Blockchain - What you need to know
“We believe that the economy works best when it works for everyone, and this new platform is an engine of inclusion” - Don & Alex Tapscott - Blockchain Revolution, How the Technology behind bitcoin is Changing Money, Business, and the World.
Recently I spend time chatting with my father-in-law; as always, he likes to pick my brain about tech stuff. More recently I spent an hour helping him out with his Apple music editing software, as he is an active jazz musician and loves to know what is going on in the tech space. This time, he wanted to know whether some new type of money, something called a Bitcoin was really worth 24,000. Well yes, it was - if for a moment but let's get a handle on the world of Blockchain and understand what that means not just in this “$24,000” context but for the world, at large; but first, a bit of history about money.
The concept of Money, as we know it today, has roots in the system of bartering – the exchange of goods and services for other goods and services. However, over time, batter trade took on the new forms. Today instead for direct trading of product/ services for another product/service, humans decided that what was needed was a concept that would have a portable value and that services and products can be allocated an amount using this thing -which today we call money. Today, we call this thing money. For many, the mental model is the physical form of paper or metallic coins, and in recent years more digital formats, with their accompanying exchange protocols, such as internet transfers, money gram, credit cards, etc. And this general idea of money has guided financial markets for many generations, setting the valuation of all things in our ecosystem – from the clothes we wear to the cars we drive and how we value of assets in the world. So back to the story of Blockchain.
The world of Blockchain technology can be a confusing, even for those of us with moderate to expert tech know-how. But hang in and read on. It will all make sense.
The first decentralized cryptocurrency, Bitcoin, was created in 2009 by the pseudonymous developer, or a group of developers, Satoshi Nakamoto. The term crypto-currency comes from the fact that the transmission of this coin was encrypted, and encoded for transmission on a Blockchain platform. But I am getting ahead. So how does it all work?
Just imagine you were a network of people with a common interest. To remain true to some of the history of cryptocurrency, let’s say you’re a group of gamers or a band of criminals, and you needed a way to pay for things on the web, why not device something called “web money?”
And that is what happened.
Undoubtedly, the idea of "web money," later crypto coin also comes with the stigma of dark web dealing, cyberpunk, gaming, crimes as well as other nefarious activities associated borne in the darkest part of the web. But imagine as the usage of web money grows and becomes more mainstream. How do you keep track of it? Well, you would have to figure out how to keep a ledger of the transaction of who owes whom, and how much and you would also have to encrypt and secure these transactions.
You can best understand Blockchain as a publicly posted digital ledger of cryptocurrency transactions. Each Blockchain has many dimensions and or parameters - in the case of cryptocurrency, this includes such parameters as the cryptocurrencies identity, its values, its transmission data. Another way to understand the Blockchain and Cryptocurrency relationship – If Blockchain was a field, cryptocurrency would be a player on the field. This digital leger has no physical form that we know and exist only online as “digital assets on a blockchain. With this said you could view cryptocurrencies are digital assets that never make the light of day; in fact, they are constituted only as transferable data, maintained Blockchain platform.
The first digital coin introduced was Bitcoin, and today it remains the "gold" standard in the world of cryptocurrency. Following Bitcoin was the Litecoin, making them the most recognizable of the crypto coins to date. Some other cryptocurrencies include Ethereum and Ethereum Classic, Monero, Dash, Ripple, and NEO.
Briefly consider that Blockchain is not solely applicable to the Cryptocurrency exchange and can be scaled and appropriated for many other types of things we are yet to imagine. So, you are this far into this post and must have other questions:
Types of Blockchain?
Blockchains can be public, private, and part of a consortium or federated blockchain – they are private, public and consortium or federated blockchain.
- Public Blockchains – Anyone can participate, without explicit permission.
- Private Blockchains – these are kept centralized to one organization.
- Federated Blockchains – operate under the leadership of a group
For more information, I propose a Google search for a deep dive of the details of each.
So, can anyone create a crypto coin?
The short answer is yes. However, it is not as simple as it requires in-depth knowledge and a following or a group who see value in your coin? It takes a group following to help imbue value into your cryptocurrency via a collective group trust. One way to think about it is Americans believe in the US dollar, an arbitrary thing, once just a piece of paper, all joined by "trust in God."
Spotting a Scam!
So how do you vet a cryptocurrency company and applications? Forbes contributing writer John Wasik outlines How To Spot a Bitcoin Scam, an article worth reading as part of a user’s knowledge gathering.
Cryptocurrency provides users with a myriad of options; however, for the average user, there is no way of telling a legitimate service from a legitimate one or knowing whether an accompanying mobile application or hardware accessories, such as wallets and vaults. User education rest, in part, on the shoulders of regulators to provide public guidance and ease around legitimate options. I also propose that service providers also play a role in orienting and educating users on their new platforms. This education could include such aspects as a customers' tax implications and investment considerations.
Future and Application of Blockchain?
The Future application is extensive for those who understand the technological scope. Imagine for a minute that a group of individuals online say women, got together to exchange clothing worldwide and decided that over time they wanted to supplement the pure exchange of clothing, with a portable means of making purchases. They may determine that a crypto coin may be a great solution. If they all decide there is value in the concept, you are witnessing the breadth of application. Replace the woman with any group. The possibilities are endless.
The future is inclusive; Blockchain technology levels the global playing field. For designers such as myself, vested in inclusive design, this space has holds some good appeal. In an article titled Blockchain for Inclusion? Gates Foundation Strikes Tepid Tone at Money 2020, author Marc Hochstein writes:
Bitcoin and other blockchain applications may help expand access to financial services for the world's poor, but the technology is not the cure-all that some of the early rhetoric in the space made it out to be.
My interest in Blockchain is linked to my passion for Sustainable social solutions. I believe that Blockchain will disrupt the world financial markets more than we understand and create a better sense of inclusivity.