Blockchain is a decentralized, distributed database, composed of chains of blocks designed to avoid their modification once it is published using a reliable seal of time and linking with the previous block. The blockchain has the following features:
- Decentralization: there is no single control over the system but it is controlled by the majority of network users.
- Public ledger: It is a distributed and public digital ledger.
- Network: It is used to record transactions across many computers or users.
- Security: Records cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.
- Autonomy: It allows the participants to verify and audit transactions inexpensively and autonomously.
- Authenticity: Records or transactions are authenticated by mass collaboration of network users.
- Reproduction: The use of a blockchain removes the characteristic of infinite reproducibility from a digital asset.
- No double spending: It confirms that each unit of value was transferred only once, solving the long-standing problem of double spending.
- Value propositions: This blockchain-based exchange of value can be completed quicker, safer and cheaper than with traditional systems.
- A proof of record: A blockchain can set up details for the exchange agreement, it provides a record that compels offer and acceptance.
Related Innovations to Blockchain
There are 5 major and related innovations:
- Bitcoin: It is a digital currency (cryptocurrency) used for e.payments, trading and investment. It was conceived in 2009 by Satoshi Nakamoto. It is based on blockchain technology like all cryptocurrencies, which makes it difficult to falsify. Bitcoin is generally referred to the network or protocol. Bitcoin is also referred to the monetary units. It is considered a decentralized system, because it is not backed by any government and central bank, it lacks legal security. It is a network protocol that makes nodes exchange information about an unreliable and potentially compromised network. Transactions do not need intermediaries and the protocol is open source. As of jan 2018, there are approximately 16 million coins and the maximum number of bitcoin to reach will be 21 millions.
- Smart contract (ethereum): Software that allows dealing in other financial instruments other than Bitcoin such as, loans, with higher level of security. It is decentralized platform ‘open source’ that allows the creation of agreements of smart contracts between pairs, based on the blockchain model. Any developer can create and publish distributed applications that make smart contracts. It is considered a second generation cryptocurrency, therefore, with more applications than Bitcoin, which is only a payment platform. Ethereum was proposed by Vitalik Buterin, a cryptocurrency developer. it is a network for the supply of ethereum-based contracts. It can be used to safely execute a wide variety of services, including: voting system, financial exchange, crowdsourcing platform, intellectual property and autonomous decentralized organizations.
- Cryptocurrency: it is a digital means of exchange in which the security, integrity and balance of your account statements is guaranteed through a network of agents of file transfers that are verified by miners. Through cryptocurrencies, the internet of value (IOV) is allowed, which are internet applications that allow the exchange of a value, i.e. dollars, by the form of cryptocurrency. The system has the advantage of reducing the transaction cost, time and eliminating financial agencies to carry out transactions.
- Miners are general public and actively protect the network maintaining a high rate of algorithms processing, in order to receive a small tip that is distributed in a random manner. When a computer adds a valid block to the bitcoin blockchain, they receive a payment of bitcoin as reward for adding a block to the blockchain. This rewards are called ‘block rewards’ and this process is known as ‘mining ‘ because it is like mining small rewards out of a large block. The computer involved in this process is known as ‘miner’. The mining process is simply verification process before it added as a block to the blockchain.
How a bitcoin works?
- Bitcoin is an entirely electronic currency with no institutions managing the records, it would appear the risks of hackers creating fake bitcoin or transactions would be much higher than traditional currencies. However, it is quite the opposite, bitcoin is in fact less prone to hacking, counterfeit currency or duplicate transactions then modern currencies.
- The decentralization structure of bitcoin means that everyone on the network confirms that records and transactions are accurate. Whenever a transaction occurs, everyone on the network has a record of that transaction and the majority of people must agree that it is valid.
- A network will agree and deal in bitcoin. Transactions for payments are accepted and recorded at the network members using the blockchain software, which enable linking of transactional blocks with each other and represent a record of transaction for verification and validation. Once a block of transaction is added to the bitcoin blockchain it can’t be altered or reversed. If a person attempts to commit fraud by altering transactions within a block, it will change the unique encrypted data. This will break the chain of blocks as they will no longer be referring to the correct block data. There is a risk known as a 51% attack, where one entity is able to control over 50% of the bitcoin network. This would allow them to decide whether transactions are valid allowing them to control the consensus of the network. This risk is very low and would require immense amount of money and computing power to achieve.
Benefits of bitcoin
- No intermediaries.
- Decentralization: there is no centralized agency controlling the transaction; instead, transactions are controlled by the bitcoin network.
- No government or bank control.
- No costly international payments: using for example Paypal for payment, you will pay fees and exchange rate losses if transaction made internationally.
- Lower fees and costs: there are no account fees with bitcoin and there is no conversion rate required when transferring between countries and transaction fees are very low.
- Increase transaction speed: removing intermediaries and settling on a shared ledger allows for transactions to be settled significantly faster than existing methods. Bitcoin allows transactions to be processes almost instantly with transactions in bitcoins sent, received and settled at the same time.
