Bitcoin will double to $2,000 USD and More: The Tapscotts on Blockchain in 2017

0

2017-01-05-1483625642-9743081-13419266_878318540481_5832556764925168795_n.jpg

This article was co-authored with Alex Tapscott.

In this CoinDesk 2016 in Review special feature, Don and his son Alex chart a broad overview of blockchain in 2016, with an eye to what is to come in the year ahead. Notably, they argue that 2016 was the most important year for the tech since the debut of Satoshi Nakamoto’s bitcoin white paper.

2016 was a critical year, the most important since Satoshi Nakamoto published “Bitcoin: A Peer-to-Peer Electronic Cash System” in 2008.

When we wrote “Blockchain Revolution”, many were speculating on what this technology could achieve. We did our best to capture those possibilities – for the economy, government, and society -and have been surprised by the breadth of innovation underway.

For example, central banks have emerged as powerful forces in the future of cryptocurrencies and are gaining momentum. The Bank of England and others are already exploring blockchain-enabled fiat currencies to reduce friction, cost, and risk, increase transparency and accountability, and improve oversight of the financial system.

Healthcare has emerged, in earnest, as one of the most exciting areas. Companies are working to unclog bottlenecks in the system, from clinical trial data to personal health records.

Financial services

2016 was the year that many bank CEOs woke up to both the threat and the opportunity of the blockchain. At a meeting of 50 CEOs of the 50 largest banks back in January, most were skeptical. Now most are investigating how this technology might transform their companies and industry services.

We wrote about the blockchain as the big enabler for reimagining every aspect of the industry – from payments to investment banking, insurance and accounting. Some observers have been surprised to see banks opening to blockchain when they’ve not typically been hotbeds of technology innovation.

What’s driving this growing interest is the blockchain’s once-in-a-generation potential for fixing problems, improving efficiencies and reducing risk – and disintermediating incumbents in the process.

The departure of several large financial institutions from the R3 blockchain consortium is not surprising. We would expect such a large group of institutions to face some collaborative challenges: many of them are competitors, each at different levels of development in different areas of the business.

Consortia will be critical to reinventing financial services and other industries. To effect change, they need well defined goals with tangible objectives. If anything, the shake-up is a sign of a maturing industry.

Investment

When it comes to blockchain investment, the money keeps flowing! 2016 was a major year for investment, with $387m being directed into blockchain startups.

But the nature of these investments has shifted. From 2012 to 2014, primarily venture capitalists were funding business-to-consumer bitcoin-enabled solutions for common banking problems such as cross-border money transfer or retail payments. In 2015 and 2016, we saw money flowing into private blockchain opportunities addressing corporate issues, from asset tracking, to wholesale banking, insurance, accounting, risk management and more.

That investment will continue in 2017, but the pendulum will swing back somewhat to the public blockchain space. If the bitcoin community can get its act together and solve some basic governance issues, investors will again see it as an attractive play – and with good reason. Bitcoin is still the biggest, most secure, most liquid blockchain to date. Ethereum has similar governance issues, which limit its credibility for big corporate investors, but we think Ethereum will get through those too.

Solving the prosperity paradox

Prosperity – rather, the lack thereof – was behind the anger that led to the ‘Brexit’ vote, the Trump election, and extreme populism in countries almost everywhere. The paradox is that there is wealth creation but declining prosperity, the gutting of the middle class and, in the USA, the end of the American dream.

Presidential runner up Hillary Clinton proposed to tax the rich, a plan to redistribute wealth. US President-elect Trump proposed to cut social services, lower taxes for business, restrict trade and resurrect industries like coal mining from the first industrial revolution – a plan to restore prosperity to those who had it in the early 1800s.

In 2015 and 2016, we saw how such blockchain startups like Abra and the not-for-profit Stellar created mobile applications that ended the remittance rip-off, enabled entrepreneurs to pool their resources, and onboarded the unbanked to the global financial system.

Inspired by these social entrepreneurs, we had an idea for a third plan, one that pre-distributed wealth, where the billions of people who currently operate outside the formal economy would own their own data and could begin monetizing it at birth.

In 2017, we expect to see not only applications for establishing individual identity and protecting property rights through immutable records, but platforms for creating a true sharing economy and a government by the people for the people – all on blockchain technology.

To be sure, blockchain innovators face barriers: legacy culture, bureaucracy, regulations and more than a few entrenched and deep-pocketed incumbents unable or unwilling to change. These barriers will slow progress down, but only to a degree. Satoshi has unleashed the genie from the bottle, and no one can stuff her back in.

2017: The year of blockchain stewardship

As noted, there are many impediments to the blockchain and cryptocurrency revolution. None is more important than the immaturity of the ecosystem.

Blockchain technology has emerged globally as the second generation of the Internet. However, its nascent ecosystem lacks the frameworks, language, and processes required for effective stewardship of this critical resource. For example, the bitcoin community has been unable to increase block size, and the ethereum community debated for a long while about how to handle the impending removal of tens of millions of dollars from the ethereum distributed autonomous organization (The DAO).

This lack of governance is in stark contrast to the first era, the Internet of Information, which had – and still has – a vast multi-stakeholder network of networks to govern the resource. This bottom-up leadership ensures that states, corporations and state-based institutions like the United Nations cannot control this new global resource.

Instead, the Internet is a self-organizing set of communities.

Several years ago, we studied the Internet governance network and identified 10 types of networks that keep it working. One of the most extraordinary outcomes of the digital revolution, the rise of the global civil society, and the emergence of business as a pillar of society, is that multi-stakeholder networks can help solve global problems and even govern global resources.

We launched the Global Solution Networks (GSNs) Program five years ago to explore this gap in knowledge and to study the definition, differentiation, and impact of these emerging multi-stakeholder networks for solving global problems. These non-government, Internet-enabled collaborations of companies, states, non-government organizations and social stakeholders are using the Web for good, and demonstrating the power of networks to solve problems too intractable for traditional institutions.

GSNs are global experts and network leaders who developed a taxonomy of 10 essential network types and studied the technologies, stakeholders, and governance of hundreds of these networks and the orchestrators driving them. The program documented new models of governance and problem solving that were impacting global challenges including climate change, pandemics, depleted natural resources, violence, and income inequality – problems that transcend national boundaries. We conducted 40 projects overall.

These networks continue to govern the first generation of the Internet. Global standards networks such as the Internet Engineering Task Force (IETF) and the World Wide Web Consortium (W3C) help to maintain integrity in the system. ICAAN is an operational and delivery network that conveys domain names. There are policy networks like the Internet Governance Forum (IGF) and advocacy networks like the Electronic Frontier Foundation (EFF). There are networked institutions like the World Economic Forum (WEF) that are working hard to keep the Internet open, robust and viable.

We need an ecosystem like this to steward the blockchain as a resource. Although blockchain technology emerged from the open source community, it quickly attracted many stakeholders, each with different backgrounds, interests and motives. Developers, industry players, venture capitalists, entrepreneurs, governments, NGOs and other civil societies have their own perspectives, and each has a role to play. There are early signs that many of the core stakeholders see the need for leadership and are taking steps to address it.

Until now, industry players have focused largely on building their own companies. Context has become critical.

Many factors can slow, impede and derail this revolution: governments can mess it up; we may fail to come up with sensible standards; we may fail to do the research needed to ensure deep penetration of this technology into various industries; repressive regimes may ban the technology altogether.

