Hackernoon logoHow Blockchain can transform the world (part 1) by@kandy2790

How Blockchain can transform the world (part 1)

Anurag Reddy Hacker Noon profile picture

@kandy2790Anurag Reddy

“Bitcoin, Ethereum,altcoins, ICO’s, moon, tokens, miners, state regulation etc”

Too many buzz words.We got really entertained in the last 1 year but we still don’t understand how they matter to us in the long run and how they can transform the world.

Definitions:

Blockchain:(wiki)

Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the bitcoin.

It is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data

“Blockchains are trust machines”

The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server.

Series of blocks (immutable database) are replicated on all nodes for decentralization and security.

Types of blockchains:

  1. Permissionless, public (anyone can join and ledger data is public)
    (Bitcoin, Ethereum)
  2. Permissioned, public(verified nodes can join. ledger data is public)
  3. Permissioned, private(verified nodes can join.ledger data is private)
    (Hyperledger)

Technically, Blockchain consists of

a. cryptographically linked blocks 
b. p2p network protocol-> for communication between nodes 
c. tamper resistant ->proof of work/proof of stake
d. incentives-> bitcoin, Ethereum
e. consensus protocol -> to finalize the transaction in block (lengthy chain of blocks , PBFT, Tendermint, Avalanche)
f. governance ->for crucial decisions and roadmaps

Cryptocurrencies:

  1. Bitcoin ->first and well known/proof of work/less developer friendly
  2. Ethereum->developer friendly/fast growing ecosystem/pathe definer/turing complete language/smart contracts
  3. privacy coins -> shield transactions (zcash/monero/dash)
  4. stable coins-> pegged to USD with fiat / crypto collateral (maker DAO, tether)
  5. IOTA — data driven blockchain ( for IOT)
  6. NEO->chinese counter part of Ethereum
  7. Ethereum competitors->zilliqa, cosmos, Algorand, Polkadot, EOS,stellar

Tokens:

  1. utility tokens — inherent utility in blockchain and token value increases with demand (Golem, Sia, Ethereum)
  2. security token — tokens of real world assets
  3. payment tokens — for payments, transfer (Bitcoin, litecoin)

Token standards:

ERC20-technical standard used for smart contracts on the Ethereum blockchain for implementing tokens.
ERC 721 — non fungible token standard(collectibles like cryptokitties)
ERC 998 — composable non-fungible token standard(real estate tokens)
ERC1155 — gaming token standard

ERC stands for Ethereum Request for Comment

“Internet is transfer of information, Blockchain is transfer of value”

Usecases:

  1. Store of value:

From the above chart, crypto with high probability will capture the large market of store of value due to portability (compared to gold). It can be the next inter-generational asset like land.

My preference:

Bitcoin — why?
a. secure — proof of work
b. non-inflationary
c. public acceptance

If Bitcoin could not meet the transactions required per day, then Bitcoin may be used by Rich(high txn cost)and Ethereum upper middle class (moderate txn cost)

2. Reserve currency:
US dollar and SDR are considered as reserve currencies globally. There is a high chance of Bitcoin/Ethereum replacing them due to universality with high market cap in-future. However, fluctuation in prices should be moderate and all the countries should give the nod (mainly US,EU,India, china) to see that happen.

3. International money transfer:(banks)
At present, Money can be transferred instantly through crypto-currencies rather than waiting for a long time through traditional setup

Bitcoin with rootstack / Ethereum can be the mode of international money transfer at scale.

4. Financial products:

a. Fundraising — ICO’s/ can compete with VC’s
b. Lending- crypto as collateral- (dharma protocol)

Best usecase is → lending money to people of developing countries by people of developed countries.

Interest rates are high in developing countries compared to developed countries. However, reputation analysis of person is crucial to lend money.

Reputation protocol is the key

c. Derivatives — (dydx)
d. Payments — in-app payments/ privacy payments

In-app payments(games), privacy payments will be the best usecases.

Daily payments by people will not be a killer app for blockchain. In developing countries like India ( UPI/BBPS/Paytm/tez), China ( Alipay/wechat), Payments are much faster,easier,safer, comfortable and cheap.

e. Security tokens

They can provide an array of financial rights such as equity, dividends, profit share rights, voting rights, buy-back rights, etc to investors . Often these represent a right to an underlying asset such as a pool of real estate, cash flow, or holdings in another fund. Tokens are traded on a blockchain-powered exchange with rights written into a smart contract.

