Blockchains:
How They Work and Why They’ll
Change the World

The technology behind Bitcoin could touch every transaction you ever make

Bitcoin was hatched as an act of defiance.

Unleashed in the wake of the Great Recession, the cryptocurrency was touted by its early champions as an antidote to the inequities and corruption of the traditional financial system. They cherished the belief that as this parallel currency took off, it would compete with and ultimately dismantle the institutions that had brought about the crisis. Bitcoin’s unofficial catchphrase, “In cryptography we trust,” left no doubt about who was to blame: It was the middlemen, the bankers, the “trusted” third parties who actually couldn’t be trusted. These humans simply got in the way of other humans, skimming profits and complicating transactions.

Bitcoin sought to replace the services provided by these intermediaries with cryptography and code. When you use a check to pay your mortgage, a series of agreements occur in the background between your financial institution and others, enabling money to go from your account to someone else’s. Your bank can vouch that your money is good because it keeps records indicating where every penny in your account came from, and when.

Bitcoin and other cryptocurrencies replace those background agreements and transactions with software—specifically, a distributed and secure database called a blockchain. The process with which the ownership of a Bitcoin token will pass from one person to another—wherever they are, no matter what government they live under—is entrusted to a bunch of computers.

Now, eight years after the first blockchain was built, people are trying to apply it to procedures and processes beyond merely the moving of money with varying degrees of success. In effect, they’re asking, What other agreements can a blockchain automate? What other middlemen can blockchain technology retire?

Can a blockchain find people offering rides, link them up with people who are trying to go somewhere, and give the two parties a transparent platform for payment? Can a blockchain act as a repository and a replay platform for TV shows, movies, and other digital media while keeping track of royalties and paying content creators? Can a blockchain check the status of airline flights and pay travelers a previously agreed upon amount if their planes don’t take off on time? If so, then blockchain technology could get rid of Uber, Netflix, and every flight-insurance provider on the market.

Satoshi Nakamoto

If the blockchain were a religion, Satoshi would be God. This anonymous hacker is responsible for writing the Bitcoin white paper, releasing the first Bitcoin code, and inspiring legions of blockchain developers. Many have sought to reveal his/her/their identity, but to this day that information remains secret.

Those three proposed applications aren’t hypothetical—they’re just a few of the things now being built on Ethereum, a blockchain platform that remotely executes software on a distributed computer system called the Ethereum Virtual Machine. In the blockchain universe, Ethereum, which has its own cryptocurrency, called ethers, is by far the project that is most open to experimentation. But zoom out and a diverse collection of potentially disruptive innovators floods into view. New groups are pitching blockchain schemes almost daily. And the tech world’s titans don’t plan to miss out: Microsoft is offering its customers tools to experiment with blockchain applications on its Azure cloud. IBM, Intel, and others are collaborating on an open-source blockchain initiative called Hyperledger, which aims to provide the bones for business-oriented blockchains. Meanwhile, many of the largest banks—the very institutions that blockchain pioneers were trying to neutralize—have cobbled together their own version of the technology in an attempt to stay ahead of the curve. And even Bitcoin, which runs on the first and most successful blockchain, is being retrofitted for applications its designers never dreamed of.

Pretty much without exception, these new blockchain projects remain unencumbered by actual mass adoption. No single blockchain concept or strategy has yet revolutionized any industry. Bitcoin itself is used by no more than 375,000 people in the entire world on any given day, according to Blockchain.info. But the investor dollars are pouring in, and proposals are floating and colliding like tectonic plates on a hot undercurrent of hype and intrigue.

When the mantle cools, which blockchain platforms will persist, and which will slowly sink back beneath the surface? To make any kind of prediction, you’ve got to understand what a blockchain really is and what it does. The place to start, logically enough, is with Bitcoin.

How Do Blockchains Work? The Bitcoin Example

In 2009, an anonymous hacker

(or group of hackers) going by the name of Satoshi Nakamoto unveiled the first entirely digital currency. The technology worked on the principle that, at its foundation, money is just an accounting tool—a method for abstracting value, assigning ownership, and providing a means for transacting. Cash is the historic means of accomplishing these chores. Simply possessing the physical tokens—bills, coins—equals ownership, and it’s up to the individuals to negotiate transactions among themselves in person. As long as cash is sufficiently difficult to replicate, there is no need for a complete accounting of who owns what portions of the money supply, or for the details of who the various holders were of a single $50 bill going back to when it was printed.

