Knowing the Downside of Blockchain
There are numerous benefits to the blockchain technology and there are numerous uses to it in the form of coin, token and currency among other things. The thing about blockchains is that they are hard to grasp, and the maths behind them tends to make people cringe when they are first introduced to it.
Then you add that to the fact that the programming behind the blockchain can be complex when you get down to the nitty-gritty of it, but my advice to you is to not let it distort your perception of the next new thing in finance.
The system’s complexity varies based on who you ask. For me, the system is as simple as it can be. For a recent computer grad, there could be some conceptual challenges, but the guys who are in their mid-careers are the ones that will find it a little strange as it is a completely new paradigm. Don’t worry though, as it just takes a little getting used to.
When it comes to transaction costs, it is mostly cost-efficient but, for those of you who think that Bitcoin is absolutely free, you need to think again. There are costs associated with it, but the benefits far outweigh those costs – unless you are trying to make micro payments and then the cost is not worth it if you are on the Bitcoin platform. For that, you should try one of the other new coins.
The biggest downside is that it is facing a steep uphill battle with lawmakers in countries that are advanced in technology and backward in thinking. Countries are used to keeping track on their citizens for one reason or another, and their knee-jerk reaction to Bitcoin has been severe. Tread carefully and be nimble when it comes to investing. Check with your lawyer if you have to, but even if you do not agree with the law, you have to follow it.
Cryptocurrencies are made possible by the distributed ledger that is kept honest by an independent system called the blockchain. The idea of the blockchain is to harness the power of the crowd to automatically verify and remember. These nodes are central to the blockchain network and provide a valuable service.
As far as the blockchain is concerned, it is in its infancy. There is a long way to go before you start to see the real power of the blockchain, but if the start is any indication, it will be safe to say that the short-term benefits of using the blockchain in a lot of other distributed technologies would be extremely beneficial.
Cryptocurrency has got a bad rap from those who do not understand it and those who are threatened by it – be that threat real or perceived. They like to throw Bitcoin and the blockchain into the category of criminal activity. I don’t buy that for one second. Privacy is the bedrock of our democracy, but that privacy has been eroded slowly in the name of security and where has that got us? Events like that of advanced psychographic manipulation on social media, and even large scale monitoring by the powers that be.
The blockchain has become the core of a number of diverse technologies; even companies such as IBM have started to dive into it in a big way. Cloud storage companies are looking at blockchain technologies to be able to perfect distributed storage that is virtually impossible to destroy or hack.
Take, for instance, a company that is combining the utility of distributed file storage and the versatility of cryptocurrency and creating a token out of it. I am only bringing that up here because I want to show you how diverse blockchains can be.
The way this works is that the blockchain is created by nodes in the system and all the nodes in the system contribute a percentage of their hard drive to the network. In turn, what they do is store some of their contents on the network that is kept track of by a blockchain. The blockchain charges those who store data and then takes that data, encrypts it, and breaks it up into small fragments and scatters it across the network. When a user wants to retrieve it, he just has to enter his private key and he gets access to all his data that is brought back to him using BitTorrent technology for downloads.
Those who want to use this service purchase a cryptocurrency or token (like Bitcoin) and then pay that token on a periodic basis for the service to store the data. The person providing the hard- drive space gets a portion of income each time his drive space is used. The person using it automatically depletes his coin reserve as it goes to the administrator of the blockchain and the nodes that are storing the data.
The income for the nodes is almost automatic and on autopilot. They just need to keep their computer on and, as time goes by, the coin that is paid for the storage accumulates over time.
The point of this example is two-fold. The first, to exhibit the flexibility and nature of blockchains, and the second, to introduce the next wave of distributed apps that will be built on blockchains and parallel the token and coin market.
The larger the coin and token market expand, the more that results in the advance of Bitcoin. It somehow seems that the entry point for a number of the cryptocurrencies is the Bitcoin; and the exchange for these tokens and coins has become quite vibrant, and do not show any signs of slowing down.
Your interest in the blockchain and the coin above it, is one probably driven by smart intuition and should be promoted. You should advance your interest in this because it is the start of a new paradigm in commerce and finance.
There are a few other areas that you should look into if you want to take this business seriously. There are issues in cryptocurrency mining that you may want to advance. There is a huge industry out there that is in its nascent stages. On the other hand, if you are more the trading type and are not to savvy with the technical aspects of things, then maybe cryptocurrency trading could be something that you could get into. Bitcoin trading has tremendous potential because it is a volatile market and program traders love to trade with volatile markets because there are profits to be made in either direction and there is a large amount of arbitrage opportunity as well.
If mining and trading is not your thing, but you are in other areas of technology, you can also think of the ICO option ICOs are Initial Coin Offerings and they are ways to raise capital by issuing crypto-assets.
There are numerous areas that you can get into to take up the opportunity that is present in this vast, new field of cryptocurrencies. You did the absolute right thing by starting with this book to get an idea of the blockchain technology that sits under the crypto-asset that rides on top.
Blockchains will revolutionize the Internet and change the face of it. The signs are already afoot, and what remains are the passage of time and the flow of ideas. The larger institutional edifices are starting to crumble in the face of the blockchain technology and the implementation of it will be nothing short of revolutionary. The movement from centralized architectures to decentralized ones will be in full force within the end of this century, and it will form the backbone of the internet of things. It will also serve as the preferred route of deployment for Artificial Intelligence and, together, AI, blockchains and the Internet of Things will be the way of the future. Welcome to a new world.