Key features of blockchain

The cryptoassets and blockchain market is quite possibly the fastest growing industry that the world has ever seen. This has to do with the speed at which information travels nowadays, which is also unprecedented.

So, why is blockchain such a big deal? What is Bitcoin? What are cryptoassets?

The preceding questions were asked by everyone when blockchain was new to the market. Quite often, they were given complicated answers, involving terms such as distributed database, cryptographic keys, hash functions, game theory, consensus protocols, and so on.

But, if you think about it, people were once baffled by terms such as domain name, website, bandwidth, and download. The main point is that blockchain technology is set to reshape the future, and will soon be a part of everyday life, just like the internet is.

Ease of access

Just like the internet, anyone can get involved in blockchain! We've seen people with diverse backgrounds, from all corners of society, getting involved with blockchain and cryptoassets. From the Wall Street tycoon to the average person, and even people with questionable reputations, everyone can enjoy the benefits of blockchain. On top of that, everyone involved has something to say about the glories or the evils of the technology. Even high-profile individuals and world leaders are trying to steer public opinion, in one way or another.

One of the positive effects of all of the media noise that started with the skyrocketing prices and brought blockchain to the mainstream domain, was that it attracted a lot of talent to this space. Thousands of developers and business people have joined the industry and focused their efforts on building blockchain projects. All of this new energy must lead to substantial results and value creation, which will justify some of the hype and market valuations that we have seen. But such fundamental developments and value creation don't happen overnight. They take a lot of time and effort.

Blockchain – the internet of money

The key features of blockchain—security, transparency, decentralization, immutability, and programmability, are combined in a platform, which doesn't need any central authority in order to process transactions, value, and information transfers. By doing so, in a direct, peer-to-peer way, blockchain creates a completely new paradigm for global business.

No wonder there are so many heated opinions and discussions about it; and, oh boy, can it get overwhelming! What this shows is how important this technology is, and what it can bring to the world.

While we call it the internet of money, we should remember that blockchain is a layer on top of the internet that is highly effective and efficient for storing and transferring values in a decentralized way.

The hype of industrial companies around blockchain

During the boom of 2017, we saw all sorts of projects and companies claiming to use blockchain for pretty much everything; this just shows an attempt to ride the hype wave. There were even cases such as the New York-based soft drinks company Long Island Iced Tea, which rebranded itself to Long Blockchain Corp, only to see its shares rise by nearly 500%. Such actions definitely don't help anyone, as the company was promptly investigated by the Securities and Exchange Commission (SEC).

Some of the other developments in the blockchain community were the multiple forks in the largest cryptoasset, Bitcoin, which we saw recently. Forks are basically splits in the network, resulting from differences in the software protocol being run by its participants.

We have seen various actors trying to drive their own versions of Bitcoin forward, and this has resulted in the creation of Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, Bitcoin Private, and Bitcoin Satoshi's Vision (SV), among others. Such developments may partly result from a desire to improve the protocol, but they also result from greedy attempts to achieve more control and extract more value from the internet of money. Effective governance of decentralized systems in the presence of multiple (and sometimes, contradictory) interests that have to be balanced is one of the most difficult problems that need to be solved going forward.

Going back to the key benefits of distributed ledgers, removing middlemen and quick and efficient transaction settlement are definitely right at the top. This can enable lots of interesting use cases, from payments and money transfers to property registers and capital markets. Such infrastructures can be public or private, the main differences being in the level of trust embedded in the system. A public network that is open to everyone, where parties don't know each other, needs a different level of security and a different consensus mechanism than a private, permissioned network, where parties are vetted before they are allowed to join. This will be discussed in detail later on.