Posts by Kumar Sambhav

The dark side of Bitcoin/Cryptocurrency

What is Bitcoin/Cryptocurrency?

“Cryptocurrency is a digital currency that is managed by using one of the most advanced encryption techniques called cryptography to secure its transactions. Bitcoin was the first decentralized cryptocurrency which was created in 2009.”

Bitcoin is crushing the markets with its high evaluations and a lot of interest from general people. It is not the only one, there are now a plethora of cryptocurrencies being traded in the not so traditional market place. These are being traded on special platforms exclusively for the cryptocurrencies. There is overall a general excitement about the whole cryptocurrency industry if you will categorize it so.

While these are highly secure transactions there is a darker side to the whole story as well. This is without even looking at the rapid fluctuations in the pricing of these or how many new forms they are coming in.

We are listing some of the not so easily discussed or discovered factors that may not be great for general acceptance of these.

1. Inefficient for retail –

The cryptocurrency transactions as based on the blockchain technology which is a mutual agreement based system where a ledger is shared and updated at multiple places and validated. This makes the system very slow for retail transactions. Cash and Cards are so much fast.

2. Unregulated Market –

The current market for cryptocurrencies is not regulated and therefore very difficult to track. This may lead to financial chaos if all transactions are beyond the control of regulators.

3. Power Inefficiency –

Electricity is a pricey commodity till we go completely to renewal sources or energy and crypto currency mining takes loads of it. It takes almost 25% of the miner’s revenue. In Indian context to mine a bitcoin, it would take almost INR 180000 worth of electricity. So if the Indian economy were to run completely on bitcoins all the worlds electricity would not suffice to support the transactions.

4. Parallel Economy –

When you can’t track the money it becomes very popular with a certain set of people in society. Such money can be easily used for transactions that are not legal. Using it on Dark Web, Money Laundering, ransom demands are just a few of those use case. These are similar problems we had with Cash economy so even being digital this is not really solving the problem.

We are not the naysayers the blockchain as a technology is great and can be used for financial transactions as well however it was not designed for a day to day transaction based use cases. There are definitely the benefits and they should be considered for each use case separately.

Business Applications of Blockchain

What is Blockchain:

A distributed ledger – It tracks ownerships through historical assets and identities – and everyone has a copy.
Unique Tokens – long numbers are tracked through the ledger
Anonymized Processing / Mining – transactions are processed through miners.
Immutable, encrypted, pseudo anon – and they are immutable once they’ve happened, and are encrypted.
Consensus Mechanisms – as long as 51% of the network agree, it holds.

Is The Blockchain a New Web 3.0?

The blockchain gives internet users the ability to create value. It may revolutionize the future and a couple of places it is making a difference today.

12 potential business applications are listed down for blockchain.

Smart ContractsDistributed ledgers enable the coding of simple contracts that will execute once the specific conditions are met.
The Sharing Economy – By enabling peer-to-peer payments, blockchain opens the door to direct interaction between parties – a truly sharing economy results.

CrowdFundingBlockchain takes this interest to the next level, potentially creating crowd-sourced venture capital funds.

GovernanceBy making the results fully transparent and publicly accessible, distributed database technology could bring full transparency to elections or any other kind of poll taking. Ethereum-based smart contracts help to automate the process.

Supply chain auditing – Distributed ledgers provide an easy way to certify that the backstories of the things we buy are genuine. Transparency comes with blockchain-based timestamping of a date location.

File Storage – Decentralized file storage on the internet brings clear benefits. Distributing data throughout the network protects files from getting hacked or lost.

Protection of Intellectual Property – Smart contracts can protect copyright and automate the sale of creative works online, eliminate the risk of copying and redistribution.

Internet of Things (IoT) Smart contracts make the automation of remote systems management possible. A combination of software, sensors, and the network facilitate an exchange of data between objects and mechanisms.

Identity Management – Distributed ledgers offer enhanced methods for proving who you are. Having secured identity will also be important for online interactions – for instance, in the sharing economy.

Data Management – In the future, users will have the ability to manage and sell the data their online activity generates. Because it can be easily distributed in small fractional amounts, Bitcoin – or something like that.

Land title registration – AsPublicly-accessible ledgers, blockchain can make all kinds of record-keeping more efficient. Property titles are a case in point. They tend to be susceptible to fraud, as well as costly and labor-intensive to administer.

Stock Trading When executed peer-to-peer, trade confirmations become almost instantaneous. This means intermediaries – such as the auditors, and custodians – get removed from the process.

What Problems does Blockchain solve?
Removal of the Middlemen to make system decentralized. There is no, a single entity that controls the network, Instead, it’s analogically similar to BitTorrent. Own your own data in the new Data Economy.

levels-of-distribution

The Central Point of Failure – Reliability on the Central Server containing all the data is less in case of Hacker’s attack on the server, Blockchain Technology makes us move towards a permanent web. A web where links never die. Stupid 404 !!!

Establishing Transparency, to make system Trustless. In other words, no need to put the trust on the peers, as the designed system is highly tamper-resistance.

Faster Data Transfer – A peer-to-peer network helps the transfer of data super fast as compared to the central server serving data.

In general, Blockchain is creating a world with more and more value. It can be applied to any need for a trustworthy system of record.

What is Blockchain Technology?

“Bitcoin is just one example of something that uses a blockchain. Cryptocurrencies are just one example of decentralized technologies. And now that the Internet is big enough and diverse enough, I think we will see different flavors of decentralized technologies and blockchains. I think decentralized networks will be the next huge wave in technology. The blockchain allows our smart devices to speak to each other better and faster.” Melanie Swan, author of Blockchain: Blueprint for a New Economy by Swan, Melanie (2015) Paperback

Blockchain is now making the biggest revolution in the finance industry. As a technologist, we should evaluate and apply the concept of Blockchain without thinking Cryptocurrency. It can unveil many possibilities and can lead to innovations. Cryptocurrency is becoming a distraction to the possibilities of blockchain as people have started using terminologies vice-versa.

What is blockchain technology and why it is safe?

Blockchain provides a protocol for building a shared, replicated and distributed online ledger network. Each participant in this blockchain network maintains their own copy of that database, or collection of organized information.

If you simply put,  blockchain is made up of a series of blocks of data that are securely tied together. Since all records are connected to each other, they are entrenched. It is impossible to modify or alter a previous record without changing the copy of every participant in the blockchain.

There are some disruptions too!

Contracts, transactions, and ledger are the defining structures which set the boundaries of our economic, legal and political systems. Today these involve people and corruption. With blockchain, contracts can be embedded in digital codes, stored in shared databases, protected from tampering.

Blockchain may be disruptive, but the question is if it’s too disruptive for its own good.

Although blockchain is one of the hottest and intriguing technologies currently in the market but it comes with its own challenges. Many business leaders and industrialists are skeptical about blockchain.

Let’s see what are those skeptics:

  • It will be hard for established business in the industry where blockchain will push uncomfortable transparency which can lead to price corrections and change in business models. It can be so much disruption that it can lead to the foundation of new technologies.
  • Adoption problem of Blockchain technology
  • Time-consuming: Blockchain-based transactions can only complete when all parties update their respective ledgers – which is a very time-consuming process.

Eight reasons to be skeptical about blockchain.