The Rise of Alternative Blockchains and the Future of Digital Currency
Originally posted Sept 5, 2014 on MoneyAndTech.com
History has a way of repeating itself. Time and time again this sentiment has proven that mankind and its individual fallacies have been a repeated issue. War, civil unrest, and times of great depression — are all defining moments in mankind which have forced us to be more innovative than before to continuously propel ourselves towards the future; with the invention of the Internet and the all-sweeping digital age came the ability to do something different. The ability to work and collaborate in real-time with people all over the world was now possible. Big ideas — and even bigger minds — could come together as one under the sovereignty of the net and finally work together to create something truly groundbreaking.
It was with the assistance and laborious efforts of Satoshi Nakamoto and his/her/their creation of the Blockchain (Wiki) that started this all. The main fruit of that labor, derived from Satoshi’s efforts, is the all ubiquitous Blockchain-backed heavyweight, Bitcoin. When the world seems locked in constant turmoil, we’ve rallied time and time again to make the necessary adjustments to continually advance human kind — and it is with the power of the Blockchain that we will continue to do so once again.
Bitcoin, the originator of distributed public ledgers, serves as a prime example of the types of innovations that can arise when people get together behind a shared commonality. That commonality just so happened to have been Bitcoin; as well as other potentially powerful applications that might be derived from the underlying Blockchain-based technology. The Blockchain is a beautiful invention that spurred the creation of many new Bitcoin-centric startups and venture-backed companies. After Bitcoin enjoyed its time in the sun for awhile, the time came for a cataclysmic change that would alter the Bitcoin ecosystem forever: Altcoins, and other alternative use cases of the Blockchain.
The Bitcoin “ecosystem” as a whole carries a sentiment, and that is “we want to decentralize”. I personally want to live in a world where no one is excluded from participation in the forward battle that is bringing this technological innovation into the hands of the masses. However, Bitcoin and its end-game is to sweep the globe in a digital currency movement; uniting all of us under an umbrella of financial independence.
Wow. That sounds fantastic. But — Bitcoin can’t do it alone.
Let’s think back to the early eras of internet before things advanced, before mom and pop could start their own blog and have their ideas on the net in minutes — the websites of the early days thrived on individuality. Just like the Internet, the Blockchain is the equivalent in this metaphor; Bitcoin being just another website on the Internet. In order for the “Internet” (Blockchain) to grow in acceptance it needs many (many many many) websites; “Alternative Blockchains” need to be created and explored before we perfect this new financial system and finally bring it into the hands of everyone — and their grandparents.
There will be a lot of competition and many alternative Blockchains will fail. However, these experimental Blockchains will have performed an important function along the way. That function is having educated and introducing at least one new individual into this crazy crypto-sphere and enabling a different perspective on what the Blockchain can do. Take for example Storj. Storj is a project that aims to bring trustless decentralization to cloud storage using a combination of StorjCoins (Blockchain based currency/token) and BitCumulus (proprietary method for their cloud storage) — this is big because it lessens the possibilities of being a political target and prevents prying eyes on your data. Storj is working on putting the Blockchain to work to deliver the first truly decentralized cloud storage option; a creation that is tantamount to the Blockchain. This is simply one example.
Bitcoin cannot be selfish with the Blockchain technology. Sure, Bitcoin deserves its current stance asthe go-to Blockchain; especially after all the efforts of early adopters, developers, investors, and evangelists which got it to where it is today. But, let’s all understand one thing: “We’re all in this together”. We all want to use this incredible technology that Satoshi Nakamoto has given us; let us not allay this incendiary and disruptive technology with our own on personal beliefs on what the eventual Blockchain the globe will ultimately need to decide on.
Whether it will be Bitcoin or not that is massly adopted, that is impossible to know or conclude at this time. However, many alternative Blockchains already tout greater efficiency and scalability; for instance many new coins are created that rely on “Proof of Stake” (PoS). PoS is a rising alternative proof that seeks to take advantage of distributed public ledgers — but do so without the need for powerful miners to keep the network afloat. For instance, BlackCoin recently introduced their “PoS 2.0” (Whitepaper) which seeked to patch many of the concerns with PoS being a viable option over Proof Of Work (PoW) based coins (Bitcoin). PoS 2.0 was developed by BlackCoin’s lead developer, Pavel Vasin — who continues to work diligently everyday to move PoS forward as a viable alternative to the resource and energy hogging, PoW. Pavel and the BlackCoin Development Team have many plans in store to advance PoS into the go-to, green standard for crypto based currencies. One of which is decentralizing checkpoints in the protocol in an upcoming update to PoS due later this year. This is an advancement that will benefit all coins built atop its codebase as BlackCoin seeks to advance not only the BlackCoin protocol and PoS — but ensure security with PoS across the whole Altcoin ecosystem.
There are many others like BlackCoin working diligently to help advance the cryptocurrency space even faster by collaborating to improve upon how the Blockchain functions to increase efficiency. Alternative currencies like these are important for the future because they help to streamline Blockchain technology more and more for scalability and mass adoption. It also gives programmers and developers a toolset to play a part in helping to make history — and to hopefully improve humanity while doing so.
Bitcoin has provided us with an array tools that will eventually help usher humanity into a new era that would make any 20th century scientist weep in jocularity with the endless possibilities the Blockchain brings. It has spurred the creation of many BBPs, or “BlockChain Backed Platforms”. Which, put simply is a fancy acronym that describes entities built on Blockchain technology — where the equity or value of the organization increases as more investments are made into the infrastructure and products that derive from it (i.e. Ethereum, CounterParty).
