Blockchain Unchained pt. II
(still for the common person :) )
As we said in the last article what makes blockchain so secure is in its decentralized mechanism. But there is another feature which makes the blockchain secure and that is the use of what is called public — key cryptography. To explain this concept let’s imagine you own a house. The house is viewable by all to see and therefore is public and inside the house contains a treasure chest. In order to get inside the house and access the treasure chest, you need your key to open the door.
Similarly, the blockchain (being a ledger) every user has a “house” but it is called a public key simply your address. It is randomized set of characters which no one can access unless they have the key to access its contents called a “private key”. Being the owner of the address, you and only you should have access to the private key.
Now if you recall our article from last week miners protect transactions and the ledgers as they validate transactions and due to the many participants verifying transactions no one person can be attacked. Each transaction is entered to a block with other transactions and all the transactions are linked to one another which through this database all the miners have access to all the blocks. In order for someone to gain access to the contents or tamper inside your account they would have recreate the entire blockchain or literally, in our house scenario, your entire city. You can imagine how much effort this would require.
So you have this digital wallet that stores all of your assets and there are other people who have digital wallets in this network, so now what?
Now you can send information or literally anything of value through the network (i.e. money, identity information, medical records, etc.). To do so all you need to do is know the recipient’s public address, no different than sending mail from you house to your aunt’s house on the other side of town, except imagine sending information all over the world securely.
This is the true power of Blockchain since its inception since 2008. Once you have the other party’s public address, you can send anything to them and they can do the same to you. All the while your transactions are broadcasted over this system and verified via the miners on the Blockchain.
What makes these transactions so unique is there is no need for a bank, government, or post office (in our house example) to verified and administer the transaction. With this method of system it is still a very nascent industry as it is still growing but as you can see there are many applications based on the underlying foundation of this technology. Let’s discuss the main layers which if you can imagine Blockchain being a tree and the layers like branches then it will help to understand.
Protocols and Infrastructures
To the common person we’ve never understood how the Internet works or how the World Wide Web operates. Even now do you understand what happens when you type in the website you want or why there is “https” located next to the address. I’m not going to discuss how the internet works but just know there are rules which help your device to retrieve a website and its contents. These rules of the internet are called you command something via the internet whether its listening to music or sending an email or messaging a friend.
These rules aren’t even noticeable to the average person as we’ve been so used to the internet at this point. But there are many protocols which are the backbone and skeletal structure of what makes the internet so enjoyable. Like the skeletons they predate the flesh and skin and are one of the most pivotal components of the internet. From these protocols we get the applications we so love and joy Facebook, Gmail, Google they all operate using protocols.
Similarly blockchain has its protocols, the earliest of them being Bitcoin which was the first successful public blockchain. It’s protocol is sending financial transactions via the blockchain and using everything we’ve described above to maintain this flow of transactions. It’s crytocurrency or coin is called bitcoin (lowercase b). Another protocol have been created such as Ethereum which coin is called Ether which is another public blockchain. From there, there are private blockchains such as Ripple, scalability and interoperability platforms such as BigChainDB and Raiden Network, and market infrastructures each platform and their associated coins. It is important to note that you may use multiple protocols at the same time similarly to how the internet runs know when you want to send an email for example.
Middleware and DevTech
This layer contains the technology needed to store all this data such as distributed storage systems, distributed computing systems, platforms to hold external data, platforms dedicated to store identity and ensure privacy, and devtech platforms. Each component under this layer has its many players and each platform has its associated coin. This layer is also important to the blockchain ecosystems because they make it easier for information to interact with each other and allow for the storage capacities for the protocols (think of how all the information on the Internet is stored today).
Capital, Liquidity, and Transparency
From all these platforms and layers there are platforms which exist to provide all the information regarding each platform. There are crypto funds which are like hedge funds and venture capital groups for helping to partake in the success of platforms. There are platforms which exist to act as exchanges and wallets for crytocurrencies. In spirit of this layer there are platform dedicated to serving the community with analytics and resources regarding the many layers and platforms in the blockchain ecosystem.