- Transparency: bitcoin offers significant improvements in transparency over current financial transactions and ledgers. Bitcoin occurs on a shared, decentralized ledger that is open to everyone on the network. Transactions are checked and approved by over 50% of computers on the network. All transactions are in real time with the status of any transaction able to be viewed on the bitcoin blockchain. With bitcoin when you send a transaction, you get a transaction reference, you can enter that transaction reference in a bitcoin blockchain explorer and view the status in realtime.
- Trust: currently when performing a transaction, people place their trust in an intermediary to facilitate the transaction. With bitcoin, this trust is placed in the bitcoin network instead of an intermediary.
- Security: Cryptography tool is used to protect wallets, addresses, identities and transactions. It is almost impossible to obtain someone’s private key to their bitcoin wallet through existing hacking methods such as a brute force attack ( where a computer generates a large number of guessing at a password in a short period of time.
Disadvantages of bitcoin
- Transaction fees: originally miners that added blocks of transaction could be conducted for free. Originally miners that added blocks of transactions to the bitcoin blockchain would receive the block reward. This was originally sufficient to keep miners contributing computing power and resources to run the network. While you can still send transactions with no fees on the bitcoin network, they will not be prioritized over other transactions. Transaction with no fees will go to the bottom of transactions miners will select, which will increase the time to complete that transaction.
- No reversal of transactions: there is no mode for reversing or correcting a transaction sent. If you send a bitcoin to the wrong bitcoin address, there is no way to reverse the transaction and the bitcoin is lost.
- Cost of running the bitcoin network: using bitcoin will require resources and utilities to run the bitcoin.
- Lack of scalability: on average bitcoin network adds a block of transactions to the blockchain every 10 minutes. Each block generally contains fewer than 2000 transactions, which equates to around 3 transactions per second.
- More transparency results in a lack of privacy: bitcoin wallets and transactions are transparent allowing everyone on the bitcoin network to view them. With this transparency comes a lack of privacy that might make many people uncomfortable using it.
- More security may result in less security: bitcoin uses more advanced security and cryptography compared to existing systems. However, for many people these methods are complicated and difficult to understand. If a bitcoin network member lost his password then he would not be able to access account and thus forces users to write down their passwords in a separate document which makes the process less secured.
- No centralized control is not always a good thing: due to the fact that in bitcoin there is no mechanism for correcting a mistake, it makes this system less attractive to many people. Instead at the conventional system, intermediary will play the role of adding trust to users for correcting mistakes, verification and auditing of transaction.
- Risk of attack on the bitcoin network: no centralized control means that control is in the hands of whatever the majority of the network agrees upon. If someone is able to control over 50% of the computing power on the network then they are able to control the network. The 50% control means ability to decide on validity of transaction, reversing, rejecting and double-spending bitcoin.
- Untested new technology: bitcoin is relatively new and still hasn’t gained mainstream adoption. There are some scalability and security issues which need resolving. With people living in an advanced and secured financial system, Bitcoin may not be attractive to them.
- Lack of trust and bitcoin’s bad reputation: Bitcoin was originally developed for trading drugs however, the drug business was shut down by the governments and since then it becomes a platform for financial and civilian transactions.
- Failure to gain mainstream understanding and adoption of bitcoin: in a stable country where financial system is advanced and well controlled, bitcoin has little reasons to be adopted.
- Regulation of bitcoin and integration into existing system: bitcoin is facing regulation hurdles before it becomes accepted by financial institutions and governments around the world. If bitcoin fulfills financial regulations, it will loss some of it security and decentralization advantages.
- Price volatility: when bitcoin first launched the bitcoin currency was less than one cent, now it is valued over $2000. The price is incredible volatile between 2012-2013 the price fell between $1000-$2000. The bitcoin price is fluctuating within a margin could reach 20% of its opening or basing price in a day transaction.
- Hype about bitcoin: there is hype around the usage and adoption of bitcoin, it is still younger, tech savvy consumer base that is using bitcoin. It is uncertain whether bitcoin will gain mainstream acceptance.
Setting up a bitcoin wallet
- Every user of bitcoin should have a wallet with password code identifying and verifying the user’s authenticity. Is this password is lost, then the account holder will use the account.
- Bitcoin wallet is made up of three main parts: your bitcoin address (i.e. email address); your private key (i.e. password) and software (bitcoin software).
- Wallet service options: web/ wallet exchange like coinbase. www.wisefoxpub.com/freebitcoin. www.bitly.com/buymamabitcoins. www.bitly.com/buypaxbitpanda. www.bitly.com/buypaxbitcoins.
Buying, trading and using bitcoins
- You will need first to have a bitcoin-wallet/exchange account. This can be obtained from a service provider such as the Coinbase website. Then get the bitcoin address and QR code. This account will be used to receive and sell bitcoins.
