Everyone says they want to make the world a better place. Every company claims to be creating a brighter future. Yet we remain hopeful that one of them will come through with a world changing idea and make a success of it. That’s what blockchain is trying to achieve. Blockchain represents a paradigm shift, a new way of thinking to further advance the world. It is the building blocks for a world in which most of our current social problems are resolved through automation. Think instant payments, driver-less cars, smart fridges, etc. these will all be operating on the blockchain. Keep this vision of the future in mind for it will become your anchor during the inevitable stormy seas of blockchain.
What is Blockchain?
Blockchain is a computing system that efficiently records transactions between two parties. It is cryptographic in nature (written in code) and is designed to eliminate the need for trust between the transacting parties. This is because every transaction on a blockchain is automatically verified by the blockchain itself. Thus eliminating the need for third party entities. Why pay someone through PayPal when you can pay them directly?!
Facilitation for payment isn’t the only function of a blockchain. People can send messages, transfer ownership of assets, and build applications, among many other things. Due to its decentralized (no center of control) and peer-to-peer nature, transactions are near instant on a blockchain. Making it a better and more secure alternative for the future of automation.
That’s as simple as I can explain it. You’ll learn and get to know more about complexities of blockchain the more you use it. Although the long term goal is to make blockchain so easy to use that no one even bothers to ask how it works. In the same way that people no longer ask how the internet works, they just know that it works. Luckily for us, we are at the very beginning stages of this technology’s development, and we get to learn how it works from the ground up. By the time it reaches its mass adoption stage, you’ll have become an expert on it. We’ll dive further in-depth on blockchain by looking at the EOS blockchain in the next chapter.
What is Cryptocurrency?
A cryptocurrency is basically a digital currency. It is a unit of exchange that uses cryptography to ensure secure and verifiable transactions. Cryptocurrencies can be used to interact with the blockchain or its community. Since it is a representation of code, it can be programmed to represent any type of a digital asset. As long as two or more people agree and are willing to accept this representation, it becomes valuable. Cryptocurrencies fuel the blockchain and open up an economic market for speculation. A single blockchain can have different types of cryptocurrencies on it serving different purposes. These kinds of alternative cryptocurrencies are commonly referred to as Tokens.
A token, also known as a coin, is an alternative cryptocurrency that only functions within restricted ecosystems within a blockchain. Each blockchain has its own native cryptocurrency which acts as the main currency of exchange/trade, and then there are tokens. These are alternative cryptocurrencies that people use to fulfill other purposes that the main cryptocurrency cannot efficiently fulfill. Usually these tokens are much cheaper than the main cryptocurrency and are used within applications built on the blockchain. For example, as an in-app currency for a gaming application. Most blockchain apps have their own unique token and are usually limited in supply. Therefore, if the demand is greater than the supply, the token rises in value. Creating yet another market for speculation all in the same blockchain. We’ll go into further detail on tokens in Chapter 4.
The introduction of cryptocurrencies has changed the world of finance for ever. Now ordinary users can finally say they have complete ownership of their assets. The supply of these digital assets is publicly verifiable and cannot be counterfeited nor tampered with. Cryptocurrency is interlinked with Blockchain because it runs on it. Thus, the value propositions of cryptocurrency being a secure, safer and faster form of payment, are interlinked with those of its blockchain. Cryptocurrencies are only as good as the blockchains they’re running on. You can’t have a sound cryptocurrency on a slow and insecure blockchain.
History of Blockchain / Cryptocurrencies
The first blockchain to be successfully launched was Bitcoin in 2009 by someone going by the pseudonym Satoshi Nakamoto. Satoshi believed that the world deserves a better money, one that’s not reliant on a central authority. In other words, money that is incorruptible. Bitcoin became the first digital currency to solve the common problem of ‘double spending’ without the need of a central authority. This was a recurring hurdle that would allow for a single coin to be spent multiple times through duplication. Decentralization was a vital feature for digital currencies, one that needed to be cracked in order for them to succeed. Satoshi Nakamoto literally cracked the code.
Bitcoin’s solution to the ‘double spend’ problem was to introduce a decentralized network where individuals would work independent of each other to verify that each coin is indeed the original. These individuals are incentivized by a system known as ‘proof of work’ in which individuals are rewarded with Bitcoin for each accurate verification of a transaction. A task that until now was reserved for central authorities such as a bank.
Today there’s well over 4500 cryptocurrencies and many of them run on their own blockchains. At least half of these cryptocurrencies have no unique use case and in most cases are just money grab scams. Many new blockchain users have fallen for these scams in the hopes of making a quick buck. Which is why it’s important to arm yourself with knowledge of blockchain because it’s so easy to fall for frauds. Bitcoin may have been the first blockchain, but it gave rise to hundreds more looking to further Satoshi’s vision for “a peer-to-peer electronic cash system”.
In 2017 it became apparent that Bitcoin, as well as many other blockchains, could not scale to support a mass adoption of the technology. The performance of many of these blockchains’ performance began deteriorating when a large number of users started transacting all at once. These blockchains simply could not keep up with this great a demand. It exposed a flaw of the current technologies, one that only a select few in the community were already aware of.
A solution to the scaling problem is currently being worked on by many of the more serious projects in the blockchain space. As it is we’ve already seen a great improvement in the operation of these blockchains in terms of transaction speeds. It seems as if that usually comes at a compromise of some other feature of the blockchain. If one blockchain is faster, then it compromises on security and if it is secure, then it compromises on speed. As I mentioned there’s already many blockchains working at cracking this scaling issue but without compromising on any of the great blockchain features like decentralization. Up until now there hasn’t been a blockchain showing any promise of scaling without compromising on some key feature. Key phrase – Up until now!
In the next Chapter we introduce to you EOSIO, the most promising prospect for Mass Adoption! We’ll explain in detail what it is, how it works and why it is leading the race for massive adoption.
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