However, if you could piece together a running tabulation of who held every bill, then suddenly the physical representations would become unnecessary. Banks and payment processors have already partially sublimated our physical currency into digital records by tracking and processing transactions within their closed systems. Bitcoin completed the transformation by creating a single, universally accessible digital ledger, called a blockchain. It’s called a chain because changes can be made only by adding new information to the end. Each new addition, or block, contains a set of new transactions—a couple of thousand in late August—that reference previous transactions in the chain. So if Helmut pays Hendrieke a bitcoin, that transaction appears at the end of the chain, and it points to the transaction in which Helmut was previously paid that coin by Helche, which in turn points to the time before that when Helche was paid the coin by Halfrid, and so on.

Bitcoin’s blockchain, unlike the ledgers maintained by traditional financial institutions, is replicated on networked computers around the globe and is accessible to anyone with a computer and an Internet connection. A class of participants on this network, called miners, is responsible for detecting transaction requests from users, aggregating them, validating them, and adding them to the blockchain as new blocks. Shortly after the Distributed Autonomous Organization debuted on the Ethereum blockchain, someone siphoned US $60 million in ethers from this autonomous version of a venture-capital fund. In a bold move, the Ethereum developers rewrote the blockchain code to return the money.

Validation entails both verifying that Helmut actually owns the bitcoins in his transaction and that he has not yet spent them elsewhere. Ownership on the Bitcoin blockchain is determined by a pair of cryptographic keys. The first, called the public key, resides in the blockchain for anyone to see. The second is called the private key, and its owner keeps it safe from view. The two keys have a special mathematical relationship that makes them useful for signing digital messages. Here’s how that happens: Helmut takes a message, combines it with his private key, does some calculations, and ends up with a long number. Anyone who has the original message and knows the corresponding public key can then do some calculations of their own to prove that the long number was in fact created with the private key.

In Bitcoin, transactions are signed with private keys that correspond to the public key most recently associated with coins being spent. And when the transaction gets processed, those coins get assigned a new public key. But the main role of miners is to ensure the irreversibility of new transactions, making them final and tamperproof. The method they use for doing so is thought to be the most significant contribution that Satoshi Nakamoto—whoever he or she is—made to the field of computer science.

Ensuring irreversibility becomes necessary only when you invite anyone and everyone to take part in the curation of a ledger. If the Bitcoin blockchain were being run by a single bank with a set of known validators operating under a single jurisdiction, then enforcing the finality of transactions would be as simple as writing it into company policy and punishing anyone who didn’t follow the rules. But in Bitcoin, there is no central authority to enforce the rules. Miners are operating anonymously all over the world—in China, Eastern Europe, Iceland, Venezuela—driven by a diversity of cultures and bound by different legal systems and regulatory obligations. Therefore, there is no way of holding them accountable. The Bitcoin code alone must suffice. To ensure proper behavior, Bitcoin uses a scheme called proof of work.

Chuck Reynolds

Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

David https://markethive.com/david-ogden

Do You Need a Blockchain?

 

According to a study released this July

by Juniper Research, more than half the world’s largest companies are now researching blockchain technologies with the goal of integrating them into their products. Projects are already under way that will disrupt the management of health care records, property titles, supply chains, and even our online identities. But before we remount the entire digital ecosystem on blockchain technology, it would be wise to take stock of what makes the approach unique and what costs are associated with it.

Blockchain technology is, in essence, a novel way to manage data. As such, it competes with the data-management systems we already have. Relational databases, which orient information in updatable tables of columns and rows, are the technical foundation of many services we use today. Decades of market exposure and well-funded research by companies like Oracle Corp. have expanded the functionality and hardened the security of relational databases. However, they suffer from one major constraint: They put the task of storing and updating entries in the hands of one or a few entities, whom you have to trust won’t mess with the data or get hacked.

