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Blockchain [1] [2] is a decentralized, immutable database. Once a transaction or data is posted on a blockchain, it becomes a "block" that cannot be erased or modified. These blocks are linked together and secured using cryptography. Cryptography converts the language into an encrypted code that is elusive and unreadable by the public. Once recorded, the data in any given block cannot be altered retroactively without the changing the blocks going forward, which requires the consensus of the entire network. Otherwise, the block is rejected from the network. The blockchain is managed by a peer-to-peer network that follows a protocol, relying on the code rather than trust.

Uses in New Media

New Monetization

Social media platforms have created opportunities for businesses and individuals to create and distribute content for the world to consume. However, the compensation models may be in favor of the content creator, but rather the corporations that run the platforms. With new blockchain technology, new monetization models can be created for content creators and not dictated by corporations such as YouTube which recently changed its ad revenue structure [3]. Steemit is a leading blockchain-powered social media platform that utilizes blockchain technology and cryptocurrency to protect the intellectual property of content creators. People can create and upload their content and they will be rewarded in cryptocurrency based on how much other users like and "upvote" it. Content creators who post articles, videos and images are adequately rewarded in proportion to the success of their work.

Data and Privacy

The general public is gradually becoming more aware of how large tech companies such as Google and Facebook, are making billions selling user data to companies that want to gain more insights on their customers and market trends. In addition to users not receiving any compensation from the sale of their data, users are also becoming unsatisfied with how these companies are collecting their data and how they are ensuring that their data is being secured. Blockchain technology can provide a high level of transparency and allow people to take the control of their data into their own hands. Because the blockchain is a decentralized ledger that is immutable, transparent and easily auditable, it can enable users to have control over their data, including what data is being shared and who it is being sold to. Using new revenue-generating models, users can be directly compensated on how their data is being monetized. Bitclave is a blockchain startup that is trying to achieve this. The project is a decentralized search engine that aims to allow individuals to access the internet on their own terms. On their website, it says "BitClave is the next generation of search data privacy. You should have control over who can use it — and how. Our decentralized search engine helps you truly find what you’re looking for and get compensated for your data, making third-party advertising networks unnecessary. Powered by blockchain, you can rest assured your data is protected.”

Telegram

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An emerging initial coin offering is Telegram [4]. Pavel Durov and Nikolai Durov are Russians brothers started a messaging app known as Telegram. It is a cloud-based messenger platform focused on speed and security with about 200 million users. All the messages sent on the app is encrypted with blockchain. The brothers recently raised 1.7 billion by selling cryptocurrency in order to fund their next project, Telegram Open Network. This project will use blockchain to establish a digital and technology platform to create a virtual currency, known as Gram in their platform, similar to Visa. It is currently growing at a rapid rate.

Cryptocurrency

A cryptocurrency [5] is a digital or virtual currency that is secured using cryptography. A key characteristic of cryptocurrencies is that they decentralized through a blockchain, and operate outside of the central bank system. Cryptocurrencies are stored in a “digital wallet” on a computer, usually on a cloud server on the cryptocurrency’s network.

Bitcoin

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It is a digital currency on a payment network that is decentralized. It was introduced in 2008. The power of the currency belongs entirely to the people who use it. The Bitcoin Network does its peer-to-peer transactions with a new currency unit called, Bitcoin [6] or ‘BTC’. The rule for Bitcoin is that there can never be more than 21 million Bitcoins created by miners. However, each Bitcoin can be divided into as small as one hundredth million of a Bitcoin, which is called a "Satoshi".

History of Bitcoin

Developed in 2008 by an anonymous programmer called ‘Satoshi Nakamoto’[7]. The main reason was that of the financial crisis in 2008. It was to take the control out of the hands of the bankers. Bitcoin is an interaction between two people that has no rules other than what the two make. It is decentralized. It is purely peer-to-peer transactions. That is one huge effect because it gives power to the people without getting banks and 3rd parties involved. No one person owns Bitcoin. Another effect is that transactions are done anonymously which is a benefit to people not wanting to pay taxes. It offers privacy in an age of surveillance, and honesty in an age of manipulation. The anonymity of Bitcoin allows anyone in the world to trade amongst themselves. No person or country can hold more value over one another.

