Blockchain in 30 minutes

(Spanish version here)

Blockchain, cryptocoins, bitcoin, ethereum, etc. All this words are around us and the interest towards them is growing day by day. We know they are complex concepts and technologies and they are difficult to understand. To help in this understanding we can find a lot of very good content in blogs, youtube among many books and courses.

In dws.io we want to help everyone looking for information to understand the revolution blockchain means and the result is this little book.

This book will be updated and we will add more explanations and particular use cases for different sectors. We obviously recommend you to read the book but we also recommend you to subscribe to our newsletter in order to receive the updates.

You can download as a pdf

or you can keep reading it in this post.

Index

Adoption time

What is establish is always evolving

Organization, currency, and trust

Double expense and Internet of value

Decentralization

Security

Mining

Advantages: security, cost and time

What is Bitcoin with B, and bitcoin with b, and what do they have to do with Blockchain?

Where are the bitcoins born?

How much does a bitcoin cost?

Ethereum, blockchains’ evolution

Other cryptocoins

Times and nodes

Protocols, applications, and solutions

Adoption time

Every new technology requires an adoption time, from the entrepreneur leaders to the followers, ending up with the majority. We all have seen the graphics of the time different innovations took to reach 50 million users. The TV +20 years, the credit card +28 years, the phone +50 years, the Internet +7 years. However, we keep using cash, physical mailing, and the traditional radio device. It doesn’t have to be all or nothing. The adoption time will increase with the utility. Until today, blockchain has a limited utility for the common citizen, there still has to be a while for applications beyond bitcoin and the speculation around all the other cryptocurrency.

At the beginning, the Internet was just a few hundreds of machines, later thousands, and now…who would have imagined, in 1992, that the Internet could be what it is in 2017 and all its utilities? Who would have imagined the smartphone as we know it today, with its permanent Internet connection? Clearly, an exponential catalyst of the Internet as we know it.

We all can remember connecting to the 14.4k modem, we all remember it was extremely slow, so slow that you couldn’t take all the advantage that you can today. Social Media wouldn’t have made sense without today’s speed to upload and download content. Do you remember deleting a file in Windows 3.1? How long did you have to wait? And now? What has been the multiplier in technology from the early days of the Internet society until today? When you understand blockchain you will see that it can be an infinitely greater multiplier relying on what we have nowadays.

What is established is always evolving

There have always been very powerful companies in finances, the media and the rest of the industries, but they haven’t avoided either the birth or been overtaken in market capitalization by Paypal (+$70B), Apple (+$800B), Alphabet/Google (+$650B), Microsoft (+$500B), Amazon (+$476B) or Facebook (+$490B)…

Along our history, every time there has been a good technology it has finally settle down. The question here is not if blockchain will settle, but when. The advantages it offers are beyond doubt. How each legislation will adapt to a technology prepared to not having barriers, it’s another topic. Anyway, during that period of time, there will be advances, adoption, and business in every step.

The world’s big financial and industrial agents like Goldman Sachs or JPMorgan, as well as each countries’ biggest banks and companies, are endorsing blockchain, in both technology and inversion.

Organization, currency, and trust

Some of the human’s biggest problems have been the organization, the currency, and the trust/security. The tribes couldn’t trust one another. Later, when the barter appeared as a mechanism for commerce, there was no trust but each person knew what they could have in return; even so, if there was any problem, there were not judges. After that, the currency appears, there was no trust between people but at least there was trust in the currency. The problem was that with any change, like a king’s change, the currency could stop having value. There you have the wars. Later, the gold, the dollar, the euros and the Zimbabwean dollars arrive. The gold and some other currencies are stable, limited, their value stays more or less steady, it’s something protected. But there are also currencies, such as the Zimbabwean dollar and quite a few more, that suffer from hyperinflation caused by a bad government, printing money and devaluating the currency, that is to say: caused by the influence of the central control, so it stops having value. Hence the need of having billions of Zimbabwean dollars to be able to buy something equivalent to $5.