Blockchains, as an alternative, improve upon this architecture in one specific way—by removing the need for a trusted authority. With public blockchains like Bitcoin and Ethereum, a group of anonymous strangers (and their computers) can work together to store, curate, and secure a perpetually growing set of data without anyone having to trust anyone else. Because blockchains are replicated across a peer-to-peer network, the information they contain is very difficult to corrupt or extinguish. This feature alone is enough to justify using a blockchain if the intended service is the kind that attracts censors. A version of Facebook built on a public blockchain, for example, would be incapable of censoring posts before they appeared in users’ feeds, a feature that Facebook reportedly had under development while the company was courting the Chinese government in 2016.

I Want a Blockchain!

Do you really need a blockchain? Asking yourself a handful of the questions in this interactive can set you on the right path to an answer. You’ll note that there are more reasons not to use a blockchain than there are reasons to do so. And if you do choose a blockchain, be ready for slower transaction speeds.

However, removing the need for trust comes with limitations. Public blockchains are slower and less private than traditional databases, precisely because they have to coordinate the resources of multiple unaffiliated participants. To import data onto them, users often pay transaction fees in amounts that are constantly changing and therefore difficult to predict. And the long-term status of the software is unpredictable as well. Just as no one person or company manages the data on a public blockchain, no one entity updates the software. Rather, a whole community of developers contributes to the open-source code in a process that, in Bitcoin at least, lacks formal governance.

Given the costs and uncertainties of public blockchains, they’re not the answer to every problem. “If you don’t mind putting someone in charge of a database…then there’s no point using a blockchain, because [the blockchain] is just a more inefficient version of what you would otherwise do,” says Gideon Greenspan, the CEO of Coin Sciences, a company that builds technologies on top of both public and permissioned blockchains. With this one rule, you can mow down quite a few blockchain fantasies. Online voting, for example, has inspired many well-intentioned blockchain developers, but it probably does not stand to gain much from the technology.

“I find myself debunking a blockchain voting effort about every few weeks,” says Josh Benaloh, the senior cryptographer at Microsoft Research. “It feels like a very good fit for voting, until you dig a couple millimeters below the surface.” Benaloh points out that tallying votes on a blockchain doesn’t obviate the need for a central authority. Election officials will still take the role of creating ballots and authenticating voters. And if you trust them to do that, there’s no reason why they shouldn’t also record votes. The headaches caused by open blockchains—the price volatility, low throughput, poor privacy, and lack of governance—can be alleviated, in part, by tweaking the structure of the technology, specifically by opting for a variation called a permissioned ledger.

“I find myself debunking a blockchain voting effort about every few weeks”

In a permissioned ledger, you avoid having to worry about trusting people, and you still get to keep some of the benefits of blockchain technology. The software restricts who can amend the database to a set of known entities. This one alteration removes the economic component from a blockchain. In a public blockchain, miners (the parties adding new data to the blockchain) neither know nor trust one another. But they behave well because they are paid for their work. By contrast, in a permissioned blockchain, the people adding data follow the rules not because they are getting paid but because other people in the network, who know their identities, hold them accountable.

Removing miners also improves the speed and data-storage capacity of a blockchain. In a public network, a new version of the blockchain is not considered final until it has spread and received the approval of multiple peers. That limits how big new blocks can be, because bigger blocks would take longer to get around. As of July, Bitcoin can handle a maximum of 7 transactions per second. Ethereum tops out at around 20 transactions per second. When blocks are added by fewer, known entities, they can hold more data without slowing things down or threatening the security of the blockchain. Greenspan of Coin Sciences claims that MultiChain, one of his company’s permissioned blockchain products, is capable of processing 1,000 transactions per second. But even this pales in comparison with the peak throughput of credit card transactions handled by Visa—an amount The Washington Post reports as being 10 times that number.

As the name perhaps suggests, permissioned ledgers also enable more privacy than public blockchains. The software restricts who can access a permissioned blockchain, and therefore who can see it. It’s not a perfect solution; you’re still revealing your data to those within the network. You wouldn’t, for example, want to run a permissioned blockchain with your competitors and use it to track information that gives away trade secrets. But permissioned blockchains may enable applications where data needs to be shielded only from the public at large. “If you are willing for the activity on the ledger to be visible to the participants but not to the outside world, then your privacy problem is solved,” says Greenspan.

Finally, using a permissioned blockchain solves the problem of governance. Bitcoin is a perfect demonstration of the risks that come with building on top of an open-source blockchain project. For two years, the developers and miners in Bitcoin have waged a political battle over how to scale up the system. This summer, the sparring went so far that one faction split off to form its own version of Bitcoin. The fight demonstrated that it’s impossible to say with any certainty what Bitcoin will look like in the next month, year, or decade—or even who will decide that. And the same goes for every public blockchain.

