In 2008, the first blockchain application was bitcoin, a private cryptocurrency or a digital coin which was introduced by Satoshi Nakamoto in a revolutionary whitepaper Bitcoin: A Peer to Peer Electronic Cash System.
No one knows Nakomoto’s identity which has been described as a person, a group of people, or a pseudonym. The concept was described as a new technology that would remove intermediaries like financial institutions to create a faster and more efficient way to make online payments with a new form of digital money without a centralized authority.
How are Bitcoin and Blockchain Connected?
Bitcoin is a cryptocurrency and the blockchain is the technology that supports it. The blockchain is a digital and decentralized ledger that records transactions. When people purchase digital coins, or buy products and services, every transaction is recorded on an immutable public ledger which maintains every transaction ever processed in history.
Rather than having a central hub like a bank, the bitcoin blockchain is supported by a global network of developers, called miners that solve complex mathematical problems in exchange for rewards, such as bitcoins or LSKtokens. Cryptography insures users’ identity and security with private and public keys that create a digital signature that enables people to sign and authorize transactions.
“If you look at the history of money it wasn’t always paper or coins. Commodity money was the exchange of things, such as cows or pigs. Over time, this became impractical so metal coins were created. Then, countries began using banknotes which corresponded to precious metals, like gold.
In the 20th century, fiat currency became popular. Its value was determined by supply and demand. Eventually, paper money became the norm with banks in-control. With high fees, legacy systems, intermediaries, and lack of speed, blockchain was created to solve these problems and give ownership back to the consumer,” said Riley Silbert, Business Development Lead of Block Works Group in New York City.
Vitalik Buterin, a Russian-Canadian programmer co-founded Bitcoin Magazine and tried using Bitcoin and cryptocurrencies but found the applications to be too limiting. In 2013, Buterin wrote a whitepaper Ethereum – A Next Generation Smart Contract and Decentralized Application Program to enable the development of other types of blockchain applications, cryptocurrencies, decentralized and fundraising projects, and including initial coin offerings (ICO’s). Ethereum was publicly announced in 2014 with development from Ethererum Switzerland GmnH.
“The technological challenges of maintaining security, decentralization, and improving speed were the goals. If it wasn’t fast, it wouldn’t be scalable. For example, if you want to send money to the U.K. via an online bank transfer, your money doesn’t show up for two-three days. I can fly the money to the U.K faster. It should take minutes,” said Jason Myers, eight-year veteran of blockchain technology and Chairman and Partner of CopyPro.AI, a SaaS marketing technology platform which uses AI and Blockchain, based in Florida and Las Vegas.
Beyond Academics: Blockchain Innovations
1. Bitcoin was the first invention which described a model for record-keeping. As of September, 2018 many companies accept bitcoins, including, Expedia, Virgin Galactic, Cheap Air, Etsy, Gap, JC Penney, Shopify, Whole Foods, Subway, and many others worldwide. When people invest in Bitcoin they buy it because that believe the price will go up.
However, Bitcoin mining is accomplished with a robust hardware that uses a lot of electricity, which takes time and is costly. Some have declared that it’s dead. But, “If some people choose to place their trust in the cryptography and the electricity that powers blockchain instead of the middlemen between them, innovation among enthusiasts of bitcoin and its descendants will remain alive and well.” – Forbes, September 2018.
2. Blockchain is a distributed, tamperproof ledger that removes third-parties, increases speed, is transparent, and traceable. PwC’s 2018 surveyed 600 executives from 15 territories, 84% say their organizations have at least some involvement with blockchain technology. Blockchain operates through a decentralized platform requiring no central supervision, making it resistant to fraud.
3. Ethereum pioneered smart contracts and decentralized apps that work on a custom-built blockchain which offer value and ownership. For example, if you want to buy a house you need to get prequalified for a mortgage, provide financial information, hire a realtor, a lawyer, and fill-out forms.
A smart contract eliminates this time-consuming process by setting-up an agreement between two parties, putting the money in escrow and records the property without title companies or lawyers. The blockchain guarantees that the buyer gets the title or deed and the seller gets cash through a cryptocurrency. Ethereum has a transaction speed of a 15 seconds per transactions as opposed to ten minutes or more with Bitcoin.
“Bitcoin and Ethereum broadly trade in similar ways. One big difference is you now have the bitcoin futures market. It’s always a question of the value of something versus the price of something. If you think the value is higher than the current price, that’s a great thing to go in and buy. If you think the value is lower than the current price, then you might want to short it…Personally, I’m not going to short bitcoin anytime soon,” said Wall Street veteran and cryptocurrency investor Jill Carlson. — Smartereum, November 2018.
4. XRP, a cryptocurrency was minted by Ripple. Ripple has XRapid which banks use to transfer money. “Ripple could be the catalyst in making cryptocurrency more mainstream. Its faster transaction speeds and lower fees make it easier for financial systems to embrace the virtual currency, which is partly why Ripple’s value has increased dramatically just this year.
Ripple is helping financial institutions save money and it is only expected to become even more prevalent in payment flows. The virtual currency is certainly on the rise and has the potential to be the first token to truly disrupt an industry, and if it does, expect XRP to reach Bitcoin-like levels of ubiquity in the future,” says Craig Cole of Crypto Maps.
Blockchain Use Cases
Banking – Ripple’s XRapid replaces legacy systems with auditing of transactions that are cryptographically encoded, create near real-time settlement, eliminate manual repetitive tasks, strengthen risk management, create cost-savings, and more.
Messaging Apps – Stealthy a new messaging app leverages Blockstack which is a decentralized application platform to build a messaging app to share data. “Every time you message someone, the message is first encrypted on your device and sent to your recipient’s cloud provider. Your recipient can then open the Stealthy app and decrypt the message from their storage system.” — TechCrunch, Disrupt SF 2018.
Communications – BCW Group uses blockchain in marketing and public relations, investor relations, advisory, digital content development, and for other business strategies. Blockchain Warehouse helps companies develop their ideas through a proprietary valuation algorithm. Once an agreement is reached, the company helps raise cryptocurrency. Enterprises benefit from the company’s knowledge and experience throughout a token sale.
Social Media — Steem is the cryptocurrency that powers Steemit, a decentralized social media platform that incentivizes user participation through micro-payments. Instead of upvotes and downvotes, like Reddit, users encourage participants through micro-payments with Steem.
In addition to banking, messaging apps and communications, CBInsights recently named the latest innovative ways companies are harnessing the power of global blockchain:
- Hedge Funds
- Internet Identity and DNS
- Critical Infrastructure Security
- Ride Sharing
- Internet Advertising
- Crypto Exchanges
- Education and Academia
- Car Leasing and Sales
- Industrial IOT and Mesh Networks
- Cloud Software
- Cloud Computing
In “Breaking Blockchain Open: Deloitte’s 2018 Global Survey” of more than 1,000 respondents throughout seven countries, Deloitte recommends that organizations should stop looking at blockchain as a “new” technology, because it’s not. And, instead of focusing on the technology, identify areas of friction and outmoded processes that can benefit from the democratization of trust and the ability to more securely verify the authenticity of both B2B and B2C digital transactions.
Blockchain technology can become more trustworthy, empowered, transparent and connective for strategic, financial, and technology decision-makers. Operationally, companies may be able to build new levels of trust with individuals, and ultimately connect their products and services with consumers in a manner and scale impossible to achieve without blockchain.
Marketing and technology leaders have the potential to leverage blockchain to reinvent their customer relationships. Early action on this far-reaching technology will put companies in the best position to benefit from what we think will be widespread adoption. – Harvard Business Review, October 2018.