The technology of blockchain had been one of the technologies which I predicted would grow in 2017 back in January.
Essentially, distributed ledgers are just new forms of databases, but because they are trustless and encrypted, they have tremendous potential to improve many aspects of finance and business.
Today, Bitcoin is undoubtedly the most visible implementation of the technology – its rapid increase in value has made it an attractive investment for speculators, while businesses are increasingly accepting it as a means of processing goods and services. You could select an online Bitcoin wallet to store your Bitcoins.
Some of the fundamental characteristics of blockchain-based applications have been demonstrated in the bitcoin economy – which is currently valued at close to $70 billion. Despite still being in their infancy, they’re showing promise as a platform for recording data transactions that is robust and truly decentralized.
What is the blockchain split all about?
As a decentralized, consensus-based currency, Blockchain apps and Bitcoin are decentralized and govern themselves – there is no central authority. The government, however, cannot interfere with supply or disrupt Bitcoin commerce (unless it legislates).
Considering Bitcoin as deterministic is one way to look at it – it consists of mathematics, encryption, and consensus by its users for its decisions. When cryptocurrencies first appeared on the world scene in 2011, these “rules” were put into place. However, the model was designed with the ability to adapt and evolve to changing conditions.
This is evident in the dramatic increase in the number of users, resulting in an increase in the number of transactions on the blockchain. Wallets record the movement of coins between wallets using cryptographic algorithms which are processed by “miners” – individuals or groups providing processing grunt to these algorithms.
Eventually, this led to a slowdown – the number of Bitcoin transactions was increasing; therefore, transactions were taking longer to record (sometimes days) and fees were rising. There is a creeping increase in the fractional values of bitcoins that are taken off transactions and remitted to miners as “payment”.
Due to the open-source nature of Bitcoin software, anyone can mess it up, resulting in a parallel blockchain that operates independently of the original. The process of creating Bitcoin Cash began at the beginning of this month, resulting in a new version of the currency (which is now commonly known as Bitcoin Core to avoid confusion).
In order for the new currency – which is capable of keeping up with the success of its older brother due to allowing larger blocks of data to be written to the new chain – to succeed, consensus is required. Basically, the split will be resolved democratically based on how well it is used.
The entire process is managed and governed by the original “trustless” cryptographical framework created for Bitcoin, as opposed to, say, elections where human counting, verification, and oversight are necessary (or possible).
What is the point of this if I don’t use Bitcoin?
In a public demonstration of how decentralized and consensus-driven blockchain technology is, the Bitcoin split – which today appears to have gone smoothly with an effortless split into two parallel blockchains and two virtual currencies – is the first public demonstration of decentralization and consensus-driven technology.
By 2020, IBM estimates that half of the banking institutions will use blockchain-based apps – this is likely to inspire a growing number of developers to use the platform.
Unlike Bitcoin which is somewhat libertarian and anti-establishment in its image, these technologies are also likely to be highly disruptive. A significant development will be the introduction of systems capable of supporting so-called “smart contracts,” which are executed digitally without a third party, on a blockchain. The Internet of Things is predicted to grow and evolve as this technology will serve as the backbone of machine-to-machine communication and commerce.
Bitcoin has been predicted to be a flash in the pan since its creation – after all, something as monumental as disrupting the fiat-based global system of currencies and commerce has always been extremely skeptical. However, its continued evolution and growth prove the underlying principles behind blockchain are just beginning to unfold.