Despite the evolution from the ancient dictatorships and the absolutist’s monarchies, to the democratic governments and the executive positions in private companies, we haven’t lost the mistrust caused by the corruption. From mistrusting a political message, or an advertising message of a product, to signing a contract. Everything can be interpreted, manipulated and we can not be sure of anything.

We are still doubting on the currency and the organizations as well, both public and private. There can’t be trust.

To solve some of those difficulties, new entities that give that trust have emerged. Entities that help making possible agreements and disputes solving between two parts that don’t trust one another.

For the currency, we have the banks. They are the ones in charge of corroborating if you have or not money. They are the ones that make the change between different currencies in the international transactions. We have to trust them but…they charge huge commissions, they are slow in quite a few transactions… Clearly, there is a lot of room for improvement. But we have no other option than falling back on them, they are our trusted third party.

For the identities, we have the government. They are the ones that issue our identifiers. The problem is that it has become clear that to fake them and supplant someone’s identity is not complicated, in the real world and especially on the Internet. There we also fall back on the banks, they are again the trusted third party, along with the governments as emitters, to corroborate that we are who we assert we are. It’s evident that there is still a problem and that there are a lot of inefficiencies to be improved.

For the problems and errors on the system, we have the insurance companies. If any of this private or public entities make a mistake, these companies pay an indemnification. The problem is that sometimes they do not pay because of contracts of a difficult application. Also, these processes take a long time and there is generally a trust problem with what happened. Usually, there is not a traceability to know what happened in every step to know exactly where does the problem come from, who committed it, and therefore who is responsible for it. For the time being, technology hasn’t helped with this aspect because everything is corruptible, changeable, everything can be deleted, etc. There is no trust, we cannot rely on any data.

Likewise, to solve all those trust, data veracity, stealing, and basically, security, problems, we have the police and the judicial system. Most of the problems they try to solve are trust concern issues. Since there is no way to know what exactly happened, we have to appeal to a judge. When someone does not fulfill a contract, we have to resort to a judge. If the data could not be modified, if it was unalterable for real, if everytime something is modified its change was reflected somehow on the data, many problems would be avoided. If when someone signs a contract, this person is automatically forced to accomplish it, without a way to avoid it, without a way of not paying, with automatic indemnifications and penalties, with no need of someone else’s intervention, a lot of problems of trust and security would be solved. These problems involve huge costs in time, money and productivity. Tons of transactions are not done because of those risks and that lack of trust.

We also have the properties. Who is in charge of certifying that one property is someone’s? A trusted third party. Generally, the state or government. There is a registration, an Inland Revenue, notaries that certify the properties, and we have to resort to them. We pay a lot of money for that, and besides, they are very slow and inefficient processes.

In all of this, in the trust on: currency, identity, security, data, traceability, and property, besides many things, is where blockchain technology can help us.

Double expense and Internet of value

In addition, together with everything mentioned above, in the transactions between two persons or organizations there is a problem called “double expense”. All previous trusted third parties help us avoid that.

The banks prevent that you pay two things with the same $1. That $1 can only be used to pay once, it is obvious, right? You cannot duplicate it. The truth is that in that case we see it clearly, but until today the Internet has helped us duplicating things, it has helped broadcasting information, hence it is called the Internet of information, but that information was duplicated. A file or document…was actually a copy, because you keep the original. A text…was a copy. It could even be copied in various places at the same time. It could be on a website, in a few duplicates and in various email accounts of different people all at once. That is information, it doesn’t matter much if it’s duplicated. There is the duplicity of “expense”.

The key point is that with currency we cannot alow that to happen. Same thing with the identities and the properties. And with many other things. Here is where the problem of double expense emerges, that it cannot happen with currency or all those things that, unlike the information (that can be duplicated), have an intrinsic value, hence they have to be unique. This is the reason why we call the new Internet, the one that blockchain technology enables, the Internet of value.

