Blockchain and Cryptocurrencies — so what?
Written by Matthew Mcilwham, Founder and President of Newcastle University Cryptocurrency and Blockchain Society
Welcome back to the next part of the series for digital leaders. After reading up on the introduction to blockchain, you may be thinking:
“Blockchain and Cryptocurrencies, another way to send and receive money, so what?”
Previously, we mentioned that Bitcoin was an application of blockchain and now we look at the assumption that all Blockchain is just cryptocurrency:
“[Blockchain] is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.” Sally Davies, FT Technology Reporter
Well, there are more applications for blockchain which are beneficial to everyone, especially those in developing countries. In particular, we will dissect Ethereum, the first decentralised application platform or “dApp”; just like you build an application on your smartphone, Ethereum allows other blockchain projects to be built on the Ethereum platform with ease.
Now, this sparks the new definition of the Crypto “Token”. A token is held within a Cryptographically designed blockchain, which can be used within its ecosystem; Ethereum allows you to use its token for utilities such as:
Ethereum has an additional layer to its network in the form of smart contracts. In order to use these smart contracts, the participants of the network need fuel to power them. Gas has a flexible unit of measurement depending on how soon you require your transaction to be processed. There is a good analogy provided by the MyEtherWallet website:
You can think of the
gas limit like the amount of litres/gallons/units of gas for a car. You can think of the
gas price as the cost of that litre/gallon/unit of gas.
- With a car, it’s
- With Ethereum, it’s
20 GWEI (price)per
To fill up your “tank”, it takes…
21000 units of gasat
Therefore, the total TX fee will be 0.00042 Ether.
Sending tokens will typically take
~50000 gas to
~100000 gas, so the total TX fee increases to
0.001 ETH - 0.002 ETH.
The role of Gas in the smart contract is to power each line of code, of which, packages are already publicly available for use across the network; Members of the network build packages or make their inputs freely available such that others can adapt and use it for their own work.
Unit of transfer
As time progressed and Ethereum looked to expand its utility, the token as a method of wealth transfer, has become more available and favourable during the high transaction fee attack in recent times. As some projects look to improve their transaction times by using off-chain transactions, Ethereum is looking to build on the dynamic sharding concept. Vitalik Buterin has recently announced his plans to launch Plasma Cash — a hack resistant scaling solution.
“A smart contract is a digitalised asset transfer, written in code on the Ethereum blockchain; the contract can virtually facilitate, enforce and verify an agreement which will activate when a set of conditions are fulfilled”.
It is essentially a programming script which only executes when all the conditions are met, for example, let’s take a look at the details with a real-world example by Shivani Siroya.
She highlights the credit scoring fundamentals used to assess whether an individual can be given a loan as third-party institutions do not have personal relationships with applicants. This is where smart contracts or smart loans can be used to improve the 2.5 billion people who cannot apply for credit.
The smart loan contract can analyse mobile data through a mobile application and check whether the individual fulfils some of the following criteria:
- Does the individual make regular phone calls to friends and family?
- Does the individual have regular travel patterns?
- Does the individual have a strong and diverse support network?
The smart loan analyses over 1,000 datapoints using mobile data to find incremental and big data trust points to approve loans. The app boasts a 90% repayment rate for 200,000 loans in Kenya, in line with traditional banks.
Smart contracts can follow a similar structure for other digital asset transfer, holding information from two parties which will only be released if the conditions are met.
The full talk can be found here.
Originally published at digileaders.com on March 12, 2018.