In 2017, we need to get our act together.

In 2017, we need to get our act together. Decentralization is critical to this technology and to the future of civilization. But decentralization does not mean disorganization. So we resolve to focus on governance in the new year. We achieved this for the Internet’s first era. Now is the time to steward the second era effectively. Nothing so powerful as an idea whose time has come (again)!

The year ahead

Notwithstanding our admonitions in “Blockchain Revolution” that “the future is not something to be predicted but something to be achieved,” here is what we think will happen in blockchain in 2017:

– A major central bank will live test a digital fiat currency and it will work, very well, leading to broader adoption.
– Large banks will begin shifting large amounts of over-the-counter (OTC) transactions to real-time settlement on private distributed ledgers. Look for JP Morgan, Goldman Sachs, Barclays and Santander to lead the charge.
– Incumbent companies in every industry will begin developing a blockchain strategy, hiring key IT talent and launching pilots – for sure, insurers, healthcare providers, music labels, defense contractors and others. Deloitte and IBM are good examples of this.
– Bitcoin will hit $2,000 (that’s right: one bitcoin will be worth $2,000). Ethereum will not collapse, post-DAO, but will become a dominant platform for new apps and new business models. There will be other distributed autonomous enterprises, and they will work as designed.
– A new round of startups will enter this space in virtually every industry, particularly a new class of platform and middleware companies. From what we’ve seen, the innovation may well be stunning.
– The crisis of legitimacy of democracy (as evidence by the recent US election) will accelerate the development and sandboxing of new e-voting systems and new platforms for accountable democracy emphasizing the use of smart contracts.
– Blockchain Revolution will continue to be a global best-seller, in multiple languages, and make the New York Times non-fiction list.

What are we doing in 2017?

We’ll close with our resolutions:

In January, we are launching what we hope will be the definitive research study on the impact of blockchain on business. We are staffing up our team with the world’s leading thinkers and tackling seven verticals: financial services, healthcare, retail, manufacturing, telecommunications and media, technology, and government. We are also looking horizontally at the functions of the enterprise, from supply chain management and human resources, to marketing and information technology. Look for more announcements soon.

Also in January, Alex’s company, Northwest Passage Ventures, is launching its first blockchain fund.

We both continue to do our part to move this ecosystem forward.
In 2016, we launched the Muskoka Group with the mission of promoting ecosystem health and empowering the nascent governance ecosystem.

We both continue to do our part to move this ecosystem forward.

We are currently conducting a project to outline some sensible steps forward. We are inventorying the players, categorizing them according to the GSN Hub (see graphic), and identifying deficiencies in the ecosystem.

In March, we will be releasing our findings and making recommendations to all stakeholders about how to overcome these deficiencies and build an effective ecosystem. Also in March, we will launch an online Blockchain Ecosystem Hub sponsored by some of the most important international organizations. The hub will provide important governance know-how for the Internet’s second era.

In addition, Alex will continue to contribute as a member of the World Economic Forum’s Global Future Council on Blockchain.

And of course, we will both be on the road in 2017 launching into new exciting markets such as Korea, Thailand, Japan and several new European and Latin American countries.

This article originally appeared on Coindesk as part of their “2016 Year in Review.”

Don Tapscott is the author of 15 books, Chancellor of Trent University in Peterborough, Ontario, and CEO of the Tapscott Group in Toronto. Thinkers 50 ranks him as the No. 4 most important living business thinker.

Alex Tapscott is founder and CEO of Northwest Passage Ventures, an advisory firm in Toronto helping fund and accelerate new companies in the blockchain space.

They are the authors of “Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World” (Portfolio, 2016).



Source link

Millennials Are Creators of New Economy

0

By AsiaToday reporter Jina Koh -“Millennials are unprecedented.” As former MySpace CEO Mike Jones said, it’s hard to define the millennials.

Whether you love them or not, you can’t ignore them. As things are little tougher for millennials than their Baby Boomer parents, they are often described as lazy and self-centered generation that desires reward with minimal effort, and has unrealistic expectation of working life. However, they have experienced more innovative and evolving technology than ever before, giving them unique and distinctive characteristics.

And they create a new economy, media, and lifestyle.

‘Lazy narcissists.’ Millennials are the creators of this age.

▲ New media economy

– Social networking service and power bloggers

Social media-based services such as Facebook and Instagram have become megatrends in the millennial generation. A social networking service (SNS), where you can share your lifestyle with others and communicate with each other in real time, is a must-have personal item in the 21st century.

A recent study conducted by Kantar TNS surveying the online behaviors of 70,000 people across 57 countries revealed that the use of Instagram and Snapchat rose to 42% and 23% respectively, up from 24% and 12% in 2014. The Asia-Pacific region is led by Naver’s LINE with global usage jumping to 91% in Taiwan, 92% in Thailand, and 31% in Japan.

2017-01-01-1483264506-1441507-2017010101000097900004322.jpg
[Snapchat and Instagram penetration in Asia Pacific / Source: Kantar TNS]

2017-01-01-1483264555-2158191-2017010101000097900004325.jpg
[Snapchat and Instagram penetration in Asia Pacific from 2014 to 2016/ Source: Kantar TNS]

Along with LINE, KakaoTalk and WeChat focused on expanding to Asian countries, creating a rival tension with WhatsApp and Facebook messengers. They lead the market in a variety of ways that connect with consumers through a platform strategy that delivers content and services beyond mere functions.

The social networks that millennials use have higher growth rate than conventional industry-based companies. They expand business and receive investment based on an enormous number of users across the continent. Their user data is the most important growth engine for them.

As a result, power bloggers, who run their own blog or social media accounts, have emerged and their role has expanded. China’s “Wang Hong” marketing is now widely used in many other countries.

Wang Hong refers to online power users who have a lot of fans, and they have recently become stars of China’s e-commerce industry as the products used and recommended by Wang Hong create a strong advertising effect, leading greater sales. Not only they promote and sell products, but also get involved in launching a new product. They also get profit from their fans.

– Big hands of IPOs

Due to a number of geopolitical shocks, the number of global initial public offering (IPO) in 2016 fell 16% year-over-year to 1,055 and capital raised down by 33% to US$132.5 billion. 2016 was the weakest IPO year since 2013. However, there have been 185 IPOs in the technology sector, leading to unprecedented growth.

In particular, Asia-Pacific region continued their busy activity with 638 IPOs, which accounts for 60% of total global IPOs by volume. The explosive use by millennials, who have become the mainstream of the media, also let social media go public.

2017-01-01-1483264605-2172361-2017010101000097900004321.jpg
[The logo of Snapchat displayed above Times Square in New York./ Source: Wikimedia]

Snapchat, one of the most popular mobile video messaging and social media apps on the market, is inching closer to an initial public offering. If Snapchat goes public, it would be valued between about $20 billion and $30 billion, making it the biggest US tech IPO since Facebook’s public debut in 2012.

Naver’s LINE, which boasts 218 million global monthly users, made a successful IPO debut on July 15 in New York and Tokyo. On the first day in Tokyo, LINE closed at 4,345 yen, 32% above the initial public offering price. The market capitalization reached 921.4 billion yen. The IPO raised 1.5 trillion won, making it the year’s biggest tech IPO. LINE’s users are mainly in Japan, Taiwan, Thailand and Indonesia.

