The cryptocurrency and blockchain revolution is coming

Source: https://medium.com/@DaexBlockchain 2018-11-12

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Written by Token Meister

Two things happened over the past year that are particularly relevant to any discussion of the cryptocurrency and blockchain revolution: cryptocurrency adoption rates are growing steadily; and blockchain technology adoption is growing steadily. Whatever objections crypto & blockchain critics are voicing, and many of them are right, the technology is trending up.

We can make financial transactions better with cryptocurrency. And we can make industries better with blockchain. The fate of cryptocurrency and blockchain over the next decade, though, depends on two major factors: cryptocurrency regulation and the health and usability of the blockchain.

Blockchain

Blockchain has one advantage over crypto: it’s not regulated. It is a distributed ledger technology that enables nodes in a network to co-create immutable, decentralized and transparent records of data. Cryptocurrency, some might say, is merely one of its applications; there are dozens of other ways in which blockchain can exist without it. And it does.

In fact, independent of the use of crypto, a blockchain revolution is already happening in the enterprise space. Some say that’s not the real blockchain revolution, since permissioned blockchains used for enterprise are just DLT versions. However, the technology is out there, and everyone calls it blockchain.

Applications

1. Supply-chain management.

This is, undoubtedly, the most successful instance of the blockchain revolution so far. It’s not just IBM and nearly 100 companies that are collaborating to track shipments across hundreds of nodes, but dozens other actors on the market that find a decentralized, immutable, transparent ledger is actually very useful. Who knew.

2. Banking and financial services.

One of the more obvious use-cases. Blockchain technology provides secure and transparent banking records, cheaper transfers, seamless automated payments and tracking, transparent borrowing/lending procedures, automated smart contracts and more. Seriously, who doesn’t want to disrupt the opacity, crazy fees and sheer power of self-interested banks? It’s got to be one of the more popular instances of the blockchain revolution.

3. Real estate.

A chain of real estate records would enable easier ownership tracking, hassle-free transactions, automated payments and notifications, transparent and streamlined buying, financing, leasing and repossession procedures.

4. Insurance.

Incorruptible and transparent distributed ledgers in the opaque world of insurance? Yes, please! Claims processing, automated payment management, policy management, automated notifications, secure data management, easy identity verification, all would bring clarity to the end user. Insurers are not going to be in a hurry to adopt it, though. Blockchain revolution, come already.

5. Digital rights.

On the other hand, transparency in the world of digital rights benefits everyone except abusive companies and fraudulent users, so digital rights managers are jumping in to take advantage of this technology. Transparent ownership records, easy tracking of intellectual property rights, managing payments and merchandise supplies are a breeze. One more blockchain revolution use-case where the bad guys will see the downside, while the good guys see the upside.

6. Government.

Have you seen that video of Rachel Tobac hacking a voting machine in under two minutes? Blockchain voting could prevent that and roll back the medieval paper trail that would be needed to counter voting machine vulnerabilities. Aside from that, local, national and international authorities would benefit from immutable, anonymized public records, automated benefit and social security payments, public funds management and more.

In fact, let’s just simplify: anything that needs accurate and transparent tracking across multiple data nodes would benefit from blockchain technology.

Objections

There are several objections to blockchain use that are being raised, with just slight variances:

1. It’s complicated.

If by complicated you mean that there is code, then yes. Not everyone can write C++ or Java or Solidity. Not everyone can grasp the SHA-256 hash function, for that matter. However, that applies to all modern databases, and a user-friendly interface can help you navigate the databases and record ledger entries. You do not need to understand how the technology works in order to use it. After all, you use mobile phones and airplanes, don’t you?

But yes, that’s loud and clear: blockchain UI needs to be accessible to the layperson.

2. It’s not entirely secure.

Ah. This is a long discussion. There is, sadly, some truth to that. While not as insecure as money of any kind, whether in digital banks, leather wallets or crypto wallets, blockchain technology is not tamper-proof. The “easiest” attack on a blockchain would be a 51% attack: a coalition of 50+ percent of the nodes coming together to influence the process of block hashing and rendering the blockchain revolution irrelevant. This would still have limited effects, most likely altering only the last few blocks on the chain, but it could allow double spending for as long as the attack went on. Other hacking methods actually target private keys, websites, wallets, exchanges and so on, not the blockchain itself. Simply put, most cyberattacks target cryptocurrency, not the blockchain technology itself.

Regardless of insecure wallets or improperly stored encryption keys, the blockchain seems to be the most tamper-proof digital system that has been invented to date.