Terminology

There are certain words that you will need to become familiar with when dealing with Bitcoin. Mining=The act of generating new bitcoins by solving cryptographic problems using computing hardware Nodes=are any computers that connect to the Bitcoin network Genesis Block=1st block on the blockchain Blockchains=history of every single transaction that ever took place Ledger=independently maintained the database, Casascius coins Cryptocurrency is a digital currency that is kept electronically

How to Get It

There are hundreds of computers scattered around the Internet that work together to process Bitcoin transactions. These computers are called, “miners”, and Bitcoin’s transaction-clearing process is called “mining”. This part seems complicated to someone who is not very tech-savvy. The Huffington Post pointed it very clear who these ‘miners’ actually are. “Initially, Bitcoin miners were just cryptography enthusiasts. People who were interested in the project and used their spare computer power to validate the blockchain so that they could be rewarded with Bitcoin. As the value of Bitcoin has gone up, more people have seen mining as a potential business, investing in warehouses and hardware to mine as many Bitcoin as possible.” You can also buy Bitcoins from individuals. This is where the peer-to-peer transactions come into play. How do I use it? You will have to install ‘Bitcoin Wallet’ app on your phone or computer then buy Bs from the bitcoin exchange. You then store them in your ‘digital or paper wallet’. From there, “users participate in transactions using pseudonyms, referred to as Bitcoin addresses. Each address is mapped through a transformation function to a unique public/private key pair. These keys are used to authorize the transfer of the ownership of BTCs among addresses.”

Advantages of Bitcoin

Many people love the idea of a decentralized currency payment system. No one else has to be involved. There is anonymity and privacy when doing business. Inflation is impossible. Bank transfer fees are gone. There is also the resolution of double spending. With printed currency, we have to worry about counterfeit bills. With Bitcoin, this is solved with special nodes and instead allow every node in the network to maintain a copy of the ledger of debits and credits. A huge advantage so eloquently stated by Eric Voorhees [8] who writes for YBitcoin said, “…people can contribute to causes they believe are important, with no government agency or financial company able to cut off the payment flow. It means an entrepreneurial child can start an Internet business before he or she is 18. It means a rural African farmer can receive payment for crops from a neighboring city, even with no bank account. It means a citizen of a tyrannical nation can hide his financial assets from seizure.”

Disadvantage of Bitcoin

There is no way to limit Bitcoin’s supply. The irreversibility of transactions means there is no going back. Cash is anonymous. Theft is very real. Grinberg [9] wrote in his scholarly paper, “like cash, Bitcoins can be lost or stolen. Keeping Bitcoins on one’s computer can be as dangerous as keeping large sums of cash in one’s physical wallet, and each user should take care to backup and secure his Bitcoin wallet.” The list goes on with hacking, volatility, illegal transactions and time delays with confirming transactions. The hacking part is a very serious issue and one way Bitcoin tries to combat it is, “to prevent this attack by storing the mapping of a user to his or her public-keys on that user’s node only and by allowing each user to generate as many public-keys as required.”Another issue is mining. It started out as being a great way to figure out a lot of problems simultaneously, yet it wastes a lot of energy and creates other problems such as source codes. There is a company called Satoshi Dice that allows illegal gambling via Bitcoin. Silk Road has popped up and allowed the transactions of illegal drugs. Luckily the mastermind behind that was caught and arrested in 2013. The anonymity of Bitcoin is key, but based on a scholarly paper by Elli Androulaki [10], “In spite of reliance on pseudonyms, the public time stamping mechanism of Bitcoin raises serious concerns with respect to the privacy of users. In fact, given that Bitcoin transactions basically consist of a chain of digital signatures, the expenditures of individual coins can be publicly tracked.”This might confuse most users who take this at face value that Bitcoin is anonymous.

Companies Working Off From Bitcoin

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1. Circle [11] is using Bitcoin underpinnings for financial services and not for digital currency.