China’s popular selfie app Meitu chose the Hong Kong stock market. The IPO raised $629 million, the biggest by a technology company in Hong Kong since Alibaba. The company now has a valuation of $4.6 billion.

– A new renaissance for startups

The ever-evolving information technology (IT) becomes the driving force of all the economies that millennials create. “Asian startups are going through a renaissance,” said Vishal Harnal, 500 Startup partner.

China and India are one of the biggest tech start-up hotspots in the world. The number of new startups coming out of China’s Silicon Valley rose to 2.61 million in the first half of 2016, a 28.6% jump from 2015.

India has more than 4,200 start-ups. The number of start-ups in India is expected to triple to 12,000 by 2020. Startup funding totaled about $6.5 billion in 2015, tripling from $2.2 billion in the previous year.

Southeast Asia is a new frontier in the digital economy. Its digital economy is expected to reach $200 by 2023, making it a popular investment spot for foreign venture capitalists. 500 Startup expanded its Southeast Asia start-up investment by launching the ‘500 Durian II’ fund in 2015.

The Middle East is keeping up as well. Saudi Arabia showed its Silicon Desert ambition as it prepares itself for the end of oil. Back in October, Saudi Arabia’s sovereign wealth fund announced its plans to team up with Japanese IT and telecommunications giant SoftBank to launch a new tech fund, dubbed the SoftBank Vision Fund, that will manage as much as $100 billion.

▲ New money economy

– Intangible currency

Millennials, who are poorer than their parents, are building a new money economy by taking advantage of social commerce benefited by technology.

Mobile payments are growing fast as they provide cheaper price than offline market, fast delivery and spread of smartphones, gearing towards a cashless society. Millennials don’t have to deal with notes and coins thanks to mobile cards. They also get payment points that provide special benefits. The function of real cash has virtually disappeared.

As a result, Southeast Asia rather than East Asia, which underwent traditional web-based e-commerce economy, is emerging as an attractive market as it is introducing social commerce economy.

2017-01-01-1483264647-3432592-2017010101000097900004323.jpg
[Retail e-commerce sales in select countries in Southeast Asia, 2016 (unit: billions dollar). Source: eMarketer (left) / Bitcoin. Source: Pixabay (right)]

According to market researcher eMarketer, social commerce in Southeast Asia accounts for 30% of total digital sales. In particular, total social commerce sales for six markets in the region – Indonesia, Thailand, Singapore, Malaysia, Vietnam and the Philippines – reached $14 billion last year. It is expected to show double-digit growth over the next four years.

– Virtual currency Bitcoin

Virtual currency Bitcoin is a major achievement of the new money economy. With the trading being reached around $11.7 billion in value, Bitcoin is in the center of the new money economy.

According to the Nihon Keizai Shimbun, the November trading volume reached 174.1 million bitcoins, the highest level ever, surpassing the 148.6 million bitcoins of the March trading volume. The transaction value was about 15 trillion yen.

China is a major bitcoin trading country, with the major three bitcoin exchanges representing some 90% of the global trading volume. Bitcoins with new technologies are coming out one after another. South Korea will see its first virtual currency based on blockchain system by February. The new digital currency called BOScoin, which, it claims, is an improved version of existing virtual currencies such as Bitcoin and Ethereum.

▲ Sharing economy

The birth of ‘sharing economy’ eventually began with poverty. The term, which refers to short-term labor in the digital market, emerged globally due to its advantage of earning income in a short period of time for millennials who suffer from lack of full-time jobs, creating a new concept.

The fruition came from start-ups. The success of Uber and Airbnb sparked new markets such as office-sharing, store-sharing, and house-sharing markets emerged. Now the sharing economy has generated heated controversy as it can lead to more precarious jobs and induce unfair competition.

However, it is in the growth phase. China’s Didi Chuxing that defeated Uber in China, and the birth of second Uber such as Grab, Ola, and Go-Jek is still ongoing. And they evolve and adapt to local conditions.

The Philippines, which is made up of thousands of archipelagos, has a local player named Xend that relies on motorcycles and boats. Indonesia has Go-Jek that rearranged the logistics industry. India’s Grab provides customized service with cash payments.

2017-01-01-1483264707-801546-2017010101000097900004324.jpg
[Uber and Airbnb/ Source: Wikipedia]

– Trusting strangers

And there is trust. The key of the sharing economy is putting your trust in complete strangers. The intangible trust built on digital platform has become a brand itself and new economy. In the end, they’ve been communicating with us through Facebook, Instagram, Twitter and other types of social media.

You buy things through e-commerce websites, and communicate on Facebook. You use Uber to take a ride and book a place on Airbnb. The digital platform is a commerce society that creates intangible money to share with others. Trust in strangers itself has become a value chain.



Source link

What is Bitcoin Mining? A Step-by-Step Guide

0

Bitcoin may be the next big thing in finance, but it can be difficult for most people to understand how it works. There is a whole lot of maths and numbers involved, things which normally make a lot of people run in fear. Well, it’s one of the most complex parts of Bitcoin, but it is also the most critical to its success.

2016-12-21-1482327206-2312561-bitcoin1368256_1920.jpg

As you know, Bitcoin is a digital currency. Currencies need checks and balances, validation and verification. Normally central governments and banks are the ones who perform these tasks, making their currencies difficult to forge while also keeping track of them.

The big difference with Bitcoin is that it is decentralized. If there is no central government regulating it, then how do we know that the transactions are accurate?

How do we know that person A has sent 1 bitcoin to person B?

How do we stop person A from also sending that bitcoin to person C?

The answer is mining.

What is Bitcoin Mining? In Some Ways, Bitcoin Is Like Gold

One of the most common analogies that people use for Bitcoin is that it’s like mining gold. Just like the precious metal, there is only a limited amount (there will only ever be 21 million bitcoin) and the more that you take out, the more difficult and resource intensive it is to find. Apart from that, Bitcoin actually works quite differently and it’s actually quite genius once you can get your head around it. One of the major differences is that mining doesn’t necessarily create the bitcoin. Bitcoin is given to miners as a reward for validating the previous transactions. So how do they do it?

Bitcoin mining requires a computer and a special program. Miners will use this program and a lot of computer resources to compete with other miners in solving complicated mathematical problems. About every ten minutes, they will try to solve a block that has the latest transaction data in it, using cryptographic hash functions.

What are Hash Functions?

A cryptographic hash function is an essentially one-way encryption without a key. It takes an input and returns a seemingly random, but fixed length hash value.

For example, if you use Movable Type’s SHA-256 Cryptographic Hash Algorithm:

Message: How does mining work?

Hash Value: 46550fef 26f87ddd 5e15407f 45a0b8d2 9513291c 4e0f0acc 24a974de 907a1569

If you change even one letter of the original input, a completely different hash value will be returned. This randomness makes it impossible to predict what the output will be.

How Are Hash Functions Useful For Bitcoin?

Because it is practically impossible to predict the outcome of input, hash functions can be used for proof of work and validation. Bitcoin miners will compete to find an input that gives a specific hash value (a number with multiple zeros at the start). The difficulty of these puzzles is measurable. However, they cannot be cheated on. This is because there is no way to perform better than by guessing blindly.