3. Fix the existing technology, rather than invent a new one.

That is one of the narrowest arguments out there. You don’t come up with an airplane by making cars better.

There are limitations to what existing technology can do. Imagine we still had to rely on Excel for large-scale enterprise accounting and record-keeping. You can’t improve the quality, security and immutability of, say, record-keeping across hundreds of participant nodes by giving each node a better computer or a newer version of Excel. The more complex the world, the more complex the technology.

Cryptocurrency

A famous graph from data viz wizard Woobull predicted a 50% Bitcoin usage rate in 9 years. His data collection was not entirely scientific, as it relied on Google trends, and his estimate obviously does not take into consideration various external factors, such as security issues and the power of regulators to influence the crypto market. On the other hand, a research paper from London’s Imperial College reached the same conclusion a couple of months ago, indicating that a blockchain revolution was to be expected. Cryptocurrency was already a store of value and, given the right regulatory framework and once it solves its internal scalability, privacy and volatility issues, would be ready to act as a healthy medium of exchange and unit of account, making it equivalent to fiat money.

With crypto, the problems are easier to see than with the issues of the blockchain revolution; on the other hand, so are its applications.

Applications

That’s easy. Cryptocurrency is the other side of the blockchain revolution, the product of blockchain technology, that wants to act as digital money. To a certain extent, it already does. You can buy goods and services with crypto (no, not just guns, drugs and murder!).

1. Money

If by money we mean a medium of exchange, then certain cryptocurrencies are money: they can be exchanged for goods and services. A growing number of retail operators accept cryptocurrency payments, from Expedia and Microsoft to Overstock, Gyft and OKCupid.

If we extend the definition to include the microcosm of crypto platforms, smart contracts etc., then most crypto out there, the most exotic tokens included, “buy” something, from other crypto to services on various crypto platforms.

2. Investment

On the one hand, buying crypto now and storing it until its price goes significantly up is an investment in itself. Not just individual investors, but institutional ones (yes, banks included) invest in crypto. Some have made crazy amounts by buying at a low and selling at a high. (Others just bought two pizzas in 2010 when they could have bought a large-ish island in 2018.)

On the other hand, you could make a case that ICOs represent a form of investment: you buy tokens as proof of interest in a project, but receive no stake in the project as a result. Instead, what you hope to get is a return on investment: either preferential access to the product or service, or, more commonly, an increased price for the tokens you have bought. With ICOs, blockchain technology enables a paradigm shift in startup funding. But, whereas anonymity is seen as an upside of the blockchain revolution, for ICOs it means an open door for potential fraud.

Problems

While with the blockchain revolution we could refer to “objections” that can be overridden, with cryptocurrencies there are actual problems that need to be overcome for crypto to be functional on a large scale. Even assuming that much user-friendlier crypto platforms will encourage people to see wallets and exchanges as accessible to one and all, there remain much bigger problems to solve.

  • Scalability: at present, no blockchain can operate with very high volumes of transactions. However much improved Ethereum might be over Bitcoin, for instance, there is a point of failure for each platform. With the increased popularity of crypto, blockchains need to scale quickly to keep congestion and transaction times low.

  • Hackability: blockchains are vulnerable, too. But most hacks are conducted through mirror websites, exchange or wallet vulnerabilities, sheer user negligence, employee fraud, DDoS attacks and other such methods should be preventable, through internal and external audits, user education etc.

  • Volatility: while it is only to be expected that currencies fluctuate in value, cryptocurrencies fluctuate madly in comparison to Forex. News, hype, accessibility, regulations etc. influence it in extreme ways that fiat currency has not seen in its wildest days.

  • Regulation: therein lies the biggest problem of cryptocurrency. Crypto regulation is wildly different around the world not just in substance, but in quantity, too. Depending on how you get your crypto, what you do with it, where you are located, who issued it and why, you may find yourself severely restricted, completely free, or (in most cases) in a grey area. The widespread opinion is that regulation is coming, that it’s a good thing, and that wishy-washy guidelines are just making the market more volatile than it already is.

Who, really, is not worried about bank- and government- controlled currencies (we’ve seen how that can go down)? And who, really, is happy with current data management systems and operators?

Anyone with a healthy grasp of economics will tell you that cryptocurrency is never going to replace fiat money altogether, or at least not in the world as we know it. However, despite the myriad problems plaguing it, crypto seems poised to become a relevant alternative to it, just as the blockchain revolution is likely to change data management forever.


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