In summary, blockchain technology allows two great things:

1. Trust: to be sure about someone or something being exactly as it says to be, without having to appeal to a trusted third party.

2. Unique expense: not having the double expense problem, because we have the certainty of data.

Decentralization

To allow what has been mentioned, blockchain has a defining characteristic, and with that characteristic, it can give us a few superpowers that we didn’t have before. Blockchain’s advantage is that is a decentralize technology.

And what is that mean? It simply means that all the storage of the data is not centralize in our computer, or on one server. It does not need of a centralized entity (the previously mention trusted third parties) taking control of it, regulate it or allow its existence.

And how is that decentralization possible? Where is the data? The answer, paradoxical as it may seem, would be: in the blockchain. Blockchain is a unique database that shelters all the information and, as the name indicates, that information is storaged in unalterable chained blocks.

Actually, is the real “cloud”. That unique database is replicated in tens of thousands of computers around the world. Do not panic, the data can be completely encrypted so nobody could see it. Keep reading and soon you will see that now is when we are really talking about secure data and how that “anti-theft” and “anti-lie” security is achieved.

That database, or data chain, or chain of data blocks: “blockchain”, is like an accounting book. It has been defined like this because it counts every transaction, every data; always adding, not deleting. All of this, allows the great things we previously saw:

1. The certainty/trust: because it does not modify the data, it registers every modification, is cumulative and, moreover, there is a secure copy of all these data in thousands and thousands of computers around the world. The advantage is that every modification is registered along with the responsible of the modification, the exact time, and all the data you want it to storage. Because of those two novelties, we can be sure, have certainty and trust, in the traceability of all the data, we can be sure that it has not been changed. In summary, the two reasons for this certainty are:

a. Is cumulative (there is no modification of the previous data).

b. There are thousands and thousands of security copies (it’s decentralized, so it’s impossible to hack or manipulate, neither to steal or cheat).

2. It avoids the double expense: because every new accounting note registers the “expense” and in the next one you cannot duplicate it or use it again. Since it’s replicated in thousands of computers, it cannot be tricked. The second transaction would make sure there was enough “balance” to be done. The same thing happens with the identity, if someone is A, that person cannot be B at the same time, verification is always done upon that unique and universal database. With property too, if something is A’s property it cannot be at the same time property of B. Same thing as before, since the system is not hackable of modifiable thanks to decentralization, every record stays forever, immutable, with complete traceability that makes impossible any duplicity.

Security

Along with everything previously mentioned, there are other reasons to assure that blockchain is trustable and secure. Of course, nothing is 100% foolproof but, anyhow, it’s far more secure than what we have without blockchain. Security is something increasingly important, and we have seen that we haven’t found a solution to achieve it. The Internet we know needs more security. Our communications need it. Even more with technology’s progress towards IoT (the Internet of Things). Imagine that everything is connected, your home, your car, your job… Everything connected. With the IoT, we multiply a lot the elements connected to the network compared to the present time. Each element is a potential vulnerability through which somebody could get in the system. Nowadays, in the cybersecurity world, there is a lot of fear to IP surveillance cameras, printers, etc. Those are network-connected devices, they are connected to the whole system, but at the same time, those are devices much more vulnerable with more fragile technologies that allow almost anyone to have access to them, and at the same time, have access to the central system. A higher level of security is necessary for all of this.

One of the keys of blockchain is that, since it’s decentralized, you don’t pay a server (as it has been done until today), you pay the network, you pay blockchain, to register each transaction, each new data quote that you want to write on it. Basically, you pay the miners that register it or the applications that give service in the blockchain. With a data server that companies use to store all its information, you may not be able to know where exactly that server is, but you know what company you are paying to have access to that server, that is your trusted third party in everything concerning data storage and data security. The problem is that is centralized, so it’s infinitely easier to hack. The blockchain network offers you thousands and thousands of machines where all the information is stored, a huge and universal database that you have to pay in order to write on, that’s why it’s highly more secure.