2. BitPay [12] is a global Bitcoin payment service provider.

3. Coinbase is a professional digital asset exchange company that operates exchanges of digital currencies like Ethereum and Bitcoin. As of May 5, 2018, over $150 billion in assets have been traded on coinbase. It is currently valued at around $8 billion and continues to expand as the cryptocurrency market grows[13].

There has also emerged competition from ‘altcoin’ companies or alternative digital currencies. Here are a few worth noting: Ripple [14] emerged in 2012 and is now a very popular online payment processing platform and digital currency. Perhaps the most important aspect of ripple is the fact that it allows for instant conversion into different currencies. You can even convert Bitcoin to Ripple, and vice-versa. Ripple sees itself not as a competitor to Bitcoin, but instead a compliment. By making currency conversions easy, ripple can give Bitcoin users and others easy access to traditional currencies. It is the third largest digital currency. Ethereum is a public blockchain software that aims to support a lot more than “just” a digital currency. Developers can actually code software, and the power that software through the public blockchain. This is the second largest digital currency.

Legalities

Which country jurisdiction oversees these transactions? Well, the answer isn’t so clear and it depends on which country you live in. Just to give you a few: the U.K states Bitcoin is currently unregulated. The U.S states as of September 2016 a federal judge ruled, "Bitcoins are funds within the plain meaning of that term.” Yet, in Canada Bitcoin is regulated only under anti-money laundering and counter-terrorist financing laws. A scholarly paper written by Reuben Grinberg analyzed that Bitcoin may be difficult to shut down, but that a government crackdown may cause a crisis of confidence especially if users do not want to own a currency associated with criminality. In the United States, there is a big debate on whether cryptocurrencies should be considered securities. The Securities and Exchange Commission (SEC) wants to protect investors. In May 2018, the SEC was looking at ethereum to determine if it is considered a security. It does this by using the Howey Test which determines whether certain transactions qualify as investments.

Ethereum

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Ethereum [15] is an open-source, public, blockchain-based distributed computing platform and operating system that features smart contract functionality. It shares the same consensus mechanism as bitcoin, Proof-of-work. Ether is a cryptocurrency whose blockchain is generated by the Ethereum platform. Ethereum was proposed by Vitalik Buterin, a former Bitcoin developer, in late 2013. Development of the project was funded by an ICO (Initial Coin Offering) in 2014 and system went live in July 2015.

History of Ethereum

Vitalik Buterin wrote the Ethereum white paper in late 2013 with the goal of building decentralized applications. After failing to gain support that Bitcoin should create its own language to for app development, he proposed his own platform with its own programming language. Formal development of the Ethereum software project began in early 2014 through a Swiss company, Ethereum Switzerland GmbH and funded by an online public crowdsale during July - August 2014.

In 2016 a decentralized autonomous organization called The DAO raised $150 million on the Ethereum blockchain. In June, an anonymous hacker(s) managed to exploit The DAO and siphon off $50 million. There was an intense debate within the community about whether Ethereum should perform a "hard fork" to retrieve the funds back. As a result, the network split into two resulting in Ethereum that used the forked blockchain and Ethereum Classic which continued on the original blockchain with the $50 million missing.

Ether

Ether is the cryptocurrency of the Ethereum network, which is a public distributed ledger for transactions. The currency is very similar to Bitcoin aside from a few differences that include blocktime, transaction fees, the proof-of-work, and rate of mining.

ERC20

A big reason for Ethereums success is the ERC20 protocol standard. ERC20 is to Ethereum tokens what HTTP is to the internet. It is a technical specification that has basic functions that any token should implement for trading purposes. Before ERC20 every new coin had its own set of specifications for trading. This meant that a basic exchange system would require very complex rules to account for all the differences in specification. Tokens that follow ERC20 protocol means they can easily be added to an exchange system, and more uniformity means less risk and less complexity[16]. For further clarification, check out the video from Simply Explained titled ERC20 tokens.

Smart Contracts

Smart Contracts [17] [18] are self-executing contracts with the terms of the agreement between buyer and seller directly written into lines of code. Essentially it eliminates the need for third parties such as lawyers to oversee and execute a contract between multiple parties. Smart contracts can help exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.

