The Most Exciting Thing About Bitcoin Isn’t Bitcoin

Have you tried Bitcoin? Whether you’ve embraced peer-to-peer currency or you still fear any kind of money you can’t fold into your wallet, it might be time to give Bitcoin a try. Or, at least, the blockchain protocol that makes it possible.

What is blockchain? It’s a decentralized record-keeping system in which the users of the technology actually participate in managing those records. For instance, if you decide to pay someone using Bitcoin, that transaction will be verified not by a central bank, but instead by several computers participating in the protocol. Every computer participating in the blockchain has a complete history of transactions, so it’s easy to spot any inconsistencies.

Since transactions happen between individuals, there are no big banks to pay massive fees, payments can quickly be made to anyone in the world, and there is no credit card number attached the transaction which can be misused. In fact, participants can even earn credit for validating transactions. So instead of paying your bank all those processing fees, you could be earning money processing someone else’s transaction.

And banking is far from the only arena where this technology can be applied. Blockchain protocol can work for just about any task where transactions or records need to be securely executed, verified, and stored.

Despite what the fear mongers in the media would lead you to believe, a company called BitCongress is proving that online voting can be far more secure than traditional voting booths. Using blockchain encryption, BitCongress can assign each eligible voter exactly one vote token so no one can vote twice, verify their vote on several participating computers, and keep a record of every single vote cast on every participating machine. Try getting a real congress to maintain those kind of records!

Other companies are using blockchain protocol for decentralized cloud storage, ride share services, contract management, and even running a decentralized nation. So the real question is, do we even need massive, centralized institutions anymore?

The Most Exciting Thing About Bitcoin Isn’t Bitcoin

Bitcoin is a cryptocurrency, but the blockchain protocol behind it can be used for a variety of non-currency purposes. People are using the blockchain to develop everything from ride-sharing services to voting applications to cloud storage. Let’s take a closer look at how the blockchain protocol works and how it’s being used.

The Blockchain Protocol

  • A whitepaper describing the blockchain protocol (an online cryptographic protocol) was first published in 2008
    • The original paper only described the use of the blockchain protocol as a means of creating currency (i.e. Bitcoin)
    • The writer (and developer) of the blockchain protocol is unknown, though the person goes by the pseudonym “Satoshi Nakamoto”
  • The simplest way to think of the blockchain protocol is as a way of recordkeeping:
    • That involves no central hierarchy
    • Where all records are out in the open
      • All those participating in the protocol also have access to these records
        • This makes it easier to spot if someone is falsifying records
  • For the blockchain itself, Investopedia uses the banking system as an example
    • The entire blockchain is like the history of banking transactions
    • A single block is like one individual bank statement
  • Unlike many conventional systems, however, every person (or more accurately, every computer) participating in the protocol works as part of a decentralized system
    • This is known as “decentralized consensus”
      • Anyone can participate in these systems
      • There isn’t one single bank or organization that controls Bitcoin, for example
    • The blockchain protocol was released as open source in 2009
      • This means that no one owns the protocol and anyone can use it to create their own system
  • All computers participating in the protocol have access to a shared ledger or record book
    • This ledger contains a record of every transaction made within the system
      • This makes it more difficult for people to forge or double-spend whatever units are created by the protocol (bitcoins, votes, etc.)
    • This ledger is called the “blockchain”
      • The name comes from the cryptographic “blocks” used to validate transactions
      • These blocks are linked in a “chain” to determine the order in which transactions occurred
        • Knowing the order in which transactions occurred is important when it comes to validating those transactions
      • While anyone can access the contents of the records contained in the blockchain, people can’t change them
        • More accurately, people can change blockchain records, but their falsified records would quickly be swamped by correct records and their fraud would be undone
  • Every transaction in the network needs to be validated by the network to proceed
    • To help prevent people from swamping the network with false accounts, validating transactions require large amounts of computing power
      • A simple way to accomplish this goal is to require “proof-of-work”
        • Computers participating in the system have to solve a cryptographic puzzle in order to come up with a desired answer
        • Once they solve this puzzle, the transaction is recorded in the blockchain
      • People are often (though not always) rewarded for performing the task of validating transactions
        • In the Bitcoin protocol, this is how miners earn Bitcoins
          • While “mining” a Bitcoin, the miner’s computer is validating transactions at the same time
        • Some systems have other ways of validating transactions or earning smart assets (not necessarily currency)
  • By using public key cryptography and cryptographic hashing (the key to the proof-of-work puzzle), the network is able to determine:
    • Who made what transactions
    • When those transactions occurred
      • This also helps prevent forgery and double-spending
      • In Bitcoin, transactions are only considered validated if they have been confirmed six times (i.e. five confirmations follow it on the blockchain)