The aim of mining is to use your computer to guess until it comes up with a hash value that is less than whatever the target may be. If you are the first to do this, then you have mined the block (normally this takes millions and billions of computer generated guesses from around the world). Whoever wins the block will get a reward of 12.5 bitcoins (as long as it becomes part of the longest blockchain). The winner doesn’t technically make the bitcoin, but the coding of the blockchain algorithm is set up to reward the person for doing the mining and thus helping to verify the blockchain.

Each block is created in sequence, including the hash of the previous block. Because each block contains the hash of a prior block, it proves that it came afterward. Sometimes, two competing blocks are formed by different miners. They may contain different transactions of bitcoin spent in different places. The block with the largest total proof of work embedded within it is chosen for the blockchain.

2016-12-21-1482326831-9438069-bitcoinblockchainsmall.png

source: Bitcoin.org

This works to validate transactions because it makes it incredibly difficult for someone to create an alternative block or chain of blocks. They would have to convince everyone on the network that theirs is the correct one, the one that contains sufficient proof of work. Because everyone else is also working on the ‘true’ chain, it would take a tremendous amount of CPU power to beat them. One of the biggest fears of Bitcoin is that one group may gain 51% control of the blockchain and then be able to influence it to their advantage, although thankfully this has been prevented so far.

Who Are Bitcoin Miners?

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.

These warehouses are generally set up in areas with low electricity prices, to further reduce their costs. With these economies of scale, it has made it more difficult for hobbyists to profit from Bitcoin mining, although there are still many who do it for fun.



Source link

5 Incredible Ways The Blockchain is Reshaping The Supply Chain

0

Cryptocurrencies have gained mass popularity and acceptance across the globe. The brilliance of the technology from which they sprung baffles and attracts new businesses from all corners of the commerce arena, at a surprisingly fast-growing pace.

Blockchain technology or a “distributed ledger” is a marvel to study. The technology grows in popularity and uses every day. What does this mean to the various industries that supply the world with the goods and services we are all paying for?

2016-12-16-1481891436-1956958-paperclips1166828_1920.jpg

How is blockchain technology reshaping the supply chain industries?

In order, to examine how the supply chain will be affected by the blockchain, let’s look at each concept more closely.

Blockchain technology is the pride and centerpiece of its popular pioneer, Bitcoin. Bitcoin and the blockchain technology that is a digitally distributed ledger that through valid transactions and multiple verification requirements, offers a permanent and unchangeable public record of events without revealing the identities of the users. It’s clear that Bitcoin is a blossoming and possibly, permanent financial fixture globally. It is because Bitcoin erupted onto the markets and had become what appears to be an unstoppable currency, which has grown in value continuously since it first was introduced.

The R3 chief technology officer, Richard Brown, explained the blockchain in what he called “The BlockChain Bundle” which is a set of 5 characteristics or qualities that define blockchain technology.

There is consensus, validity, uniqueness, immutability and finally authentication.

Consensus. In the blockchain model, each user And each transaction are verified multiple ways. Brown gave the following as a silly, yet effective example of consensus. It’s people basically saying. “I know. You know. Now I know you know I know” which leads to the next piece of the puzzle.

Validity. Once a transaction is confirmed six times it is considered valid and correct it is permanently sealed into a record on the public ledger as a valid transaction in the block.

Uniqueness. The blockchain has special solutions for problems that apply uniquely to the users, no matter what it is used for.

Immutability. Once a transaction is verified, valid and recorded in a block of data on the distributed ledger it is irreversible and cannot be hidden or altered. It becomes another block in the chain of blocks that represent all the transactions that have taken place. Can’t erase, undo or manipulate block data that is already confirmed.

Authentication. Users authenticate transactions as they get confirmed and recorded, then that transaction is closed and irreversible.

Supply Chain Needs A Boost

“There is currently a whole industry set up to reconcile and audit all these separate ledgers, and you can’t easily connect them. This comprehensive shared data source could be a real benefit.”

A supply chain is a common system of organizations, people, activities, information, and resources involved in moving goods and services from supplier to customer. The supply chain industry seems to be a decent process, but the fundamental flaws are in the large margins of error, and there is always a distinct risk of loss due to potential human mishaps.

A new breath of life is surging over the outdated methods of the supply chain industries. Blockchain platforms are beginning to gain momentum. A blockchain integration Is an upgrade our supply chains really need to get the most out of our precious time and resources on this planet.

One example is Everledger:

Everledger allows users to store ownership records, detect fraud and combat counterfeit goods, providing the end consumer with a reliable source-to-sale narrative. It can also add so-called “smart contracts” to the system – contracts that allow the owner/seller to finance and insure these luxury items more efficiently.

“Diamonds are just the start, and our vision is so much bigger, she told the audience. We’re going to help in combating counterfeiting, and that’s not a fifty-billion-dollar problem — that’s 1.7 trillion.” – Leanne Kemp: Founder

The distributors and suppliers of the world’s goods and services will need to be flexible and perhaps even obedient as these major changes begin to take effect. The amount of product waste and loss due to human accounting errors as commonly seen in the previously used system of ledgers for manufactured products will decrease dramatically which increases profitability and will boost sales, productivity, and overall business efficiency. Plus, the record keeping that is attained through blockchain will make the supply chain a more smooth, reliable, and stunning operation.

Companies are finding ways to leverage these innovations to increase profits and strengthen relationships across the supply chain. They’re also partnering with forward-thinking service providers who value transparency and innovation and understand blockchain’s potential.



Source link

Why Bitcoin Could Be More Important Than the Internet: Here’s why

0

The ninth year into its journey, people’s trust in Bitcoin is growing at an exponential rate reaching new audiences. Hacker-money, as it was called in the beginning, is no longer for hackers only.

Bitcoin was one of the biggest leaps in technology since the inception of the Internet, hailing the new era of digital money, disrupting industries and financial institutions as well as introducing a new social paradigm where transparency and trust are the default value.

Revolution in financial services

German philosopher Schopenhauer was right in saying that all truth passes through three stages – first, it is ridiculed, then it’s violently opposed until finally it’s accepted as being self-evident. Case in point for Bitcoin.

Back in 2010, when most of the world first heard of Bitcoin much-renowned finance and economy experts were skeptical about the digital currency’s complex mathematical algorithm, dubious origins, and unknown creator.

Fast forward six years, leading banks and financial institutions are pouring millions of dollars investment into research. In the attempt to harness the power of the blockchain, the protocol that enables Bitcoins and other cryptocurrencies, major players such as Santander and JP Morgan gave a tacit acknowledgment to the fact that Bitcoin is valuable.

2016-12-08-1481211678-454378-ecuador298335_1920.jpg

If banks proceed to adopt blockchain-based transactions as well as officially accept bitcoin as a currency, they will be doing humanity a huge favor. Considering current bank transaction times of up to five days not to mention the enormous fees as compared with any cryptocurrency transactional, blockchain payments would be instant and cheaper.

Alternative store of value to fight inflation and economic turmoil

One may argue that Bitcoin as a store of value may even be better than some of the national currencies, especially in countries where the local economy is turbulent as is the case with certain Latin American countries where $1 today may be worth just 50 cents the next day.

Another advantage of Bitcoin is it’s built-in deflation mechanism achieved by a hard coded limit of 21 million bitcoins that will ever be in existence. The way our traditional debt-based economic systems work, inflation is almost inherent in the design. In other words, your dollar’s purchasing power today is almost guaranteed to be lower in a year or a decade from now.