With permissioned ledgers, you know who’s in charge. The people who update the blockchain are the same people who update the code. How those updates are made depends on what governance structure the participants in the blockchain collectively agree to.

Public blockchains are a tremendous improvement on traditional databases if the things you worry most about are censorship and universal access. Under those circumstances, it might just be worth it to build on a technology that sacrifices cost, speed, privacy, and predictability. And if that sacrifice isn’t worth it, a more limited version of Satoshi Nakamoto’s original blockchain may balance out your needs. But you should also consider the possibility that you don’t need a blockchain at all.

Chuck Reynolds

Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

David https://markethive.com/david-ogden

 

Management theory, in broad terms, deals with the relationship

between managers and business entities. Inherent in this relationship is the principal-agent problem. This problem arises because the interests of a manager (agent) can — and often do — diverge from the interests of the owners of the business (principal) that he or she is managing.

Classic management incentivization: the carrot and the stick

Business organizations mitigate the principal-agent problem by use of incentive games that better align manager and business owner interests.

Example 1 (Reward-Based Game):

A manager is incentivized to generate revenues for a business because this is a performance metric that will influence his or her compensation. Revenues also benefit the business and its owners by increasing a company’s equity value (benefiting shareholders), enabling the company to pay down debt (benefiting creditors), allowing employees to be paid on time, etc.

Example 2 (Deterrent-Based Game):

A manager is deterred from acting in a manner that incurs excessive risk and liability for the business owners. One way this is achieved is through legal mechanisms such as vicarious liability or ‘piercing the corporate veil.’ The former may allow a manager to be held directly liable for the injury, or illegal conduct, of his or her employee; the latter may allow a manager to be held personally and solely liable in the context of fraud, etc.

I would hazard that the modern ‘business organization stack’ is built upon hundreds of different reward and deterrent incentive games, each playing a part in collectively establishing a Nash equilibrium between the ‘players’ within a business (i.e., managers and owners). These games are prevalent at all layers of the stack — e.g., compensation structures, human resources policies, governance policies, laws and regulations, etc. — and each game provides ‘checks and balances’ to the principal-agent problem that are fundamental to the viability of the organization.

Enter the ‘Cryptoeconomic Business Model’

With the advent of Blockchain-based assets — and the exponential influx of capital into the Blockchain industry over the past few years — we have witnessed the birth of a novel business model. This model enables companies to make money in new ways through the creation of open-source protocols and code (an invaluable service for which we once relied upon the altruism, rather than profit motive, of developers to provide).

I refer to this as the cryptoeconomic business model. This can be defined as any business model predicated on making profit by building a cryptoeconomic system, i.e., a peer-to-peer cryptographic network which functions on providing incentive payments to (assumed) adversarial nodes. Virtually all public/permissionless Blockchains today are ‘cryptoeconomic systems’ by this definition.

The cryptoeconomic business model upsets the classic principal-agent equilibrium that is often achieved by using reward and deterrent incentive games. This is done by introducing an entirely new class of stakeholder into the ecosystem — the Keepers of a Blockchain network (e.g. tokenholders and other participants who provide a form of ‘paid labor’ into the network, such as validators, miners, etc.)

If the traditional business has two classes of players (managers and owners), the cryptoeconomic business has three (managers, owners and Keepers). These new entrants complicate the game theory model because, now, instead of the acting only on behalf of owners, there are two sets of stakeholders (owners and Keepers) whose interests depend on the efforts of a manager. What happens when the interests of these different sets of stakeholders diverge? In whose interests would (or should) an agent be motivated to act?

Token offering events & the risk of divergence/dilution

Value creation in a traditional business model is different than value creation in a cryptoeconomic business model. In a traditional business, the final milestone of success is achieving profitability. Managers are incentivized to achieve profitability, and then to perpetually increase profitability, because the fruits of this labor accrue 100 percent to the business entity benefiting both owners and managers. Simple enough. This is not exactly the case for a cryptoeconomic business model. Early in the cryptoeconomic business life cycle, each milestone benefits managers and owners collectively — but upon a company’s token offering event milestone (note: because the term ‘ICO’ is a faux pas) there is a fundamental shift.