Last but not least, Applications
From the above mentioned there are a plethora of applications I’m sure you’ve thought of since reading this story, from Government applications, to Legal applications, to Supply Chain and Logistics applications, applications for decentralized social media, applications regarding energy, and even the cryptocurrencies are by their very nature an application. New applications are being thought of everyday including the one we are going to create very soon ;) but we’ll save that for another day. As much as blockchain looks to transform our daily lives there is an interesting phenom taking place for several years called Token Crowdsales aka Initial Crypto Offerings aka Initial Coin Offerings aka Crowdsales aka Token Generated Events.
For most of the platforms mentioned above because this industry is so new in every aspect of its inception has been nothing short of innovative. Traditionally startups sought venture capital or tried to attract investors for some capital in exchange for equity in the company. The startups usually had to have some traction first or some example of reaching product market fit.
Eventually after rounds of investing and reaching mass adoption, the startup would conduct an Initial Public Offering, allowing the public to buy shares of the company and those shares are predicated on the value of the future expectation of what the company will grow into the future. As more people believe the company will grow in terms of some metric (i.e. sales, growth, user base, etc) more people will buy shares in the company.
Blockchain has flipped this model on its head. For most of these platforms, the technology was too new. And their ideas were just that, ideas, there is no precedent for any investor to go by to invest in as they are starting to figure it out. So what platforms are doing are creating their cryptocurrency which will run on the platforms and using them in a way to fund the platforms growth to success.
What is formerly called a token (token = coin = cryptocurrency) crowdsale, platforms create a cryptocurrency and build its characteristics (i.e. supply, etc) and can sell them or a fixed amount of them for the public to buy which allows them to raise money and create a value for the new coin.
Companies have risen millions of dollars in mere minutes and the value of each coin is dictated based on what the future value of the platform to the blockchain ecosystem. To put in perspective bitcoin at its inception was worth less than $1 USD in 2009 and in 2017 have a hit highs of $5000 as more people used them.
For SEC and legal purposes about these coins being securities it has been of recent concern because there have scams and false promises and because there is no regulators in the industry investors risk losing it all if they back the wrong platform. because of these scams,which there aren’t many, there are certain controls in terms of due diligence if you want to participate in a crowdsale. And in part of the team behind the project there are many measures they need to inact in order to ensure hackers don’t tamper with their crowdsale with their websites and wallet.
Because of the human negativity bias we tend to amplify the negatives over the positive and obviously you can imagine the disruption this is causing in the financial world let alone the disruptions blockchain is going to have so you can see why people are eager to heavily report about fraud and schemes. But it is important to know where the message is coming from being the same people behind the attacks (banks and venture capital) are the same ones behind some of the biggest schemes and frauds known to man (2008 financial crisis) so forgive some people from trying a different way to develop a better world.
Future of Blockchain
In the early years of Blockchain many have compared it to the early years of the Internet. It hasn’t quite reached mass adoption yet and the community is still niche with many different entities trying to leverage its full potential.
The more successful ones will be the platforms which contribute to the Blockchain ecosystems and use applications which drive the growth of their platforms. A good example of this is Ethereum because they created their protocol but they have released applications which have been built on top of it (i.e. smart contracts which are programmable contracts, and its ERC20 platform which allows people to build tokens to conduct crowdsales).
One can see in this example that by contributing to the Blockchain ecosystem this way, communities form around these platforms to ensure they are maintained and grow to help advance Blockchain. Right now there is a progression and an offensive ensuing on part of those who are leading the charge to have Blockchain reach mass adoption and those who want to control and maintain their hold on being the central authority ironically trying to build Blockchain technologies but missing the key point for having the Blockchain in the first place which in that no one should own things in life which should be enjoyed by all. Information and the access to it, freedom, democracy, trust should be owned by all not by one and what many who oppose Blockchain don’t understand is this very foundational layer of the human experience make up which is why this movement cannot be defeated. Blockchain is the future, it is one built by everyone for everyone.