On the contrary, bitcoins by design will steadily increase in value as the currency becomes universally adopted until the point when the last bitcoin is issued, a process, which is controlled by a mechanism called halving. Halving ensures that the prize that miners get for each bitcoin they mine is halved on regular intervals before all the bitcoins have been mined which is projected to be around the 7th May 2140.

Despite recent years’ volatility, bitcoin has been relatively stable and increasing in value. From an investment point of view, you may have been safer investing in the digital currency as opposed to more traditional commodities such as silver that in fact lost nearly 40% of its value in the last five years.

Socio-cultural renaissance

When the Bitcoin whitepaper was released in 2008, it caught the attention of programmers and hackers who revered it as a true masterpiece in cryptography and computer science. This unleashed a wave of other cryptocurrencies also known as alt-coins, and a whole new community of computer experts formed who were inspired to share a spirit of exploration and experimentation which lead to the first wave startups utilizing bitcoin blockchain technology.

Bitcoin allows anyone in the world with an internet connection to send and receive money without trusting – or needing permission from – third parties. The Bitcoin network is decentralized, which means no company or government controls the platform. Coupled with decentralized markets like OpenBazaar, it means that Bitcoin users can engage in trade without third parties taking a cut or censoring their transactions. – Sam Patterson: Cofounder, OpenBazaar

What is more, the decentralized ledger concept that Bitcoin introduced applies to many industries outside of finance. Many developers believe that blockchain will become the main data storage medium for authorities in the future when the authenticity of birth certificates, marriage agreements, and education diplomas will be guaranteed through the technology. Using Bitcoin for everyday transactions is an act of support for innovation.

Ultimately, mass adoption of Bitcoin will not only mean financial and technological revolution. Bitcoin is not simply a currency or protocol. Bitcoin is the ultimate showcase of trust in mathematics and perfectly embodies the changing times we live in. Disrupting the money space is also disrupting our cultural, social and political systems.

Finance and politics have been closely linked throughout history and recognizing Bitcoin as an official currency will have a big impact on world’s governments, political parties and administrative institutions who will have to adjust legislations to match the new paradigm. Undoubtedly, this will lead to more transparency within governments and prevent corruptive practices.

Reducing the human factor in money supply and institutional involvement in money distribution to the minimum is an important step forward for our society, and hopefully, we will witness a widespread economic reformation in an attempt to solve the inherent problems with paper money. In this respect, Bitcoin was the missing piece in the puzzle.



Source link

5 Blockchain Applications That Are Shaping Your Future

0

You probably have heard of bitcoin and cryptocurrency by now. And as of late the term “Blockchain” has made huge splashes in the tech community.

It’s the technology that underpins digital currencies and ensures that all transactions are properly conducted and recorded. But what is stored on the blockchain need not be just a monetary unit – it can be put to all manner of other interesting uses.

But, there is one underlying question most have.

What are the blockchain applications of the future?

As it turns out, more applications besides the currency can be developed to harness the technology. The following are five of the blockchain ideas that are in work in progress stage.

2016-11-28-1480338390-4074406-3pgb5eqvaielorenzocafaro.jpg

DISTRIBUTED CLOUD STORAGE

Blockchain data storage will become a massive disruptor shortly. (3-5 years)

Current cloud storage services are centralized — thus you the users must place trust in a single storage provider. “They” control all of your online assets.

On the other hand with the Blockchain, this can become decentralized. For instance, Storj is beta-testing cloud storage using a Blockchain-powered network to improve security and decrease dependency. Additionally, users (you) can rent out their excess storage capacity, Airbnb-style, creating new marketplaces.

Anyone on the internet can store your data at a pre-agreed price. Hashing and having the data in multiple locations are the keys to securing it.

Storj.io and factom are two start-ups exploring this idea. After encrypting your data, it is sent out to a network with easy to track basic metadata.

DIGITAL IDENTITY

Imagine never having to worry about your digital security every again. It’s a massive problem in the world.

Which is now estimated to cost the industry about $18.5 billion annually, according to a report released Thursday by Distil Networks.

That means for every $3 spent, $1 is going to ad fraud.

Blockchain technologies make tracking and managing digital identities both secure and efficient, resulting in seamless sign-on and reduced fraud.

Be it banking, healthcare, national security, citizenship documentation or online retailing, identity authentication and authorization is a process intricately woven into commerce and culture worldwide.

Remember what happened with Target?

The data breach at Target was significantly broader than originally reported: The company said that 70 million customers had information such as their name, address, phone number and e-mail address hacked in the breach.

Events such as hacked databases and breached accounts are shining the light on the growing problems of a technologically advanced society, without outpaced identity-based security innovations.

Blockchain technology offers a solution to many digital identity issues, where identity can be uniquely authenticated in an irrefutable, immutable, and secure manner. Current methods use problematic password-based systems of shared secrets exchanged and stored on insecure systems. Blockchain-based authentication systems are based on irrefutable identity verification using digital signatures based on public key cryptography. In blockchain identity authentication, the only check performed is whether or not the transaction was signed by the correct private key. It is inferred that whoever has access to the private key is the owner and the exact identity of the owner is deemed irrelevant.

Blockchain Identity Use Cases

  • Blockchain technology can be applied to identity applications in the following areas:
  • Digital Identities
  • Passports
  • E-Residency
  • Birth Certificates
  • Wedding Certificates
  • IDs

ShoCard is a digital identity that protects consumer privacy and is as easy to understand and use as showing a driver’s license. It’s optimized for mobile and so secure that a bank can rely on it.

SMART CONTRACTS

What if you could cut your mortgage rate, make it easier to update your will?

The world of smart contracts is fast approaching, but what are they?

These are legally binding programmable digitized contracts entered on the blockchain. What developers do is to implement legal contracts as variables and statements that can release of funds using the bitcoin network as a ‘3rd party executor’, rather than trusting a single central authority.

For example, if two people want to exchange $100 at a specific time in future when a set of preconditions are met, the conditions, payout, and parties’ details would be programmed into a smart contract. Once the defined conditions are met, funds would be released and sent to the appropriate party as per terms.

By giving computers control over contracts, we can make business more efficient and make the legal system more equitable.

“Smart contracts solve the problem of intermediary trust between parties to an agreement, whether that is between people transferring assets like gold, or executing decisions between two parties in a betting contract,” explained Vitalik Buterin, a founder of Ethereum.”

DIGITAL VOTING

The greatest barrier to getting electoral processes online, according to its detractors, is security. Using the blockchain, a voter could check that her or his vote was successfully transmitted while remaining anonymous to the rest of the world. In 2014, Liberal Alliance, a political party in Denmark, became the first organization to use blockchain to vote. With American voter turnout still shockingly low, distributed digital voting may represent a way to enfranchise non-participants.

Last year a team accredited to observe the 2013 municipal elections in Estonia – the only country to run Internet voting on a wide scale – revealed that they observed election officials downloading key software over insecure Internet connections, typing PINs and passwords in view of cameras, and preparing election software on vulnerable PCs. Norway also canceled trials of e-voting systems in local and national elections, concluding that voters’ fears about their votes becoming public could undermine democratic processes. (Source: estoniaevoting.org)

Can you imagine what would happen to our governmental structures?