Imagine an attack to your data right now. A bad guy wants to steal the data or modify something in your system. Careful, that bad guy can be an expert delinquent or a simple angry client or employee. He can access your system, and from there your server, do whatever he wants and, if he is good, leave without a trace. How has he done it? Easy, he knew there was a unique access point (a server), he could access it for free and, moreover,the data was not encrypted. He could access for free because he could infect tons of machines to make them try accessing that server, and those machines were already paying for their Internet connection. The bad guy didn’t have to pay at all to attack your server with the power of many machines.

What does blockchain change in all of this? That there is no longer a unique server to attack and that the data is encrypted. That decentralization, that security and paying for each transaction are the key elements of this technology that changes everything.

1. The information is disseminated and can be encrypted in the whole blockchain.

2. If you want to do an attack you would have to pay for each transaction, since even if you infect various machines, they don’t have a flat rate in blockchain (as they do in the current Internet with their connection). In big attacks that could mean a lot of money, because you would have to have the 51% of the whole network’s machines. Anyway, all of that would be to “falsify” a new record, at the exact moment of adding it, it would not be possible to modify the past.

3. The database being cumulative makes impossible to delete any data. There is always traceability of all there is and has been.

4. You don’t know where to attack since is not a unique server.

The only way to attack and work out well would be: to know which are all and each one of the machines that form that network, attack them simultaneously and have at least 51% of them, having to pay an enormous amount of money so that all of them accept the new transaction as valid. That way, none of the rest (49%) could block it and…that is the end of the example, because that is the extreme failure hypothesis of the blockchain. Why? Because it would be economically impossible. That first economical inversion would be tremendous, the possibility of discovering the fraudulence very high and, besides all that, if it was ever to be done, the involved ones would lose millions in value, since the currency that supports that blockchain would plummet.

Anyhow, it could only be done for a new record, it could not change any past data because all the data is already in the blockchain, copied and cryptographically assured in all the nodes. And, in addition, all of that applies the same way to both a big and a small attack, the change difficulty of the whole network is exactly the same.

All that cryptographic security is blockchain’s big novelty. And, who gives all that security?

Mining

Have you heard about the miners? The ones that extract gold or carbon. This is how computers/people/companies that do data mining are called. That data mining allows each data quote written in the blockchain to be checked (to avoid the double expense) and to be cryptographically protected with a password. You will also see the word hash, it is something impossible to decode in order to discover the information of any given operation. For each transaction, there is just one correct hash between trillions of options. This hash is the evidence of a validated operation. In summary, as you already know, every file is just a set of 1 and 0. All that data is converted in that famous hash, this is: an alphanumeric chain (letters and numbers) of 64 elements. It’s a super-password, like the one that you have in your router with indecipherable numbers and letters. That is the key. Those miners offer high computing capacity machines to work together with the system and register all the data, group it in blocks, and connect them one after the other without any possibility to remove them after its addition. They are the ones that create the famous chain of blocks. The big advantage is that for this kind of security it is necessary a big computing power and it is not reversible. That is where all its strength is.

As you can imagine, this completely changes the game rules. The technology and how we think about the Internet do completely change. How the information and our data are managed changes. The companies can now do tons of things that they could not do before, or could cost them a lot.

Advantages: security, cost and time

We have been talking about blockchain’s big advantages, the great advance it supposes for technology and the Internet. This is something that experts and important technological leaders are increasingly agreeing with. Along with the knowledge of this technology, they discover its great potential.

We have been talking recently about the security, but I think is worth reminding you the saving on economical cost and time.

We have already seen that without blockchain we have to appeal to the trusted third parties to assure everything, right? In brief, we need intermediates: banks for the currency, governments and an Inland Revenue for the properties, and a lot of private companies for everything else. What if we could avoid all of that, or at least a big part of it? There will be a lot of things that we won’t be able to avoid, at least for a while, but there will be others that we will be able to.