Altcoins

Enigma

Enigma is a blockchain based protocol that using privacy technology to enable decentralized applications. In Enigma, input data is kept hidden from the network that executes code. They want to make it possible for encrypted data to be used in computations. Lack of privacy on the blockchain is a big reason big companies are slow to adopt these new technologies. If companies cannot protect their data, they are not going to adopt new blockchain technology. The first use of the enigma protocol Catalyst is already out. Catalyst is a trading library for crypto assets[19].

Golem

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Golem is an ethereum based market for computer processing power. It lets you put your computers excess CPU up for usage by other people[20]. Let us say a company has a project that is going to require a lot of computing and processing power. Normally, that would require the purchase of expensive hardware and software that would not only cost a lot of money but take up a lot of space. With Golem, a user could purchase excess computing power from users around the world. Since there is only as much computing power as users are willing to sell, the market basically balances itself. The Golem token (GNT) is the form of payment used to buy computing power.

Litecoin

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Litecoin is one of the biggest altcoins. Its main appeal is for peer to peer trading. Just like Bitcoin, it uses blockchain technology to process transactions. The biggest difference is that while bitcoin that process usually takes 10 minutes, with Litecoin it is closer to 2 minutes. This means that fees will be lower, and it is able to handle more transactions at once. It is ultimately better for those actively making transactions with their cryptocurrency. It is also expected to produce 84 million litecoins which are more than Bitcoin will produce[21].


Tron

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Tron [22] strives to construct a global free content entertainment system, utilizing blockchain technology. This protocol allows each user to freely publish, store, and own data. The issuance, circulation, and trading of digital assets, through decentralized self-governance, lay the foundation for the distribution and subscription of content, thereby empowering content creators as well as forming a decentralized content entertainment ecosystem. The app partners of Tron protocol include Peiwo, Obike, Gifto, Uplive, with a total of 4 million users, making Tron a blockchain protocol with the most DAPP users in the world. Tron is a representative of the Web 4.0 Ecosystem. More than 100,000 users from more than 100 countries have become part of this network with ever-expanding boundary.

Verge

Verge.jpg Bitcoin succeeded in creating a decentralized cryptocurrency, Verge takes it a notch further by making transactions completely anonymous. The currency is virtually untraceable and the users of Verge can make instant anonymous transactions without every having to worry about security. Verge accomplishes this by using advanced blockchain technology built on top of services such as Tor and I2P whom hide data such as IP addresses. What truly makes Verge special is two different things. One is that it is a 100% open source project and "The Verge Community" has full input in any new features implemented. This protects the project from the common crypto issue where one person or group has a large control of the project. Two, is what is called Wraith Protocol, which allows users of Verge currency to choose wether they want to hide transactions in the private ledger or if they want to transact on the public ledger for book keeping reasons.

Forks

Hard Fork is when a single cryptocurrency splits into two because of a change to a protocol that renders older versions invalid [23]. Soft Fork is not as harsh as a hard fork and can still work with older versions. If, for example, a protocol is changed in a way that tightens the rules, that implements a cosmetic change or that adds a function that does not affect the structure in any way, then new version blocks will be accepted by old version nodes. Not the other way around, though: the newer, "tighter" version would reject old version blocks.

Bitcoin Cash

On August 1, 2017, the bitcoin protocol underwent a hard fork which split the network in two: Bitcoin and Bitcoin Cash [24]. There was a long debate within the community on how bitcoin would handle scalability, and one proposal was to increase the block size from 1MB to 8MB, which the new version of the protocol now includes.

Ethereum Classic

Ethereum Classic appeared as a result of a disagreement with the Ethereum Foundation regarding The DAO Hard Fork. It is technically the original Ethereum blockchain.

Tokenization

Tokenization [25] (in a blockchain context) is the process of converting rights to real-world assets into a digital token on a blockchain. The benefits of blockchain can be used while maintaining the characteristics of the asset. Many of assets are difficult to physically transfer or subdivide, so buyers and sellers instead trade paper that represents some or all of the asset. But paper and complex legal agreements are cumbersome, difficult to transfer and can be hard to track. One solution would be to switch to a blockchain system.

References