My hope is that Blockchain technologies will become the gold standard for all nations of the world shortly. It is time for our system and governments to become more transparent.

DECENTRALIZED NOTARY

One interesting feature of the blockchain is its timestamp feature. The whole network essentially validates the state of wrapped piece of data (called a hash) at a certain particular time. As a trustless decentralized network, it essentially confirms the existence of [something] at a stated time that is further provable in a court of law. Until now, only centralized notary services could serve this purpose.

Manuel Aráoz, a Buenos Aires, Argentina-based developer, who built Proof of Existence as a decentralized method of verification, a kind of cryptographic notary service explained:

“As the blockchain is a public database, it is a distributed sort of consensus; your document becomes certified in a distributed sort of way.”

HOW IT WORKS

Proof of Existence allows users to upload a file and pay a transaction fee to have a cryptographic proof of it included on the bitcoin blockchain. The actual data is not stored online and therefore does not risk unwanted publication of the user’s material.

After anonymously uploading the document and paying the network fee, a hash of the document (or any other type of digital file) is generated as part of the transaction.

The Proof of Existence website shows recently uploaded files that have hashes on the block chain.

This, in effect, uses the public and ledger-like nature of the blockchain to store the proof of your file, which can later be verified should an issue of authorship or dating arise.

“Basically, by inserting the cryptographic hash of the document in a transaction, when that transaction is mined into a block, the block timestamp becomes the record’s timestamp,”

– said Aráoz.

Just imagine never having to pay for notarization ever again: The world is evolving towards a value-based economy. Where, if you are not adding value to the whole, you are no longer needed. And it’s about time. Too many old systems exist today that only leech off you instead of adding value in your life.

CONCLUSION

As mentioned above, most of these applications are still underdeveloped The future potential of the blockchain applications is still unraveling. The next couples of years will be all about experimenting and applying to all aspects of society. Regardless of which application comes first on a global scale. The bottom line is, Blockchain is here to stay and is transforming how our society functions.



Source link

Goodbye Corrupt Charities: Hello Blockchain

0

Blockchain technology could eventually be used to carry out many of the functions of a traditional regulator, according to a new paper by the Charities Aid Foundation.

2016-11-24-1480012812-3406081-55la3cisjkqmadirobson2.jpg
source: Unsplash


Blockchain technology
is creating a new model for charities, which manage large amounts of money, require complex accounting and conduct a lot of research, have much to gain from blockchain technology as digital transactions and smart technology increase.

Last year, charities in the US brought in over $2 trillion in revenue. $373 billion of that came from charitable contributions. And while charitable donations are increasing in popularity. The industry still has problems that have persisted for years, and that prevent many from contributing as much as they otherwise would. In some cases, it prevents people from donating at all.

The Charities Aid Foundation recently released a 20-pagereport, “Giving Unchained – Philanthropy and the Blockchain,” which examines how blockchain technology will affect the way charities raise money and operate.

Is this the future of Charities?

The report claims that blockchain technology could change the way people contribute to charities and the way funds address social problems.

  • Can digital colored coins that represent assets create a way to make donations of intangible assets like intellectual property?
  • Can self-governing contracts provide new opportunities for businesses to embed philanthropy as well as new ways for charities to raise funds and address social problems?
  • Can the blockchain offer a “radical transparency” to overcome the lack of public trust?
  • Will the “Internet Of Things” supported by blockchain technology deliver an environment in which smart machines become a “hyper-rational” donor class?

The Benefits of Blockchain Technology

  • Transparency: The ledger is public and can be seen by any user. Any system based on it is fully transparent.
  • Reduced transaction costs: The ledger is maintained and owned by users, so there is no need for a third party, thereby reducing associated costs.
  • Building trust: Since blockchain technology eliminates the need for third parties and makes transactions open, it could deliver significant benefits in improving trust.
  • Integrating the physical and the digital: Blockchain technology provides a way to represent any asset, tangible or not, in the digital world. It does this in a way that ownership status can be identified at any point in time while being completely integrated with digital payment mechanisms.

Examples to look at:

The BitGive Foundation, which describes itself as the world’s first Bitcoin nonprofit.

The organization partners with nonprofits like Save The Children and The Water Project, explains founder and executive director, Connie Gallippi, and harnesses Bitcoin’s benefits — namely cheaper, faster and more secure transactions — in order to raise charitable funds.

In March, BitGive unveiled a water well at a girls’ school in Western Kenya funded entirely with $11,000 in Bitcoin donations culled from members of the Bitcoin community.

The well serves 500 Kenyans who wouldn’t otherwise have access to water, says Gallippi, ork City. “It has made a huge impact.”

“While very few charities or donors may at this stage even be aware of the blockchain, it seems almost certain that the technology is, in one form or another, going to play an increasingly important role in the years to come. Those who want to prosper in this new environment would thus do well to think through the implications now.”

What Are The Benefits?

Radically reduced transaction costs.

  • Blockchain technology is decentralised.This means that it is not owned or operated by any one person or organization, but rather shared between users. Transactions on the blockchain do not require middleman (PayPal, Charity reps) as the ecosystem can be used to create things like “smart contracts” which are computer protocols (think lines of code) that record and active based on triggers.

Increased Transparency

  • Blockchain technology is by its nature entirely transparent (Well, not 100% exactly). Any user of the system can see exactly who owns what at any given time, and who has given what to whom. So, when it comes to money; since cryptocurrency is non-fungible (i.e. each piece is unique so one piece cannot simple be exchanged for another), an individual donor would literally be able to track their donation right through a charity and out the other side.

Enhanced Trust

  • Trust should be the most important element in charities, but these days that seems not be the case. Blockchain technology offers real opportunities to show trust. The removal of the need for third parties (Payment systems, organizations, and governments) means that the new 2.0 charities (You to the needed) and non-profits would no longer have to rely on other institutions such as banks, lawyers and government bodies in the same way

.

Benefits overall:

  • Almost zero transaction cost

What is Your Next Step?

Buy some cryptocurrency and get used to using it.Read the CAF report on blockchain based currencies. And finally become the change, instead of waiting for change to happen.



Source link

7 Incredible Benefits Of Cryptocurrency

0

Over the last couple of years, the term cryptocurrency has been rapidly gaining ground and understanding of its use and value in the public eye. At first it seemed unfamiliar and somewhat scary like the credit card looked to users in its early days.

You might be more familiar with terms like Bitcoin, and Ether. These are all cryptocurrencies using the Blockchain Technology to keep this currency and technology safe.

Currently, there are many types of cryptocurrency. A simple google search of the popular trend shows you the start of the growth and where it is taking us.

2016-11-23-1479864172-9341842-infographics0301.png

Source: Blockgeeks

How will cryptocurrency help you?

Fraud: Individuals cryptocurrencies are digital and cannot be counterfeited or reversed arbitrarily by the sender, as with credit card charge-backs.

Immediate Settlement:Purchasing real property typically involves some third parties (Lawyers, Notary), delays, and payment of fees. In many ways, the bitcoin/cryptocurrency blockchain is like a “large property rights database,” says Gallippi. Bitcoin contracts can be designed and enforced to eliminate or add third party approvals, reference external facts, or be completed at a future date or time for a fraction of the expense and time required to complete traditional asset transfers.