- There are other options for the service providers, such as Circle, voPay, Jaxx, Blockchain.info, StrongCoin, Exodus, Poloniex, Kraken and others.
- Buy local bitcoins: https://bitly.com/buybitcoinslocal.
- Buy from local businesses: mainly in the USA http://libertyx.com.
- Wall of coins ( exchange with local banks): https://bitly.com/wallofcoinsbitcoin.
- Bitcoin ATMs: for some cities, banks have developed a bitcoin atm similar to the conventional one, where bitcoin holder can deposit or withdraw cash from his account. www.bitly.com/findbitcoinatms.
- Selling items for bitcoins: it is a e.marketplace like an ebay website, where you buy and sell items using bitcoin currencies. https://glyde.com/bitcoin. https://bitify.com/.
- Trading bitcoins: through dealing in the bitcoin currency value on speculation and higher risk process for the sake to make profit.
- Companies that accept bitcoin: www.overstock.com.
- Buy amazon product using bitcoin: www.purse.io.
Opportunities Related to Bitcoin and Blockchain
I have tried to list some of the business ideas created by startups during 2017 and 2018 using the blockchain technology to give practical examples for the possible business ideas. Entrepreneurs are inspired by the successful startups created and open the doors for the new list of business ideas using the blockchain technology. Depicted business ideas are:
- Blockchain services: Bitcoin exchange, merchant services, a blockchain explorer, as well as a hosted wallet.
- Blockchain products: finance, finteck, insurance, aviation maintenance log, distribution of goods & services, banking, capital market, government duties, health & pharmaceuticals, manufacturing, shipping, telecommunication,defence & military, artificial intelligence, trading, charity,cloud services, data bases & security, manage payments, healthcare, education, environment management, networking and many others.
- Below is a list of some business ideas, which have been applied by startups during 2017-2018:
- Artificial intelligence with the blockchain to make secure, compliant, and user-friendly products.
- Finance: Fintech, banking, and payments through blockchain-based products.
- Supply Chain.
- Asset management: Turn a business asset into a cryptocurrency token.
- Trading: Tracking of goods and services.
- Charity: Tracking of donation collection and spending.
- Tracking: Tracking prisoners and others for legal reasons.
- Cloud services: Decentralized cloud platform that is capable of storing and analyzing confidential data and exchanging it, and at the same time, this data is not revealed completely for both parties.
- Data security: It resolves such problems like personal data inviolability and system scalability.
- Data security: Increase of security and fight financial fraud.
- Manage payments: Managing of leasing and other type of billing payments.
- Healthcare: Development of solutions for healthcare areas to optimize inefficient models of assistance and to increase the efficiency of medical procedure and improve consumers’ treatment.
- Environment protection: Development of solutions for the environmental issues.
- Filing system: Manage filing and retrieving system for various documents and information.
- Health services: For medical researchers and users, using a platform that allow patients to share their health data and manage it. It cannot be hacked and managed by a third person since blockchain technology reliably encrypts all confidential data.
- Health services: Control data falsification in medical and other records.
- Trading: Digitization of record-keeping related to the trade of assets, even in scenarios where intermediaries and brokers are incentivized to resist change.
- Energy management: Managing renewable energy resources from generation to distribution to payment.
- Communication: Decentralized social video ecosystem with a full economic cycle and rewards for creating, curating, viewing and sharing videos.
- Marketing & networking: Connect global influencers with brands in a secure and transparent ecosystem. Benefits of the platform include the elimination of most common intermediary fees, incentivization and voting using tokens to match parties.
- Photography platform: Decentralized stock photography platform built on the blockchain.
- Education: Decentralized on-demand education marketplace. Using the power of blockchain technology and its smart contract-based payment platform. This platform will enable students and professors to interact directly and participate in the exchange of education and learning, without the involvement of intermediaries. This means greater access to quality education at a lower cost, helping bridge the educational gap for millions of students globally.
- Networking & crowd business: Decentralized P2P (peer-to-peer) betting application that allows people to bet on anything, at any time and against anyone. This platform will use smart contracts on the Ethereum blockchain to store players’ funds and information, providing players with confidence that their wagers will be executed securely and quickly. The goal is to reduce black market gaming, while promoting fun and transparent gaming between parties.
Call for Action:
You please feel free to feed me back with your comments and suggestions. Should you need a training or mentorship or advising assistance on entrepreneurial businesses, You please contact us. For more details, you visit our website http://www.growenterprise.co.uk.
- Information Bank @ Growenterprise.
- Blogs @ Growenterprise.
- 8 Core Skills Every Digital Entrepreneur Needs
- Step By Step To Build Your Customer Development Model
- How To Design a Winning Business Model
Written by: Munther Al Dawood
Enterprise Development Services
- Gerry Chattman- http://www.ascendantfinancial.org
- Mark Gares, 2017. Bitcoin:complete guide to bitcoin
- Mixed up of online sources.