Blockchain can do a whole lot more than manage Bitcoin. Blockchain technology is a digital innovation that is poised to significantly alter financial markets within the next few years within a cryptographic ecosystem that has the potential to also significantly impact trusted computing activities and therefore cybersecurity concerns as a whole. Bitcoin is a digital cryptocurrency that most people have heard of. Blockchain, in fact, as a distributed digital ledger, can manage almost any type of transaction imaginable, and therein lies its power.
Introduction – Blockchain
Blockchain technology was first introduced in a white paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” by Satoshi Nakamoto in 2008. Blockchain, Bitcoin, smart contracts, and AI are probably what they mean and how they can affect our lives, maybe or maybe not. There are many questions and issues surrounding these terms and new technology, and this post may answer some of the key questions, including:
- No reliance on trust
- Digital signatures
- Peer-to-peer network
- Proof-of-work
- Public history of transactions
- Honest, independent nodes control majority of CPU computing power
- Nodes vote with CPU computing power
- Rules and incentives enforced through consensus mechanism
Governance – an open source community of developers backed by the Bitcoin Foundation.
Democratic – if you don’t like one of the changes, you are more than welcome to fork the chain and implement your own rules
Money Creation – is given to the people, not to the central bankers.
Deflationary by design – money supply cannot be manipulated and is fixed at 21 million coins, each divisible up to 8 decimal
Bitcoin is the latest rage in the online world. It has been around since 2009 but all of a sudden it has become the new buzzword. Bitcoin (capital B) refers to the entire system whereas bitcoins (b in lowercase) refers to the currency itself. One can get started by obtaining a ‘Bitcoin wallet’- an App that stores bitcoins needs to be installed on the phone or computer.
Bitcoin is a “peer-to-peer” (“P2P”) system. In a P2P system, there is no central administrator. The ledger (“blockchain”) is publicly available, and distributed nodes (“miners”) verify transactions. Bitcoin is a “convertible” virtual currency. Bitcoin can be used to purchase real and virtual goods and services and is readily exchangeable for government-issued currency. Transactions are signed using public and private keys.
Bitcoin users now see virtual currency largely as an “asset” to be traded rather than something to make payments with or a liquid asset for cash flow. So there is huge confusion on whether payment via Bitcoin or other cryptocurrencies should continue or need to stop immediately. At this time, payment providers have stopped or are stopping this facilitation, and at the same time, service providers are also not showing interest in accepting it via Bitcoin. Fewer online merchants wanted to accept cryptocurrency.
Bitcoin was the first digital, i.e., cryptocurrency. It is simply a means of sending and receiving numbers to and from “addresses”. Just as with real-world mining, energy must be invested to solve complex mathematical problems through which systems earn Bitcoins. It was the first digital, i.e., cryptocurrency. An open-source peer-to-peer payment network.
- Using Digital Signatures & Encryption
- decentralization is the basis for Bitcoin’s security and freedom
A maximum of 21 million bitcoins can be generated. Cryptocoincharts claims to be indexing 4,220 cryptocurrencies. Most circulated: Bitcoin, Ethereum, and Litecoin. Think of Bitcoin as an electronic asset (as well as a digital currency). A network of computers keeps track of Bitcoin payments and adds them to an ever-growing list of all the Bitcoin payments that have been made, called “The Bitcoin Blockchain.”
The file that contains data about all the Bitcoin transactions is often called a “ledger”. Bitcoin value is created through transaction processing, referred to as “mining,” which is performed by distributed processors called “nodes” of the peer-to-peer network. Bitcoin is an artificial intelligence currency. Because it is assured that in the future, robots will make use of Bitcoins. The robots will take over the enterprises’ operations. It is even predicted that in the future, robots will own property and assets and trade with Bitcoins.
There are lot of vital questions though around BitCoin
- How did it get started?
- How Would I buy some Bitcoins?
- Why would I want some Bitcoins?
- Problems with Bitcoin currency
- How is the currency created?
- Why does it have value?
- Who controls the value?
Who Accepts Bitcoin?
BitCoin – How to Sell & Buy
Larger Buyers go to Exchanges. An Exchange is a website with significant software and funding. Exchanges act as a clearing house to match buyers and sellers similar to Stock Exchanges. They keep a very small transaction fee for each trade. There are at least 21 Bitcoin Exchanges in the U.S. alone. Mt Gox was one of the largest exchanges and was located in Japan. BitCoinFundi, BitMari etc are local in Zimbabwe. To Buy Bitcoins on an Exchange.
*Create an account at an exchange like Coinbase.com. Wire them some money (no credit cards allowed). Funds will show up in your account. Purchase or sell Bitcoins whenever you wish from your account. You can have all or some sent to your Bitcoin wallet on your computer.
Blockchains compared to traditional big-data distributed databases like MongoDB. We can think of blockchains as “blue ocean” databases: they escape the “bloody red ocean” of sharks competing in an existing market, opting instead to be in a blue ocean of uncontested market space. Blockchain is here to stay, is Blockchain as a Service (BaaS) offerings from both IBM and Microsoft.
The risks and challenges include security, environmental impact, equipment being expensive, and interoperability. The Bitcoin & Ethereum cryptocurrencies have both been hacked, although new safeguards were put in place each time to close their vulnerabilities. Blockchain and Artificial Intelligence technologies have already started reinventing & demystifying the succinct and drastic transformation of Fintech. It would be coming time which will tell its mass adoption across the markets and guide into a completely new ecosystem whose rate of innovation will only accelerate at speed we have never perceived before.
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Great post Vinod!
Thanx Kunal