Value creation no longer accrues to the business entity, but directly to the product/output of that business (i.e., the cryptoeconomic system)

In a cryptoeconomic business model, the final milestone is not profitability per se, but in the value of the Blockchain network/token, which recent scholarship suggests may be measured as a token’s current utility value (“CUV”) and discounted expected utility value (“DEUV”). CUV/DEUV come into play immediately following the token offering event milestone, concurrently with the introduction of Keepers into the stakeholder set.

So how does this impact our thinking on managerial incentives?

The immediate observation is that managers and owners will only benefit from working to increase a network’s value to the extent that they retain some amount of that network’s native tokens. In practice this amount might be in the ~20–50 percent range for the business entity, which is sizable, but significantly less than the 100 percent value retention model of a traditional business.

In theory, managers have ‘skin in the game’ by virtue of these token holdings and should be motivated to drive growth in the token’s CUV/DEUV with the expectation of selling those retained tokens for a profit at some later date. This outcome would be ideal as it implies an alignment between manager-owner-Keeper interests. But the problem is that the dilution from 100% value retention (in a traditional business model) to ~20–50 percent value retention (in a cryptoeconomic business model) may also dilute a manager’s motivation to create long-term value for the network. Without sufficient reward/deterrent games in place, managers are prone to instances of moral hazard and myopic thinking.

It is plausible, for instance, that this may result in some degree of friction between the profit motive of managers, which incentivizes a manager to retain a significant portion of the tokens for the core business and the interests of the other Keepers/tokenholders who would benefit from those tokens being distributed more broadly thus creating network effects that could increase the CUV/DEUV of the token. This would be an example of misalignment between manager-owner-Keeper interests.

Other challenges in managerial motivation post-genesis block

Another challenge is due to the fact that revenue models (i.e. ‘rent-seeking’) may not be viable in cryptoeconomic systems. If a manager were to extract profit/revenue from a network by coding a centralized fee* into a protocol or dApp (i.e. any type of transaction fee that remits value back to the business), a likely outcome is that the protocol or dApp would either: (i) fail to gain adoption, or (ii) be hard forked by users (or duplicated by a competitor) to remove the fee from its code base thus making the network more cost-efficient.

*Note:

To clarify my point on centralized fees, certain platforms use sustainable fee models as a feature of the platform’s cryptoeconomic design (e.g,. Factom and Counter-Party, wherein a portion of fees are burned to increase the scarcity of the token). Also, as the use cases for dApps/protocols continue to proliferate, centralized fees may prove to be an accepted business model for certain applications of Blockchain technology.

Here are a few of the other ramifications of this challenge:

Profiting upfront; creating value later:

The creators of cryptoeconomic networks (currently) realize value for the business entity primarily via two streams: (i) the proceeds of token offering events, and (ii) the retention of some amount of the offered tokens. Both of these milestones occur relatively early in the life cycle of a business. Given that the majority of a manager’s compensation/profit is front-loaded, experience has shown that some managers will opt to simply complete a token offering event before ‘jumping ship’ to the next project, rather than working to generate value for their current project.

CUV/DEUV is a bad indicator of managerial competence:

We may not yet have the best tools to evaluate managerial performance in cryptoeconomic business models. CUV/DEUV are inherently different metrics than earnings per share, EBITDA, return on equity, etc. (the latter are some of the tools used to evaluate CEO performance in a traditional business). CUV/DEUV is driven by supply and demand; more fitting for valuing a commodity than equity. To evaluate a manager’s performance on the CUV/DEUV of a token is akin to evaluating a gold company CEO’s performance on the price of gold.

The lack of legal mechanisms to protect Keepers/token-holders:

There exists an elaborate body of corporate, securities and employment law designed to address the principal-agent problem between participants in traditional business structures (e.g., vicarious liability, ‘piercing the corporate veil,’ fiduciary duties owed by directors to shareholders, etc.) These protections do not (yet) exist for the Keepers/token-holders of cryptoeconomic systems. Granted, there is free market mechanism in play by virtue of the Keepers’ ability to hard fork a protocol in retaliation to mismanagement, but this overhaul should only be used as a last resort.