(Non-BitCoin) Systems Using the Blockchain Protocol

Storj

  • Founded by:
    • Shawn Wilkinson
    • Tome Boshevski
    • Josh Brandoff
    • Jim Lowry
  • Specialty:
    • Cloud storage
  • What it does:
    • MetaDisk, a Storj web application, allows users to store, retrieve, and share their files in a decentralized network
      • Users purchase Storj Coin X (SJCX) in order to pay for their storage space
      • One month of online storage costs roughly $1.98, compared to $9.99/month for Dropbox Pro
    • DriveShare, another Storj web application, allows users to rent out their unused storage space to others in exchange for money
  • Advantages:
    • Data cannot be censored once it is uploaded to the cloud
    • Does not require users to create an account
    • Information on the server is encrypted
      • The company is working on achieving end-to-end encryption
    • Data has triple-redundancy
      • This means that it is stored on three separate hard drives, to keep it safe if one fails
    • Storj has created a process that makes it easier for people to avoid storing illegal or exploitative data on their hard drives

BitCongress

  • Founded by:
    • Morgan Rockwell
  • Speciality:
    • Voting and legislation
  • What it does:
    • Users receive VOTE tokens that they use to vote
    • AXIOMITY, a web app supplied through BitCongress, allows users to vote on:
      • Legislation
      • Candidates
  • Advantages:
    • Much like a Bitcoin, each VOTE token can only be sent to an address one time
      • This prevents someone from voting twice on the same law/bill/etc.
    • Unlike a Bitcoin, a VOTE token returns to the voter after it has been counted
      • VOTE tokens are counted once voting on the bill/law/etc. has closed
    • The blockchain creates a permanent record of voting data
    • Using private-public key cryptography, users can vote on issues and have access to voting records, but their identities remain anonymous
    • Easily allows anyone who participates in the project to vote on topics from anywhere they have Internet access

La’Zooz

  • Founded by:
    • Shay Zluf
    • Matan Field
  • Speciality:
    • Ride-sharing
  • What it does:
    • Users download the app on their phones
      • To mine “zooz” tokens, drivers turn the app on, connect to GPS, and drive around
        • Drivers must drive over 10 kph (~6.2 mph) to continue mining tokens
        • Drivers do not have to be driving anyone else to earn zooz tokens
      • Users can also acquire zooz tokens by:
        • Paying for them
        • Contributing code to the project
        • Getting others to join the project
    • With zooz tokens, users will be able to:
      • Pay for rides from other La’Zooz users
      • Convert them into fiat currencies (e.g., USD, Euros, etc.)
        • While users can generate zooz currently, the app needs to reach a “critical” mass of users before the zooz tokens can be used as transportation tokens
  • Advantages:
    • Allows users to easily access a ride-sharing program that:
      • Is decentralized
      • Doesn’t require fiat currency
      • Isn’t capitalistic like Uber or Lyft

