asymmetric cryptography, on the other hand, is more complex. Two keys are used to decrypt information. In the case of blockchain, one key – the public key, is used to encrypt data and a second key – the private key, is used to decrypt it. 

Asymmetric cryptography adds an extra layer of security to a transaction by securing both the item transacted and the recipient’s ability to access it.  

Public Key Cryptography and Blockchain

The idea behind blockchain technology is to create a network where people can securely carry out transactions without the possibility for a third party or a central authority interfering. The security of the network, transactions, and parties involved is crucial to this process. In a traditional model, the third party, or the authority, usually provides the security – like the bank overseeing transactions, or protecting money in general.

But the blockchain model has no overseeing authority. So how will security be ensured? The answer is in public and private keys – which are based on cryptography. 

Public and private keys are digital assets that, when combined, form a digital signature, allowing the secure sharing and unlocking of information or data. 

What’s the Difference between Public and Private Key? 

Since the blockchain model uses cryptography to facilitate transactions, and public cryptography uses both public and private keys, every user on a blockchain network has a public and private key.

Now, the keys are usually randomly generated alphanumeric sequences that are unique to every user.   

A blockchain network, e.g., Bitcoin, usually generates a private key when a user creates a wallet. This key uses 256-bit encryption. This encryption makes use of really large numbers that unauthorized parties can’t guess or calculate. After the key is generated, it’s incredibly important that it’s kept private and secure. Nobody other than the owner is to see or have access to it. 

The private key confirms a person’s identity when carrying out a transaction on the blockchain. 

By contrast, the public key is exactly that – the key that an individual shares with the public, or in this case, the blockchain network. The public key is also generated by the blockchain network based on the private key. This means it’s only that private key in the world that can decrypt a message attached to that public key.

It helps to think of the public and private keys in real-world terms. Think of the public key as your bank account number – people who know it can send you money through it. The private key is like your pin code – it’s only known to you, and you use it to access the money in your bank account. 

How Public and Private Keys Work

An individual’s private and public keys combine to create a digital signature that proves their ownership of funds and allows them access to those funds. To carry out a transaction on the blockchain, a person must use both keys together. 

The following is an illustration of how public and private keys work. Person A wants to send, let’s say, Bitcoin to Person B. They can do this by obtaining Person B’s public key, and attaching the relevant information – in this case, the number of coins, to that public key, and then send it to Person B. 

As the information is attached to person B’s public key, and it’s only their private key than can decrypt the information on their public key, Person A is sure that it’s only Person B who can see that information on the blockchain network. So, Person A will use Person B’s key to encrypt the information, because only Person B’s private key can decipher it.

Person B receives the information from Person A, and using their private key, creates a digital signature which will unlock the information and access it. 

The role of a digital signature is central to this process. On the blockchain network, it serves these three purposes:

☑️ It proves that the owner of a private key has authorized a transaction

☑️ It proves that a transaction is undeniable – i.e., there’s no doubt that the owner and they alone authorized the transaction, and they cannot repudiate their involvement in it in future

☑️ It proves that the transaction has been authorized by that signature and has not been altered or modified by anyone after it was signed

How does Blockchain Use Cryptography? 

The blockchain model uses cryptography in these ways: 

Protects the identity of users – It enables every individual to keep their identity private, so they can securely transact on the network

Secures blocks –It allows people to execute transactions on the blockchain, which then adds blocks which no one can modify, sealing them permanently

Validate transactions – It enables individuals on the network to confirm transactions are indeed initiated by who they say they’ve been initiated by, and they can thus be added on the blockchain 

Conclusion 

It’s exciting to see how cryptography – the technology behind public and private keys, has evolved from being used during medieval wars to become the technology that enables people to transact on the futuristic blockchain world. And as blockchain technology continues to become accepted by other industries outside of finance, cryptography will continue to be central. It will be exciting to see how art and science will play a role in blockchain-based processes in the future.