Singular token offering events: 

For traditional start-ups, the process of raising capital occurs in tranches (i.e. Seed, Series A, Series B, etc.) and each tranche is largely tied to a manager’s ability to demonstrate progress towards profitability since the previous tranche. Token offerings — on the other hand — are mostly structured as singular events. This structure alleviates the much needed external pressure on managers to deliver on building their products on time and on budget. It also fails to backstop losses for investors in the event that a manager fails to deliver.

These are just a few examples of how the principal-agent problem can manifest itself in the context of new, cryptoeconomic business models— each of which will eventually be solved by new incentive games designed for the tripartite (i.e., manager-owner-Keeper) environment.I suspect that the study of management theory in the context of cryptoeconomic business models will continue to be an evolving field — and a very relevant one at that.

Chuck Reynolds

Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

David https://markethive.com/david-ogden

Is Blockchain Technology Really the Answer to Decentralized Storage?

 

The Blockchain has become much more than a simple piece of technology.

It has become a symbol for freedom, transparency and fairness. With this being said, it’s no wonder we see projects leveraging Blockchain tech as a “one-size-fits-all” tool to solve all sorts of problems, many of which could not be further from the original purpose of the Blockchain. Nowadays, the words “Blockchain technology” are thrown around alot and sometimes the use of the technology itself is unnecessary. Tim Swanson, Director of Market Research at R3CEV has even coined the term "chain washing" to describe companies/startups that are using or trying to use Blockchain technology in certain areas when in fact, they could be using more advanced technology for the purpose at hand.

This becomes especially evident when it comes to file and data storage. Although the Bitcoin Blockchain is basically a decentralized database for transactions, accounts and balances, keeping that information on a decentralized ledger is already proving to be a challenge due to capacity issues. Nevertheless, several projects and companies insist on looking at Blockchain-based solutions for storage and, while there are clear cases of misguided enthusiasm when it comes to the use of Blockchain technology, there are some projects out there that are worth taking a look at.

Blockchain Technology as an Incentive Layer

When it comes to a mutualistic relation between Decentralized Ledger Technology (DLT) and data storage, the most common use case for the Blockchain is as an incentive layer. This means that data isn’t stored on the Blockchain itself, but the network at hand is able to leverage the Blockchain as a ledger for automatic payments and/or for value exchange, enabling users to pay for storage or access to files. In this case, the advantages for using the Blockchain over any other technology are clear. These include faster settling times, lower transaction fees (which enable microtransactions), higher privacy and the ability for transparent and immutable record keeping. While the Blockchain isn’t being used for data storage, it is providing the foundation on which the decentralized network is built, allowing it to run with no central authority whatsoever.

There are several projects leveraging the Blockchain in such a way. Storj, one of the first and most successful decentralized storage networks on the cryptosphere, comes to mind. The project started out using a Bitcoin-based asset but later moved to an ERC20 token on the  Ethereum Blockchain. This token, the Storj Coin (SCJX), is used by clients to pay for storage and acts as an incentive for nodes that keep part of the client’s files. These files have been previously shredded, encrypted, and distributed to multiple nodes in order to ensure their safety and availability.

Another popular example is Filecoin, a project developed by Protocol Labs, the creators of the InterPlanetary File System (IPFS). In case you aren’t familiar with IPFS, it is an alternative p2p hypermedia protocol that allows files to be stored in a permanent and decentralized fashion. This provides historic versioning for files, removes duplicates and even allows users to save on bandwidth since files are downloaded from multiple computers and not from a single server.

While IPFS provides a basis for the storage of files, Protocol Labs took this one step further with the development of Filecoin which, according to the whitepaper, “works as an incentive layer on top of IPFS.” The system is different from the one used by Storj on many levels. In Filecoin, miners are paid to store and retrieve files, while also receiving mining rewards from their “useful Proof of Work." There is also no set price for file storage. Instead, users and miners place buy and sell orders in a decentralized storage exchange, making Filecoin a competitive marketplace in which prices can adapt to outside conditions.

While Filecoin and Storj focus on providing affordable cloud storage services, a project named Decent is currently working on a decentralized content sharing platform which allows users to upload and monetize/share their work (videos, music, ebooks, etc) without the need to rely on a centralized third party. Users can access content in a much more affordable way by skipping these intermediaries while the nodes that host the content are rewarded with fees. Much like Storj, the files stored by the nodes on the Decent network are shredded and encrypted.