Do you remember when you had to do absolutely all procedures in person? Do you remember when you had to sign every transaction and contract with a pen? Do you imagine that today? If we could go back, would we be able to imagine our companies and governments allowing us to sign, accept or buy without our physical presence? Can we really imagine that a few years ago the Internet didn’t even exist? Moreover for the kind of transactions we are talking about. What? An electronically signed contract having validity? What kind of witchcraft is that?

All of those things that seem obvious today, not so long time ago they seemed crazy. With blockchain we are still at that point of disbelief. Yet, technology progresses relentlessly.

Can you imagine the saving on costs and time that all of this means? It is impossible to imagine, right? We almost cannot imagine our lives without any of that. Blockchain is a jump in that same way, but with a lot more impact.

Let’s imagine some examples:

• Right now, if you want to do a transfer to another bank, a series of checking has to be done, it takes some time and they charge you a commission for it. We can even be talking about a few days if it is an international transaction. There are already some banks working with blockchain to do almost instantaneous operations. That change means absolute madness for many businesses. That immediacy is a huge step forward.
• All property operations require a never-ending paperwork, hundreds of comprobations, banks interventions, lawyers, notaries, recorders, administratives, etc. All that means a lot of time and expense. What if we had a universal registry with immutable security to avoid all that? What if a property’s change was instantaneous? Where nothing has to be checked because everything is verified permanently, and where all the actors use the same database (the blockchain). Now imagine that operation being international…buff.
• Imagine not having to worry about your servers, attacks, the technical infrastructure, security, etc. Imagine that the blockchain already gives you all of that. It doesn’t matter if it is a big and international company or a small one, for both of each, having its own budget, it means the same. We are talking about avoiding huge infrastructure and management costs. In the blockchain you pay per use and that cost is infinitely smaller, plus, it is a global competition that tends to reduce costs.

And, also:

• Traceability of everything you want. Immutable. The impossibility of changing something in between. Everything has its timestamp (exact time, responsible, etc.). Imagine what that means for many industries with suppliers and clients. Imagine being sure about a piece arriving at any given time, an employee doing something or having information about a location. Imagine having absolute trust on some of that data. It changes the world for quite a few ones.
• A network without owners, or intermediates, or delays, or added costs, and not being a captive of any supplier, etc.
• Without thefts or hacks. And against technology’s impossibility to avoid human errors we still have the perfect traceability of all the data.
• And, of course, if this means removing many frontiers and difficulties for the particulars and in between companies, imagine the advantage it means internationally. In any international operation that right now requires of multiple validations and checks, and a lot of time and cost, imagine the revolution it would mean for a company if this could be done instantaneously. And even better, automatically because there is a signed contract that says that when X happens Y is activated. This could be with a manufacture, a shipping, a communication, a transfer, a recruitment, a penalty or an indemnification.

When a solution is created it generally comes from the analysis of a problem, and from there comes the solution. Nevertheless, about Blockchain technology it keeps being said that is “a solution looking for a problem”. In reality, the first created blockchain was a solution for a problem: the problem of currency being controled by the governments and the famous “double expense”. There, Bitcoin was born, the currency and the blockchain technology to support it.

From then on, even though we have exposed many examples, nowadays there are many more that are already using blockchain in their organizations and governments. All of them have taken advantage of this technology to solve their own specific problems. We are still at the very beginning, and the first protocols, the first developer tools, etc. are being created. Think about what the Internet is today and remember how it started, using those noisy modems. We don’t know where blockchain will take us, or the productivity many industries will take out of it, or how it will transform our lives. What we actually can do is building step by step, contributing to the growth and enjoy the journey.

And now… what was the initial problem of currency?

What is Bitcoin with B, and bitcoin with b, and what do they have to do with Blockchain?

I’m gonna summarize it because I guess you already know something about this currencies.

Just to let you know the difference, although you will see term written both ways, the bitcoin currency is written with a lowercase b, and the blockchain Bitcoin is written with a capital B. It leads to confusion to be called the same but… we have to live with it.

