On 5 & 6 April, Tokenize attended one of the most anticipated conference, De/Centralize 2018, to gain more insights of the realm of blockchain & cryptocurrencies!
As mentioned from before. Tokenize would be summarizing the content for our members! Remember to share and upvote this!
Without further ado, here is what you have been waiting for!
Given Bitcoin’s meteoric rise over 2017, everyone has probably heard of Bitcoin and cryptocurrencies by now. Most people have a negative impression as it’s been featured in mainstream media as a bubble waiting to burst — making them apprehensive of investing in such speculative instruments.
But is that really the case? If cryptocurrencies are merely but a fad it would have perished by now. Most leaders in business & academia around the world acknowledge the potential of the underpinning technology of blockchain and agree that it’s here to stay. However, there are conflicting views as well — will blockchain revolutionize the world as like what the Internet did? Or will it cease to exist 10 years from now and be passed off as just a fad?
Blockchain’s current state
Blockchain is proclaimed to be the next revolutionary technology — but, is it really the case? Adoption for the technology hasn’t been as widespread as expected — most of such adoption are private blockchains and the actual use cases for cryptocurrencies based on public blockchains are few and far between. The best application on Ethereum by far is Crypto Kitties. Other than front runners like Bitcoin and Ethereum, many other cryptocurrencies fall short of their promises and simply do not have a working product.
Blockchain and cryptocurrencies are still a very new field, with irrationally exuberant market participants pricing in the future utility value of these technologies in a hasty manner. This is clearly evident from the selloff we had from January till now.
The path for blockchain and cryptocurrencies, in particular, hasn’t been a rosy one. From technical challenges like scaling & cyber-security to excessive price volatility, threatening the very value cryptocurrencies are supposed to store, as well as regulators threatening to ban cryptocurrencies.
Public vs Private Blockchain
Private Blockchains, unlike Public Blockchains are not based on a public ledger, meaning that there is no transparency of any kind at all — it is controlled by only a few people in charge of the blockchain and is in fact very centralized compared to a Public Blockchain. Most blockchain advocates do not believe in a Private Blockchain because in many aspects it is no different from a traditional database.
This article focuses on Public Blockchains and the term Blockchain henceforth will be referring to Public Blockchains.
The future of Public Blockchains
The immense potential of blockchain cannot be denied — it completely changes how information is stored and in this digital age we live in, information is the name of the game.
Blockchain and Social Impact
Blockchain has the ability to bring about tremendous social benefits to society — for example, the World Food Programme (WFP) has been experimenting cash-based verification on the Ethereum blockchain. Transacting on the blockchain reduces transaction fees by 95–98%. This translates to a substantial amount given the massive amount of inflows and outflows the WFP deals with.
Blockchain can also help to address the wealth gap by giving back control of personal information back to their owners.
Facebook and Google are profiting over users’ data. For example, it earns $16 per account annually, with 2 billion accounts, that’s $32 billion in revenue annually based off our information alone!
Currently, billions of people are unbanked — blockchain technology makes bringing banking to the unbanked much more cost efficient, accelerating the process of reducing the number of unbanked people around the globe.
People in developing or rural regions who are unbanked, who don’t have an identity, have no means of interacting with the global economy — they can’t turn the resources they have into wealth!
There are many other use cases for blockchains that can contribute to society significantly as well, from end-to-end verifiable elections to transparent charity organisations to a collective cyber-security network, the applications are endless!
Blockchain & Cryptocurrencies — The Ecosystem
Blockchain, or distributed ledger technology, is a decentralized database which is different from a traditional centralized database run by a single entity. It is on its own an ecosystem which involves various stakeholders — investors, users, validators (miners) & node operators.
Running a database isn’t free — there are significant costs involved; data storage companies collect fees for their services in order to cover operating expenses and turn a profit (otherwise no one would want to run a database). Likewise, for blockchains, there needs to be an incentive in order for the validators (miners) on the network to do what they do — validating transactions to record on the public ledger. This is where cryptocurrencies come in — they are an integral part of blockchain which provides the incentive and acts as fuel for transactions or information to be stored on the ledgers. Without cryptocurrencies as an incentive, no one would want to run the blockchain. This is the main reason why cryptocurrencies are often paired up with blockchain and why they can’t be separated!
Security vs Utility Tokens
It is important to understand that there are two different types of cryptocurrencies — Security and Utility. The regulation implications are different depending on which classification it falls into. Security tokens are regulated much more heavily than utility tokens as they are regarded as investments under law.
Conceptually, a security token entitles the holder to ownership rights of the network (or company) as well as promises of dividends/profit sharing in the future.
Separate from security tokens, a utility token have a use case and are not designed as investments. It allows the holder to access certain goods or services provided by the network.