Bitcoin has the potential to change our current financial dependence on central bodies, and it would be wrong for us to attempt to limit that potential by choosing who (software developers, core developers) will wield the tools to create our -inevitably- decentralized future. By limiting the majority of the market to one particular Blockchain, you stifle the nascent businesses and organizations who already do so much, with only a modicum of the current market share as Bitcoin.
Now there is a lot of controversy in the crypto-sphere in regards to Bitcoins and Altcoins. With any significantly disruptive innovation comes controversy somewhere (Mt. Gox, BTER/NXT fiasco, $SYS IPO, Neo&Bee, Mintpal hack) — you get the point. These are some of the growing pains that the technology has had to endure in order to evolve. Some of these travesties/failures can be tightly attributed to greed, while others incompetence. We should not be surprised; we should should be ecstatic! These controversies are the most apparent evidence we have to indicate that we’ve struck a technological gold mine. Everyone wants to cash in before the barriers of entry get too high (regulation).
Speaking of disruption and failures let’s revisit the Internet metaphor mentioned earlier. Does anyone remember ‘Pets.com’; how about ‘Geocities’? Man, those were awesome! Ehem. Anyways…
The point here is that these inevitable speed-bumps and blunders represent growing pains of an emerging disruptive technology — except this time instead of websites, it deals directly other people’s money. Money is inherently a very touchy subject for most people. In the past if a dot com venture failed, only VCs and investors would lose money. Now, if these emerging companies and technologies screw up — it is the early-adopters pocket that is also robbed, or in this case their digital wallet.
Mature Blockchain backed companies that are proactive, ‘flexible’ (meaning can scale adequately or adjust to regulations) during these intense periods of impending regulation, will be able to evolve and reap huge rewards in the mid to long-term. Meanwhile, they will also increase the adoption rate of Bitcoin and Blockchain-related technologies, for example companies such as BlockTech. It is important to remain agile when dealing with such a new, unregulated technology. Fortunately, the digital currency ecosystem is ripe with intelligent and talented people eager to collaborate and capitalize efficiently to take advantage of this entrepreneurial window.
In the same instance there will be companies built around the ideals of older financial models that will eventually be burned by those that will innovate them out of relevance. Especially companies who continue to use outdated financial terminology and models to give services like those of traditional banks. But, it will not be the fault of the major digital currency disruptiveness that will kill them; it will be the archaic belief that someone else should have control over our finances. People will cling to their old habits of financial responsibility by throwing their money at an institution to babysit their cash for the convenience of having a piece of plastic to pay fees and spend money with little liability or personal responsibility. However, that is okay. People will grow out of this belief once the appropriate killer apps have been developed to show people just how simple using digital currencies can be; like how mom and pop can start a WordPress blog in minutes and get their ideas out on the web.
With the power of alternative Blockchain technologies we can help spread the power of decentralization by appealing to as many unique niche’s as possible to get more people to reach the, “Ahhh, I get it now!”, moment. This moment is one that we all eventually experience when working with and learning about digital currencies.
Peer-to-peer mediums of exchange are another major breakthrough utilizing Blockchain technology. The elimination of “middlemen” to facilitate trust between third parties can be difficult with modern financial tools, as escrow services and the like have fees and force you to entrust others. However, with the power of the Blockchain and a few innovative ideas behind smart contracts and decentralized escrow agents, the fear of dealing with strangers and our money is eliminated. Services like BlackHaloand Open Bazaar are promising examples of new peer-to-peer infrastructure which utilizes the Blockchain to create new decentralized marketplaces and contract methods which do not require a middleman to properly execute. Services like these will eventually render certain financial institutions pointless if we can create the appropriate contracts to enforce anything we wish to contract with another person here on earth (i.e. MoneyGram, Western Union). Tools like these can gradually carve a way out of existing financial models and into the real decentralized utopia that Bitcoin is eagerly seeking to obtain. But, it’s much easier and far more fun to do it, together.
So we should be applauding all alternative currencies for their efforts to bring digital currencies to the masses: BlackCoin, RZR,Darkcoin, NXT, Vericoin, Dogecoin — the list goes on. But, we can all agree on one thing. Greed will reign apparent as the dust continues to settle on this technological gold mine. There will be more hacks, thefts, and controversies and failures. Ideas built during this beautiful entrepreneurial window will flourish — and come to their abrupt end, when [insert amazing idea here] 2.0 releases and trumps it, rendering it pointless. For example, everyone is always seeking to secure a stake in what they believe may be the next Bitcoin. But isn’t that kind of the point of all this madness? We’re pioneering faster than ever in this disruptive environment and some people (including myself) complain that it isn’t moving fast enough.
For now, we should view this competitive digital currency landscape for what it is — a primordial pool of endless ambition and passion for a technology and what it can do for humanity. The Bitcoin and Altcoin movement will continue to play out, leaning on our inherent human nature and bad habits on dependency to institutions as it wiggles its way free. Once free the Blockchain and all things created with it will finally trump the investors and those seeking to get rich quick once true mass adoption has occurred. That will only come in time if we start working together, now. Together, from those smoldering ashes of adversity is where we will triumph together and give birth to the final Blockchain; one which we can all agree is the right fork.