The bitcoin currency was born as a solution to the problem of governments and banks controlling the currency. People wanted to create a decentralized universal currency, under nobody’s control. This limits many people a lot (less developed countries that don’t have banks, countries where the government does crazy things with the currency and it ends up not having any value, and for the developed world, it is limiting because it has to go, without election, through the banks, with all the inefficiencies and costs that this means, like for example having to deal with the currency exchanges.

This is not something new, it was tried to be solved several times, but there was always the same problem, the famous “double expense” we have already talked about. Having a currency that did not have an “anti-copy” protection, that did not have any protection to the double expense, ended up as a currency that had no value. So, in November of 2008, somebody published a whitepaper developing the idea of bitcoin currency but adding all the security that until that point did not exist. That person is still unknown, but he signed the document as Satoshi Nakamoto.

That is when the currency and the technology needed to give it the indispensable security and avoid the double expense, was born: blockchain.

If you have read all the way here, you already know that blockchain allows two great things: the certainty and the unique expense. You already know that the double expense is not possible because the accounting book is cumulative, it does not delete any data, and it even checks the veracity and the “balance” in every operation. This way the currency cannot be duplicated. Alike, the certainty is determined by the blockchain being replicated in thousands of computers and being impossible to hack. So…there we have the universal currency and the technology that takes care of it. As you see, the currency was created first and later the blockchain technology was created to support it with the needed security.

That blockchain Bitcoin is created to be used almost exclusively for its currency. I say almost because it could really be used to store other data not related to currency transactions, but I won’t get on that because otherwise this would be a never-ending document.

This currency had a worldwide adoption and little by little, since it’s a limited resource because there is a limited amount of bitcoins under circulation, it increases its value. The same way gold is “limited” and increases its value everytime somebody uses it as a reservation or “exchange currency”. The same way a very quoted company’s shares are limited, and each one increases or decreases its value according to the trust on that company. It is a supply and demand market. It increases or decreases its value according to the rest of the currencies like any other one. There is a total of 21M of bitcoins, although not all of them are into circulation yet.

Getting to this point, you may have two questions: where are the bitcoins born and how much they cost?

Where are the bitcoins born?

The bitcoins are automatically generated as a reward to all of those miners that contribute to the security by grouping the data in the blockchain. There are commissions that the ones that do the transactions have to pay, and there is a system’s reward for the miner. All automatic, with no prices’ fluctuation. They give the technical resources and they know what they charge. That is the way bitcoins have been created from the very beginning. Then those miners sell them to get dollars, euros or any other “fiat” currency, this is, a country’s currency (it is a Latin term but you will probably see it a lot). With those sells, a currency exchange market is created in which some people sell bitcoins to get fiat currency and others invest fiat to get bitcoins.

How much does a bitcoin cost?

As I was saying, the bitcoins are bought in the “exchange”, exchange markets similar to the ones around the world but instead of exchanging fiat currency or shares, here the protagonism is bitcoin’s. This way, with the supply and demand the price increases or decreases. The same way that happens with a company’s shares, that are also limited, but in this case with a currency. This way it has evolved from a value lower than $0,01 in 2009 to a value of +$4.000 in the summer of 2017. All of this comes from its adoption worldwide and the trust in the currency. To some people, this may seem crazy, but imagine a company on its first steps with nobody investing on it, in which along with its client’s growth and its good performance, an increase of demand follows, and the people seeing its value and willing to invest increases. It is just that, a price that rates trust.

It is true that there is still a lot of speculation and price fluctuation, but what is clear is that this value will keep on increasing. Many people think it will reach $25.000, $100.000 or even more. In reality, it would be defined by the bitcoin’s total value, that is to say, by what is called “market capitalization”. At the beginning of this text you saw the capitalization of some known companies such as Paypal or Google, now I add Visa and Mastercard, well-known “money sector” companies with a worldwide presence. Maybe we could have an idea of the magnitude we are talking about with bitcoin if we compare possible “capitalizations” (the data is given in billions of dollars):

• Paypal’s +$70B of capitalization would be equivalent to bitcoin in +$3,300.
• Mastercard’s +$140B “market cap” would be equivalent to a +$6,600 bitcoin.
• Visa’s +$235B “market cap” would be equivalent to a bitcoin at +$11,000.
• Facebook’s +$490B “market cap” would be equivalent to a bitcoin at +$23,000.