Ethereum

  • Founded by:
    • Vitalik Buterin
      • Wrote the initial paper describing the project
    • Gavin Wood
    • Anthony Di lorio
    • Mihai Alisie
    • Stephan Tual
    • Joseph Lubin
  • Speciality:
    • Contracts
  • What it does:
    • Users can create “smart” contracts in Ethereum, which are essentially computer programs
      • While Bitcoin does use a scripting language to fulfill transactions, Ethereum uses a more complex language that allows it to fulfill a wider variety of tasks (as opposed to just cryptocurrency)
    • All Ethereum smart contracts take place on, and are validated by, the blockchain
      • This helps prevent people from forging contracts or defrauding other users as the blockchain provides:
        • A record of all programs and contracts accessible to all users
      • Ethereum contracts execute as soon as users tell them to, but their effects don’t take place until they’re validated by the blockchain
        • So the bet between Bob and Alice that the Dolphins will win the superbowl won’t actually transfer money to either party until the blockchain validates the result of their bet
    • Ethereum uses “ether” tokens in order to fulfill contracts/programs
      • Without ether, contracts won’t execute
    • Users can either:
      • Buy ether (the original sale in 2014 sold ether for Bitcoins)
      • Mine for ether
        • To mine ether, users validate blocks in the blockchain
          • These blocks contain Ethereum contracts
          • Once a miner carries out a computation specified by the program:
            • They earn some ether (the amount of which is determined by the contract in question)
            • The program takes place
    • These contracts can be used for a number of purposes, including:
      • Creating a cryptocurrency
      • Decentralized data storage
      • Decentralized voting
      • Financial assets like CFDs
      • Shared savings account
      • Automatic pre-nuptial agreements
      • Decentralized car rentals
      • Decentralized home rentals
      • Decentralized online storage
      • Validation of clean energy production
  • Advantages:
    • Smart contracts allow users to cut out the middleman present in a variety of financial/legal institutions
      • For example, someone could put control of their assets into an Ethereum escrow account
      • They then create a smart contract that determines who gets what once they die
      • Upon their death, the smart contract automatically distributes the assets based on its programming
    • Ethereum can be programmed to serve almost any purpose, from peer-to-peer gambling programs to creating webs of trust, even the creation of savings accounts

Bitnation

  • Founded by:
    • Susanne Tarkowski Tempelhof
  • Speciality:
    • Government services
  • What it does:
    • Creates a way for people to enter DBVNs (Decentralized Borderless Voluntary Nations), nations characterized by these factors:
      • There is no one governmental body making decisions for these citizens
      • They do not necessarily correspond to the physical or political borders of the world
      • Their citizens enter into them of their own free will
        • Currently, the only real-world example of a DBVN is Bitnation
  • Advantages:
    • The permanent nature of the blockchain makes it a valuable resource for keeping records
      • Record keeping is one of the central services of any government
    • Offers similar services to what nation-states provide, using the blockchain and decentralized applications
      • For example:
        • Record events like births, marriages, and deaths
          • In October 2014, a couple at Disney World were the first ever to have their marriage permanently recorded on the blockchain
        • Designate property ownership
        • Record business and legal contracts
        • Identification documentation
          • The first citizen of Bitnation is Janina Lowisz
        • Resolve disputes
    • Allows citizens to participate and pay for only those services they want

Many people are excited about cryptocurrencies like Bitcoin, but even more exciting than Bitcoin is the blockchain protocol that powers it. Beyond currency, the blockchain can power transportation, contracts, and even governments. Who knows what it will be used for next?

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3 Comments to “The Most Exciting Thing About Bitcoin Isn’t Bitcoin”

  1. […] Original by Who Is Hosting This Original post here […]

  2. is bitcoin safe to use or there are any complications to it ?

  3. Nice info graphic,… It is true that Bitcoin Technology is beyond the original plan, it makes improvement not only to cryptocurrency but also to others industry.
    By the way, I also made a posting on my website and the reference is this one. Thank for allowing me to use this posting as reference.

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