Lower Fees: There aren’t usually transaction fees for cryptocurrency exchanges because the miners are compensated by the network (Side note: This is the case for now). Even though there’s no bitcoin/cryptocurrency transaction fee, many expect that most users will engage a third-party service, such as Coinbase, creating and maintaining their bitcoin wallets. These services act like Paypal does for cash or credit card users, providing the online exchange system for bitcoin, and as such, they’re likely to charge fees. It’s interesting to note that Paypal does not accept or transfer bitcoins.

Identity Theft: When you give your credit card to a merchant, you give him or her access to your full credit line, even if the transaction is for a small amount. Credit cards operate on a “pull” basis, where the store initiates the payment and pulls the designated amount from your account. Cryptocurrency uses a “push” mechanism that allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information.

Access to Everyone: There are approximately 2.2 billion individuals with access to the Internet or mobile phones who don’t currently have access to traditional exchange, these people are primed for the Cryptocurrency market. Kenya’s M-PESA system, a mobile phone-based money transfer, and microfinancing service recently announced a bitcoin device, with one in three Kenyans now owning a bitcoin wallet. (Let me repeat that again. 1/3)

Decentralization: A global network of computers use blockchain technology to jointly manage the database that records Bitcoin transactions. That is, Bitcoin is managed by its network, and not any one central authority. Decentralization means the network operates on a user-to-user (or peer-to-peer) basis. The forms of mass collaboration this makes possible are just beginning to be investigated.

Recognition at universal level: Since cryptocurrency is not bound by the exchange rates, interest rates, transactions charges or other charges of any country; therefore it can be used at an international level without experiencing any problems. This, in turn, saves lots of time as well as money on the part of any business which is otherwise spent in transferring money from one country to the other. Cryptocurrency operates at the universal level and hence makes transactions quite easy.

There is no other electronic cash system in which your account isn’t owned by someone else.

Take PayPal, for example: if the company decides for some reason that your account has been misused, it has the power to freeze all of the assets held in the account, without consulting you.

It is then up to you to jump through whatever hoops are necessary to get it cleared, so that you can access your funds. With cryptocurrency, you own the private key and the corresponding public key that makes up your cryptocurrency address. No one can take that away from you (unless you lose it yourself, or host it with a web-based wallet service that loses it for you).

Overall, cryptocurrencies have a long way to go before they can replace credit cards and traditional currencies as a tool for global commerce.

Fact is, many people are still unaware of cryptocurrency aka Digital Currency. People need to be educated about it to be able to apply it to their lives. Businesses need to start accepting it They need to make it easier to sign up and get started.

The future appeal of cryptocurrencies lies in allowing you ultimate control over your money, with fast secure global transactions, and lower transaction fees when compared to all existing currencies.

When used properly and fully understood it would be the initiator of many emerging systems that will fundamentally change our global economic system.



Source link

Here’s What You Need To Know About Cryptocurrency

0

2016-09-14-1473882679-3868833-bitcoin.jpg

What is CryptoCurrency?

While many people have heard of Cryptocurrency, it is still shrouded in much mystery and misunderstanding. In this article, we’ll try to unshroud this new and exciting trend. To put it simply, Cryptocurrency is a decentralized virtual currency based on cryptographic software. CryptoCurrency relies on public and private keys to make transfers between individual. The great thing about cryptocurrency is that transactions are anonymous and untraceable. The decentralized nature of CryptoCurrency empowers individuals and eradicates the need for financial institutions.

The cryptocurrency market works very similar to FOREX (Foreign Exchange), however, with Cryptocurrency, there is no centralized bank or institution. Buyers and sellers rely on cryptography to secure transactions and control the creation of new ‘coins.’ Don’t let the word ‘Coin’ fool you, though, as cryptocurrency has no physical coins. The so-called coins are bought and sold through certain exchanges, and the value of these coins can fluctuate quite a bit, from day to day.

Where did this CryptoCurrency Come from?

The first decentralized form of CryptoCurrency was introduced to the world in 2009, by an individual (or group) operating under the pseudonym ‘Satoshi Nakamoto’; this was dubbed ‘Bitcoin‘ and is now the standard under which other cryptocurrencies operate. Bitcoin uses the SHA-256 cryptography, designed by the U.S. National Security Agency (NSA).

As mentioned earlier, Bitcoin users keep their balances in pairs of keys which consist of private keys and public keys. These ‘keys’ are actually long strings of numbers and letters, determined by a mathematic encryption algorithm. The public key is the address (much like a bank account number or a credit card number) which is published online, allowing users to trade, buy and sell with their bitcoins. The other ‘private key’ is used to authorize transfers, which is a PIN number, and is generally kept secret (or private) by the users so that only they can use it for transactions.

The backbone of the Bitcoin is the block chain. Whenever you purchase a bitcoin or purchase something with bitcoins, these transactions are recorded to a block chain, which confirms that the owner possesses the bitcoin.

When you download a Bitcoin wallet, you are basically downloading the block chain so that you as well as every user of bitcoin has a copy of the entire bitcoin network. The ‘wallet’ is actually a program that will generate an address to receive and transfer bitcoins. While the whole process is a bit complicated, the action of setting up a Bitcoin wallet is actually very simple. Simply download the program (wallet) and then use it to purchase, send and receive bitcoins.

The Emergence of the Altcoins

Because of the relative success of bitcoins, shortly after their creation, other forms of Cryptocurrency began to emerge based on the basic concept of Bitcoin. For instance, in April 2011, Namecoin was introduced, and a few months later the Litecoin came into being. These alternative cryptocurrencies were dubbed ‘altcoins.’ One of the great things about the Litecoin, introduced in October 2011, was its use of ‘Scrypt’ for the hash function, rather than using SHA-256 that bitcoin used. With Bitcoin, to generate (or mine) bitcoins, you required an ASIC machine; this often required a massive amount of dedicated computing power to mine the coins. With the Litecoin ‘Scrypt’ the Bitcoin miner no longer needs the ASIC machines.

While there are a lot of new altcoins emerging, many people feel safer sticking to the established coins. However, much can be said for checking out the newer startup altcoins, as the reward can be much greater in a shorter amount of time for investing in these new startups. You should do some research before plunging into the unknown waters, but for a small investment in such coin startups, the dividends can be out of this world!

In Conclusion

While how this cryptocurrency works may seem a bit complicated at first, once you actually get into it, you’ll find you don’t really need to know exactly HOW it works, but just to know it does work. If you have any experience trading in FOREX, it will probably seem familiar to you. The only difference is that this is a virtual currency, which means there is no physical money involved. The talk of it being decentralized means that you can trade in CyberCurrency without ‘Big Brother’ looking over your shoulder. It also means that you are going to take some risk in trading in this virtual currency. However, the rewards of trading can make the risk worth it, especially when it comes to newer altcoin startups, where you can get in at the ground level and watch the value of the coins rise over a short period. It is important to know, though, that as with trading of any kind, the real trick is in knowing when to get in and when to get out.

Whatever you decide, whether you want to trade in these virtual currencies, or simply provide a ‘nest egg’ of sorts, in case our ‘real’ economy collapses, I would encourage you to do some in-depth investigation, and look into the myriad of options available.

(Image Source)

The Morning Email

Wake up to the day’s most important news.