I am not saying that this will happen tomorrow, but if bitcoin keeps its pace and its usage turns into a worldwide reality, maybe it won’t take long to see. Facebook is a worldwide impact company, we use it everyday and its capitalization equivalent would be a bitcoin at $23,000, why not?

Ethereum, blockchains’ evolution

After the technological changes that bitcoin implies, a developers’ revolution takes place. In the middle of them, one called Vitalik Buterin appears. Born in Russia in 1994 and raised in Canada since the age of 6. In 2011 (when he was 17 years old) he meets bitcoin and starts working on its possibilities. In December of 2013, he starts working on something new, something to improve bitcoin, and in February of 2014 (at the age of 20) he publishes the first proof of concept of what has been called Ethereum.

Ethereum is another blockchain, but with the possibility of programming, that is to say, it is a computing capable blockchain, in which the machines that are part of it do not only record operations but also run programs. That is its innovation and is a huge one. Those programs have been called “smart contracts”. This name can lead to a confusion. Those smart contracts are just programs that execute predefined orders. The equivalence and innovation of these “contracts/programs” is that they are automatically executed without any discussion.

Do you remember when we have talked about the procedures that have to be done in some industries to be able to carry out some operations? Do you remember the time that could be spent? Do you remember how many people have to be involved? Do you remember all the operations that each one had to do to be able to accept an operation?

Well, by using Ethereum’s blockchain all that turns into a smart contract that would include all the conditions and the liabilities/penalties/indemnifications to be applied and any verification is not needed since all the data stored there is correct and immutable. Everything runs automatically without anybody’s intervention. Without excuse, delays or discussion.

Imagine all its possibilities!!!

And, of course, Ethereum has its own currency to operate in its blockchain: the ether (ETH). It is also available to buy in the exchange and it’s limited to a total of 100M of ethers (remember that bitcoin was 21M). Being less or more is not very important, the important thing is that they are limited and that is the reason why the currency’s value increases or decreases. Depending on the price that has to be paid for each operation you will pay 0,00001ETH or the corresponding amount.

Alike bitcoin, the ether has turned from not having much value to having a value of $400 (June 2017) with a market cap of +$36B, that is to say, half of bitcoin’s value. They are two different blockchains, with different applications, we do not know how and at what pace they will progress. They do not have to have similar developments.

There are still a lot of things to be explained, of course, but this way I do not write a whole book and just with this information you already understand a lot of things ;) The technical aspects and how to implement them come later.

That is exactly what we do in dws.io. We will be happy to help you.

Other cryptocoins

Along with all previously mentioned, during the past years/months, other blockchains have emerged, that also provide storage capacity and many other things. The same way, many companies have emerged (developer groups) that try to build things on top of Ethereum and create their own cryptocoins. Those cryptocoins are the ones they issue at the beginning to finance all the development of the technology they pledge. There is where the ICOs (initial coin offering) appears. This way, a development team that promises a given technology does that first fundraising giving their coin in return. Those currencies do not have much value right now (except for the inversion that has been done), they mainly build upon that technology’s future value, and the trust in the team and its possibilities. This has come up on a small madness, where many teams from all over the world want to do things in blockchain and especially in Ethereum. There is a lot of investment and still a lot of mistakes. It will take time to have experience, and do everything better, so everything settles.

All those currencies are exchangeable in those “exchange”, nearly from the first day. That liquidity is tremendous and it is what is leading to a huge speculation.

Besides all that madness, all that speculation, the core is a spectacular technology. Some of the teams may not achieve what they said they would do and the investment will be lost. There will probably be many cases. There will probably be a lot of fluctuation in those currencies’ values and some people will “play and bet” and lose money. Likewise, some people will bet and earn money. Despite all that, blockchain technology is there and has to be separated from all that pattern. With the Internet there was also that madness but that does not mean that the Internet did not change our lives in a way that we could not even imagine.