Blockchain for storage? Is it possible?

Storing data on a Blockchain like Bitcoin would be doable, in theory. However, Bitcoin’s current blocksize limit only allows for 1MB of data to be stored every 10 minutes. Even if you remove that limit, nodes will eventually stop being able to maintain a copy of the Blockchain due to its size, resulting in a centralized and easily-disruptable network. Of course, the scalability problem hasn’t deterred developers from trying to use the Blockchain as a storage solution and a project called Archain may just have found a solution. Archain is a cryptocurrency project that wants to address online censorship by creating a decentralized archive for the internet. To do so, Archain will leverage a new Blockchain-derivative data structure, the "blockweave" which according to the whitepaper, allows the network scale to an “arbitrary size."

Once a user submits a page for archiving on the Archain system, it is stored on the blockweave with the fees paid by the user being allocated to the miner that finds the block at hand. Since the  Archain requires miners to store both the current block and a previous block that has been randomly picked from the blockweave, miners have an incentive to store as much as the data as they can without being forced to store the entire blockweave. As such, Archain is able to ensure that content requested by users is always available without the need for it to be stored by every single node on the network. Archain is also able to address download speeds by incentivising users to propagate poorly-mirrored blocks.

Private Blockchains?

You cannot talk about chain washing for too long without talking about private Blockchains. The concept of a private Blockchain is, to a degree, paradoxical as there is really no use for a Blockchain if the network is closed. To put it simply: If a Blockchain network is not immutable, open or transparent, then a regular database will usually be far more efficient than a Blockchain. Yet there is a little known project leveraging a private Blockchain in combination with the public Waves Blockchain to provide clients with the “best of two worlds." We are talking about Sigwo Technologies LLC, a company that focuses on providing dApps and consulting services for legacy businesses that want to integrate Blockchain technology for data storage and disaster recovery.

Although Sigwo Technologies LLC provides a wide range of services, its use of the Jupiter Blockchain, the Mercury token and the Waves Platform caught my attention. Jupiter is a private Blockchain built specifically for encrypted information storage. Different networks are created for different companies, allowing authorized nodes to join in and download the data on the chain. So far, Jupiter is not much different from any other private Blockchain. What makes it stand out is how Jupiter is able to ensure transparency and immutability despite being a private Blockchain.

Once data is stored on Jupiter, the block hashes from the private Blockchain are stored permanently on the Waves Blockchain. This is done by adding the block hash to a Waves transaction. Since Waves transaction can be paid for with a custom token, the Mercury token is used which makes the process affordable.  Since block hashes are stored on the Waves Blockchain, any change made to the private Blockchain will be publically detected. This happens because the hash from a certain block will always vary according to the information contained in the block. What we’re left with is a Blockchain in which large amounts of data can be stored by specialized nodes (unlike public Blockchains) while remaining publicly verifiable.

Conclusion

As we have seen, there are no shortage of projects that are using Blockchain technology and cryptocurrencies to make decentralized storage possible. However, it is also worth noting that DLT is still in its early stages and it is possible that other, more advanced technologies can replace it with respect to specific use cases. In other words, Blockchain may not be the answer for everything.

Chuck Reynolds

Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

David https://markethive.com/david-ogden

Digital Currency Mining May Look
Much Different in 2025

 

Digital currency mining has reached the point

where all mining equipment combined uses more electricity than Iceland. However, the cryptocurrency market capitalization is still minuscule in comparison to other traditional markets. Such electricity consumption may soon become unsustainable if the adoption rate of digital currencies continues to grow at its current pace.

Higher mining difficulty

Bitcoin mining difficulty is adjusted every 2016 blocks to remain at roughly 10 minutes per block. As more mining capacity is brought online, the difficulty increases accordingly. Thus difficulty increases proportionally to the increase in computing power of the network. The mining difficulty of both Ether and Bitcoin has increased exponentially since their respective genesis blocks. This trend will likely continue as adoption keeps increasing. Therefore, digital currency  miners will have to constantly acquire more powerful mining equipment. The times where everyone could mine Bitcoin with his/her personal computer are long over.

