To be upfront, cryptocurrency and blockchain are both infant and broad technology, and where they apply is an ongoing discussion. At the least, this post aims to clear up definitions of key buzzwords and at most, some direction for your curiosity into the space — thanks for reading.
With any new tech touted as ‘groundbreaking’ there’s always talk of interactions between each other changing forever, and worries about having to learn a bunch of new technology and systems.
But for cryptocurrencies and blockchain tech you won’t really have to. As is the case with other cutting-edge technology like artificial intelligence, they will operate behind the scenes to improve our experience whether we are aware of it or not.
The buzzword basics
Before we begin, let’s quickly solidify our understanding of a few blockchain buzzwords that have been flying around since Sept/Oct last year.
These words are blockchain, decentralisation and cryptocurrency.
Firstly, blockchain is a type of technology, just like spreadsheets are a technology and just like clay tablets are a technology.
Blockchain is an instrument for us to use and do things with.
More specifically, a blockchain is a form of distributed ledger technology, which is a continuously growing series of records (blocks) linked to each other chronologically (the chain).
It’s a way to store data differently to how we’re used to.
Instead of banks storing our data in centralised servers, blockchains can be store data on several thousand computers around the world. That data is now decentralised, meaning it is held together by a network of participants who all agree what data is valid — without even needing to exchange first names.
Since the same information is stored everywhere and thousands of participants agree on it, you can’t fraud the system. If you tried, the thousands of computers constantly verifying the network’s transactions would detect any tampering and stop your attempt.
This agreement on what is ‘right’ or ‘valid’ is called consensus, and a large contribution to all the hype around blockchain is being able to reach consensus in a decentralised fashion — traditionally, consensus is heavily influenced by centralised bodies who may, or may not, have people’s best interests in mind.
A blockchain can store anything in its blocks, from a list of transactions (like the Bitcoin blockchain), to self-executing contracts which manage ownership of assets like property (see ‘beyond storing transactions..’ below) — so we’ve come a fair way since recording data on clay tablets.
The classic cryptocurrency example
Jess lives in California, and wants to send $200 to her mother in Australia. Modern methods of international money transfer are too expensive for Jess, so she transfers her Mum cryptocurrency. Rather than this transaction being handled by banks, it is handled by the blockchain and its thousands of participants. Once the transaction is verified and confirmed, it is added to a block and recorded in the chain permanently, making it irreversible and un-fudgeable.
In this example, the cryptocurrency represented the value transferred between Jess and her Mum, which was recorded on the blockchain and traced and verified by a decentralised network of computers. Get the gist of it?
Without getting too technical, the possibilities for blockchain are massive, with the potential for multitudes of different kinds of tech to interact with blockchain applications.
Beyond storing transactions — smart-contracts
Meet Bitcoin’s younger cousin Ethereum, who brought a new functionality to the blockchain space through things called smart contracts (cheers, Nick Szabo). Smart contracts allow for two parties to write and agree upon a contract, and have it facilitated over the blockchain.
These contracts have conditions like any other, like how to execute the contract, how to disable the contract, and payments to represent the exchange of value, but with no need for a third party body to manage it.
Crush the intermediaries, or give them sharper tools
With these examples, blockchain is easily interpreted as a technology that will “remove the middle-men,” the intermediary bodies who manage our relationships and exchanges — and if decentralised money like Bitcoin is altering our relationship with banks, then smart-contracts alter our relationships with other intermediaries like property managers, lawyers and insurance-brokers.
This means connecting more from person to person (peer-to-peer), resulting in more personalised exchanges of value, which would traditionally require an expensive middle-man.
Blockchain and cryptocurrency have a ways to go
The example blockchain used above with Jess, where all computers in the network store exactly the same data, is how Bitcoin operates, and although Bitcoin is awesome, this is an extremely inefficient way to store data.
There are hundreds of other blockchains being developed, all with different benefits, use-cases and ways to agree on what data is valid (hint: consensus algorithms).
And on top of these blockchains, there are thousands of cryptocurrencies being minted, and soon to be thousands of decentralised applications (dApps) launched.
And when you add media-blasts, market-fluctuations, scams, and unclear regulations, it’s really not easy to navigate what’s going on.
However, behind whatever your media-wall is, there’s a lot happening. The space is consolidating in all kinds of ways, markets are maturing, regulations are clearing up, governments are funding blockchain projects and already, cryptocurrencies have had serious impact on people’s lives (see Venezuela).
But hey, here’s “Why Bitcoin and Crypto Have No Future”.
Thanks for reading — LivenPay is building a global payment network for everyday lifestyle purchases with crypto-token LivenCoin (LVN) built on the Ethereum blockchain. If you’re interested in the project, check out the Liven Whitepaper at livenpay.io, join the conversation in our Telegram, or download the Liven app.