My final recommendation is to distinguish between blockchain’s technology and that speculation fever.

The fever will end up leveling off, but the technology has arrived to change everything.

Times and nodes

The most exciting thing about this is that this adventure has just started. It is true that it has been here for a few years, and it is true that bitcoin and Ethereum are supported by many companies and individuals from all over the world. It is also true that there have already been many successful cases of governments and organizations, but despite all these examples that show that we are on the right path, we are still at the beginning. Talking about blockchain we are still at the beginning, compared to the Internet we know it would be like being before the 90’s, when the Internet only connected a few universities’, security’s and some nerds’ computers. We cannot compare today’s Internet with those days modems, right? Actually, Bitcoin goes through 9,000 nodes and Ethereum does not reach the 25,000. It even sounds ridiculous. The nodes are the computers that store an updated copy of blockchain. All that is growing very fast, we have not seen anything yet.

Certainly there is still a lot to be done, and of course it does not run as smooth as we would like it to (remember those modems), but the adaptation’s and improvement’s speed is infinitely greater than before. The new challenges that technology is presenting and its scalability are being overcome as they appear.

Protocols, applications, and solutions

We said before that blockchain is a solution looking for a problem. We have already seen that until today it is working very good for currency creation but…for what else?

Now is when we have to talk about blockchain’s “state of the art”, about where are we in the development process and about how long it will take to reach the market, and more specifically about Ethereum’s blockchain, where most of us are doing developments. To understand the change that blockchain causes and its development, we have to talk a little bit about technology. Do not be afraid, it will be painless.

We have to think about the differences between protocols and applications. On the Internet we know, there are protocols on top of which the Internet is built, such as: TCP/IP, HTTP, SMTP, FTP, etc. All of them are protocols and each one allows different things: data transfers, the web, the email, etc. All of them were created but nobody owns them. We use them, they support today’s Internet and they are free. Imagine someone being its owner, maybe not an individual but a community, image they had established a price for its usage, even if it was a small amount like for example a millionth of a dollar. Now imagine all the data that have used those protocols over the years and the value of that company. Stunning, right? All those protocols and other technologies are necessary to create applications, so it all starts with them. Equally, tools have to be created so the developers can build applications. Those tools are horizontal solutions for the developers, they are indispensable to build the applications. If they do not exist, each developer would have to create them from scratch. That is what is still happening with blockchain, we are at that stage.

Let’s talk now about applications. We all know Google, Netflix, Spotify or Dropbox. Those are applications, right? Well, those ones do charge money for what they do. Those are the ones absorbing all the Internet’s value. As well as all the governments’, companies’ and personal applications you can image. The user pays the Internet connexion and the given application, and that is all. That is the reason why we have successful companies with a market cap of billions of dollars. They take their created value to capitalize on their shares value.

Now imagine that under all those applications there is a layer of all those protocols, without them those applications would not work. What would be the value of the HTTP protocol that enables the web? What would its stock market value be? Much more than the applications it bears? There you have Ethereum value. Ethereum is blockchain’s technology new protocol. Along with all the different solutions and tools that are being created so the developers can build their applications on top.

The innovation is that everything is connected and everything has a value. It has that much value that it is being built on top, and the more it is built, the core layers acquire more value. First Ethereum, later other protocols, after that, the developer tools and lastly, the final user’s applications. Right now, in 2017’s summer, the core protocol is still being improved (very important improvements in Ethereum), we are building those developer tools and we are starting to see the first use cases.

All the industries are making their own first tests, starting their technology’s learning curve and hiring talent (still very limited since they have to learn new technologies). The yet unattended companies and developers are willing to try and solve problems with blockchain’s solution.

That is where dws.io wants to be, helping developers and companies, providing the knowledge and the tools to help them build their own applications.