Benefits:
1. 24/7 markets
2. Fractional ownership
3. Rapid settlements
4. Reduction in direct costs
5. Automated compliance
6. Asset interoperability
7. Increased liquidity and market depth
8. Expansion of design space for security contracts

In US, Ethereum is not considered as security. Howey test can guide us on deciding whether tokens are security or utility tokens.

5. Decentralized bank.

It includes
a. storage of funds — (Eth)
b. Access to funds — (Balance)
c. Access recovery — decentralized recovery!!
d. stable account — (Maker DAO)
e.interest bearing accounts- (Dharma)
f. exchange of funds-(Ox)
g.usage of funds- ? (Wallet connect)

To succeed,this bank should excel in
1. Governance
2. Usability
3.Identity
4.Speed
5. Recoverability
6. Reliability

This gonna take time, but we are not very far.

Recoverability options:

a. Biometric data- can get changed
b. Social recovery- tell to friends — trust issues
c. KYC procedures
d.Paralysis proofs/time lock recovery/last resort recovery

6. Collectibles

As we all know, Ethereum got congested due to famous game named cryptokitties.

CryptoKitties is a blockchain based virtual game developed by Axiom Zen that allows players to purchase, collect, breed and sell various types of virtual cats.

At present, famous artworks are collectibles people die for. However, in-future, virtual collectibles will be the trend.

Ex: Curiocards, Rare Art Labs, DADA etc

7. Gaming

Gamers are the early adopters of virtual in-app tokens. However, these tokens are not inter-operable. With Interoperability, gamers can exchange tokens for the fiat money/bitcoin and can be consistent earners.(parallel income)

Gaming with crypto tokens + VR/AR will be the killer app

I personally feel, gaming + scalability solutions will lead to next round of crypto hype cycle.

8. Prediction Markets

Prediction markets will become the new age Facebook, whatsapp. Humans love predictions and they love to predict things regularly.

Usecases:
a. Football/cricket matches
b. Who will die next in Game of thrones!!
c. Who will be the next prime minister
d. Girls asking friends to predict her date behaviour.

What if you earn with every right prediction, then its addictive than whatsapp :)

Ex: Gnosis, Augur

9. Dating

Tinder helps in identifying people with similar interests and good-looking dates. But, people sell themselves o tinder pre-date which can be true/ false. Post-date, there is no feedback on authenticity of person regarding his/her interests/traits.

Reputation can be key here.

People can rate other people post-date on parameters like
a. Humour
b. Chivalry
c. Romantic
d. workaholic
e. too serious
f. friend zone material etc

10. Hiring:

In linkedin, testimonials/references may not help us identifying the inherent nature of person. It only gives us idea of him/her. Colleagues should be incentivised to rate the person on different parameters(in-private) like
a.Working in teams
b. Emotional/logical/over stressed
c. inspirational
d. leadership qualities
e. Smart / hard worker

Right amount of incentives helps us identifying the persons we wish for and improve the productivity of organization

11. Decentralized applications (Blockstack)

a.Decentralized Identity

“We envision a world where people can decide who they want to share their personal information with and what information gets shared.

Civic’s visionary blockchain identity-verification technology allows consumers to authorize the use of their identities in real time.

We are spearheading the development of an ecosystem that is designed to facilitate on-demand, secure, low-cost access to identity-verification services via the blockchain.” — Civic

Ex: Civic, uport , selfkey etc

b. Decentralized storage — Storj, filecoin, sia, IPFS
c. Decentralized computation — Golem
d. Decentralized communication — Whisper
c. Decentralized Ms-office — graphite (Blockstack)

12. Insurance:

As the everything gets digitized, vehicle data, home automation data, industrial plants data, health data helps in changing the face of insurance industry. Blockchain helps as trust machines by stroing the hash of time-series data stored in Database.

People can share data privately with companies and can earn discount on the premiums.

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In the next part, Other important use cases will be discussed.

PS: I am thankful to the blockchain community for knowledge sharing. This post is inspired by content of many outstanding writers in block chain space.

I am also grateful to my wife for helping me on how to rate humans in reputation systems.

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If you found this overview interesting or helpful, please 👏 the article below and follow me (Anurag Reddy) on Medium to read similar work in the future!

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Other important articles to read :

Next Megatrends in tech

Important SAAS tools

Future of Offline Retail

Investment strategies in crytpocurrencies

Rise of public goods(Tech) in India

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