Both tokens’ prices may fluctuate, the key difference is that security tokens entitle the holder to ownership rights while utility tokens function as tickets and doesn’t provide ownership of a network or company.
So, it’s important for participants in the cryptocurrency space to be aware of regulations as it often have very significant impact on the development of blockchains & cryptocurrencies.
Blockchain and the Information Revolution
Blockchains offer a completely different approach to storing data — allowing users transparency and control over their own data. In the existing model, data storage is centralized and in the hands of a trusted third party (Facebook, Google).
As we have seen from the Cambridge Analytica scandal, power grows out of information.
What power you may ask? The power to:
- To make or break our careers
- To track us
- To deny us access to our data, apps & identity
- To influence our emotions
- To influence relationships with our closest ones
- To overthrow governments
A lot of responsibility comes with the great power provided by information. No individual or company should have this power. We can do better with decentralization, which is what blockchain promises.
With decentralization, the need for trusted 3rd parties will be removed and users will be put back in control of their own data. Currently, corporations are profiting over our data with undue data collecting — the data that is actually collected from us is much more than what we think.
To find out exactly how much information about you has been collected, you can extract copies of your data from Facebook and Google (be warned, you won’t be able to unsee this). Click here for more information.
We need to understand that information collection (which is essentially what Google and Facebook is based on) is a very profitable business and we ought to have control over our information and some share of whatever profit that is generated from it. Blockchain provides the platform for a more transparent, equitable and sustainable model to be adopted.
Blockchain for Data Storage
There are a few ways that a blockchain can be used in distributed storage software. One of the most common is to:
- Break up data into chunks.
- Encrypt the data so that you are the only one with access to it.
- Distribute files across a network in a way that means all your files are available, even if part of the network is down.
Essentially, instead of handing your files to a a trusted 3rd party, you distribute it across a network of people all over the world. The cloud is shared by the community, and nobody can read or tamper with the data. In other words, you stay in control. This could also be useful in public services to keep public records safe, available, and decentralized.
Another model is to just save a cryptographic signature. This would give users a way to ensure a file is not tampered, without needing to save the entire file on the blockchain. When you look at a file, you can guarantee that it is the same version of the document that existed at another time.
Smart contracts can also be used with blockchains. These ensure that certain transactions happen when certain conditions are met, meaning records can be programmed to be changed or updated automatically.
Click here for more information!
Blockchain and AI
Unsurprisingly, blockchain and AI have a lot of synergies — modern day AIs based on machine learning thrive off massive amounts of data. Not only is a critical mass of data required, the quality of the data is equally important as well. There are privacy concerns when dealing with data as well, this restricts the amount of data AIs can access for its development or function.
Blockchain, if adopted on a wide scale, can potentially provide large amounts of quality data that is anonymised — data can be converted into a token and a score rated by users on the network can be attached to it and with encryption and better access control, anonymisation of data becomes more feasible. This benefits not only AI but other areas as well, for example, blockchain can greatly improve access for healthcare research data — researchers can freely access data for their research without the need to survey others.
In addition to better access to data, blockchain allows for interoperability — this allows different AIs to interact with each other. A high-level AI can outsource different parts of the work to low level AIs and then subsequently piece them together to provide a desired output, similar to a factory manufacturing process. For example, to provide a document summary and analysis service, the first AI can extract text from scanned images and then pass it to the second AI which is able to recognize words from the text and then the third AI will interpret the text and perform an analysis. This allows developers to market their AIs as well as build theirs on top of others, reducing duplication and making the development process more efficient.
Blockchain and Decentralization
While blockchain promises decentralization of information, it is actually in fact very centralized if we take a look at some of the leading protocols in the space.
We can see that the number of applications on existing blockchains are few and far between, with high node concentration and concentrated distribution of tokens — indicating that centralization is actually very alive and well in blockchains as well.
The power law (which is a worldwide phenomenon) dictates that a selected few will capture most of the value in any specified area. However, some semblance of centralization should stay — not everything should be decentralized as centralization has its own merits as well.
The potential blockchain has is immense — arguably on the same scale as the Internet, if not higher. From giving back users control of their own information to more efficient transactions and the acceleration of the growth of AI as well as countless of other use cases, blockchain is here to stay and cryptocurrencies which acts as fuel and incentive for various stakeholders remains a crucial part of the ecosystem.
Admittedly, blockchain technology is still in its infancy stage and has its own fair share of challenges, especially with regulations. It still has much more room for growth and is definitely a step up from the current way we are storing and managing information.
While blockchain technology is promising, investors would be wise to do their due diligence when investing in cryptocurrencies and not succumb to the irrational exuberance that drives the markets at times.
Hope that you have learnt something from this! If it’s helpful kindly upvote & share it with your friends! And for those who have yet to join the Tokenize Community, what are you waiting for?! Join us!
Article written by: Alson Chia, Marketing Associate of Tokenize