More centralized

The rising mining difficulty has forced miners to keep buying new and more powerful mining equipment. The problem is that these super-computers are also very expensive, creating a significant barrier to entry that only those with deep pockets can overcome. Mining benefits greatly from economies of scale, which further limits the ability of small-time miners to be competitive. Because of this, mining has become heavily centralized. AntPool claims to be the largest cryptocurrency cloud mining company in the world, controlling 17.82 percent of the hashpower of the Bitcoin network. Most mining companies are located in China due to the low cost of electricity and labor.

Green alternatives

As the hashrate of Blockchain networks keeps increasing, the amount of mining hardware will continue to grow. These mining computers consume vast amounts of energy, and this is with the entire cryptocurrency market being relatively miniscule in size. One can only imagine how much electricity will be used for mining if digital currency becomes mainstream. Unfortunately, the electricity that powers these machines usually comes from non-renewable sources of energy, which contributes to climate change.

Austrian company HydroMiner is one of the few mining companies that are planning to make mining more sustainable and profitable by using renewable energies. Nadine Damblon, CEO at HydroMiner, pointed out in an interview for CoinNoob that there already are companies using solar energy for mining, but that hydroelectric power is probably the better solution since it’s more consistent and because the water can then be used to cool down the mining equipment.

Proof of stake

In a proof of stake (PoS) network, every validator owns a portion of the network. This is much different from Proof of Work (PoW) where every validator needs to own expensive mining equipment. PoS also encourages greater decentralization of the network, since all the currency holders are involved in securing the network in proportion to the amount of currency they own. Additionally, PoS is extremely energy efficient, since there is no need to make computationally difficult calculations. It also enables much faster validations. Proof of stake does have a couple of drawbacks, with the most serious being the “nothing at stake” problem. Imagine that a network which uses PoS is under attack by a hostile actor who is trying to supplant the valid Blockchain with one of his own. It makes economic sense to “mine” on both Blockchains, since it costs you nothing to do so.

In fact, that’s the smart thing to do, just in case the attacker succeeds. With Proof of Work, a miner must instead decide to mine on one chain or the other, since mining equipment can only be used on one network at a time, and burns expensive electricity doing it. Blocks on the Bitcoin Blockchain will always be verified through PoW. However, Ethereum is moving towards PoS with its new “Casper” protocol. If successful, this will enable Ether holders to stake their coins in a smart-contract in exchange for transaction fees. Many are eyeing Ethereum to see if they can in fact solve the heretofore intractable problems with Proof of Stake.

Chuck Reynolds

Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

David https://markethive.com/david-ogden

 

According to a recent study by the Cambridge Centre

for Alternative Finance, central banks around the world are strongly in favor of Blockchain technology. This, in spite of the recent report by the ECB that Blockchain technology is too immature for widespread use. According to the study, central banks surveyed indicated that 20 percent of central banks will be using Blockchain technology by 2019, and 40 percent will have active Blockchain applications within a decade.

Priorities

Among the respondents, however, many declined to give time frames but indicated that Blockchain technology was high on their priority list. The findings indicate what many market researchers had already been noting, namely, that the banking industry is starting to grasp the power of Blockchain technology.

The central banks who responded indicated that they are most interested in using Blockchain technology for permissions platforms or protocols, but also indicated strong interest in both Bitcoin and Ethereum. Ironically, a large percentage also indicated that they are considering using Blockchain technology to create their own central bank-issued digital currency. In fact, more than 80 percent of the banks surveyed indicated that this was the main reason they were conducting research. The findings represent a new shift in adoption away from government free cryptos to attempts at centralized digital currencies.

Governments embracing crypto?

The use of Blockchain in the government sector has certainly been increasing. From railway lines to mining farms in Russia, Blockchain technology and cryptocurrencies are on government's’ radar. Other applications appear to be coming on line as well, including Blockchain-based data security after the Equifax hack, and Blockchain based voting systems like Horizon State, which has created a platform for fraud-free voting through Blockchain for state use.

Founder Jamie Skella said:

“For the first time in history, thanks for the post-unforgeable characterises of distributed ledger transactions, we have a ballot box that cannot be hacked. When the result of a vote cannot be tampered with, unprecedented trust amongst communities – and indeed companies – is delivered for constituents.”

With central banks around the world embracing Blockchain technology, and governments seeking solutions for data tampering and fraud-less voting, Blockchain technology will continue to gain market share.

Chuck Reynolds

Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

David https://markethive.com/david-ogden