Source link

The First and Last Word in Money: How Bitcoin is more like Ancient Sumer than the Federal Reserve

0

The First and Last Word in Money: How Bitcoin is more like Ancient Sumer than the Federal Reserve

The newest forms of money – bleeding edge, blockchain-based cryptocurrencies – look a lot more like the oldest forms than anything that appeared in the meantime. 

Over the millennia money has taken many different forms. For seven thousand years or more, gold and silver have remained perennial favorites, but the nature of money is highly dependent on context. Precious metals, grain, axe heads, beads, animal pelts, rum, cigarettes – money is simply whatever people agree is money in a given situation, governed by whatever is available and convenient to use.

Monetary economists agree that money serves at least three distinct purposes: it is a unit of account, a store of value and a medium of transfer. In other words, you can use it to keep track of who owes what to whom; to defer spending to a later date; and to carry out commerce.

A number of properties facilitate these functions. Money should be durable, portable, divisible, hard to counterfeit, rare (though not too rare) and fungible – that is, one unit should to all intents and purposes be the same as another. In practice, different forms of money display these properties to a greater or lesser extent. Micronesian rai stones, for example, are huge disks of limestone weighing up to four tonnes. What they lack in portability and divisibility, though, they make up for in durability and resistance to counterfeiting.

Rai stones provide an interesting precedent for the newest forms of money, the digital currencies hosted on a network of shared ledgers, such as bitcoin. When a rai stone was (and occasionally still is) used as payment, typically for an important transaction like a dowry or arranging a political alliance, it was rarely physically moved. Instead, the community got together and agreed amongst themselves that the stone had changed ownership. So it is with bitcoin: the ledger is updated to reflect what belongs to whom.

The origins of money

Whilst money has taken diverse forms over the millennia, humans have always gravitated towards gold and silver. Attractive, scarce, malleable and resistant to corrosion, they have been a default at least since Sumerian times. David Graeber, author of Debt: The first five thousand years, notes that some of the earliest written texts establish a fixed exchange rate between silver and barley: effectively a silver standard. Money may even have arisen in the huge and elaborate temple complexes of the Ancient Near East as an accounting tool to facilitate payments for labor and much else besides – rather than being a development used to address the shortcomings of a barter economy, as a competing theory holds.

Either way, money at this stage in history typically meant pieces of silver, weighed out at the point of transaction and assayed using a touchstone to determine purity. It may not have been the most efficient system, but it worked and it was egalitarian. Money could truly be used as money; it was a technology of the people. Market forces might increase or decrease the value of silver against other commodities like grain or textiles, but no one controlled it or could tamper with supply.

At some point around 2,600 years ago, probably in Lydia (modern-day Turkey), the first coins were developed. Seigniorage, or the right to create money, was quickly appropriated by the king. Thereafter, money became a tool of the state, not of the people. The king could reduce the proportion of precious metal in the country’s coinage, replacing it with cheaper metals like copper, and pocket the difference – a lucrative source of revenue and one that was tapped repeatedly by Roman emperors to fund wars. Of course, this had the effect of devaluing the currency and often causing runaway inflation, as in the case of King Henry VIII, who earned the nickname ‘Old Copper Nose’ because he so heavily debased the English penny that the silver surface quickly rubbed off to display the copper underneath – particularly around the raised relief of his nose.

The Rise of Free Money

Seigniorage and the inflation that frequently accompanied it had the effect of transferring value from the end users of money, ordinary people, to those who created it, the state. Far from being a simple, decentralized technology – it may seem strange to call the use of pieces of precious metal as a medium of exchange for goods and services ‘technology’, but the impact cannot be overestimated; this truly was fintech, 5th millennium BC-style – it became a means to wield power.

Further interference came after the first banks were established. The basic idea was sound: it’s risky to keep large quantities of gold and silver in your home, so wealthy individuals would pay a bank to do it for them. Clients would withdraw funds as they needed them. After a while, it became evident that you didn’t physically need to take the gold out at all. The bank could write you a contract that gave you a claim to the gold they held in their vaults – the first banknotes. The state took the same approach with so-called representative money, or notes that were backed by holdings of gold. You could, in theory, redeem a note for its face value in gold. But both banks and states realized they didn’t need to hold 100 percent of the gold their notes represented. They could lend it out at interest or, in the case of the state, spend it elsewhere. The logical conclusion of this process was fiat money: money not backed by any precious metal but created at will (fiat: Latin, ‘may it be so’) by the issuer. In most countries, the central bank plays a role in creating money but outsources much of the responsibility to commercial banks, and both profit from seigniorage. Inflation is built into the system. It works, more or less, so long as there is confidence in the issuer. Overdo it and you end up with rampant inflation or hyperinflation, as in the Weimar Republic in the 1920s or modern-day Zimbabwe. Quantitative easing may have been a necessary evil – the least-worst solution to a problem that never should have arisen in the first place – but the long-term effects of creating so much new money will not be known for many years.

Blockchain Money

This is the context within which bitcoin arose eight years ago. Bizarrely, bitcoin is in many ways more like the earliest forms of money than it is like fiat – a remarkably recent development in the broad historical sweep of cash.

Bitcoin’s ledger of accounts is shared amongst tens of thousands of computers around the world, rather than being controlled by a single entity like a bank or government. Like the Micronesian rai stones, ownership is agreed by consensus. No one can tamper with the ledger without everyone else asking questions and ignoring fraudulent transactions. Unlike rai stones, though, bitcoins are highly divisible, down to eight decimal places. Existing in cyberspace, verified by thousands of computers, they can be considered tremendously durable. They are portable – they can be sent anywhere in the world in seconds – highly fungible, rare (with limited supply) and extremely hard to counterfeit. The earliest transactions required buyer and seller to weigh out pieces of silver, assaying them with a touchstone to verify purity. Instead of scales and a touchstone, bitcoin uses maths: coins are tested to establish their cryptographically-guaranteed ‘purity’, which in this case is a binary matter of legitimate or fake. Like money was for its first 4,500 years or more, bitcoin is a tool of the people, the slight technical hurdle to usability notwithstanding (see 3 Easy Steps to Get Started with Bitcoin). The process of money creation, whilst not perfect, rewards those who protect the security of the network, and inflation is not unlimited. Other digital currencies have fixed supply from the outset, rewarding their ledgers’ guardians with small transaction fees.

Arguably for the first time since the development of coinage, more than 2,500 years ago, cryptocurrencies like bitcoin are returning money to its original purpose, without the inherent power dynamic that state- and bank-controlled issuance brings. Of course, fiat money isn’t going anywhere in a hurry, and those who claim that bitcoin will replace one or other national currency are likely to be waiting a long time (there are, after all, advantages to state-sponsored currencies, as well as vested interests). There will, most likely, ultimately be a plurality of different forms of money, catalyzed by blockchain technology – perhaps even a free market of competing currencies similar to the one foreseen by the Austrian economist Friedrich Hayek in The Denationalization of Money. These will include blockchain-improved versions of fiat currencies and other assets. The Waves platform, for example, was designed to bridge the gap between the complexities of the 21st century monetary system and the blockchain, as well as allowing new financial instruments like gold and silver on the blockchain, and much else besides.

Thus blockchain won’t necessarily replace money as we know it. But it will make it more like money should be and needs to be in order to work as it was originally conceived.

The First and Last Word in Money: How Bitcoin is more like Ancient Sumer than the Federal Reserve was originally published on Due Digital Wallet by Guy Brandon.



Source link