Blockchain technology used in non-cryptocurrency applications

Blockchain technology used in non-cryptocurrency applications

by | Dec 18, 2018 | Blockchain

Blockchain is best known for being the technology behind cryptocurrencies like Bitcoin and Ether (the currency of Ethereum), but blockchain is much more than an instrument of finance.

What is the blockchain technology? Basically, it’s an encrypted database of agreements.

Blockchain serves as a bookkeeping platform or ledger that is incorruptible, enforces transparency, and bypasses censorship. By tackling issues of financial, political and institutional corruption, this has the potential to create massive social change—and greatly protect the human rights of every individual.

Blockchain technology is in its early stages and industry insiders are still mulling over the ways in which it can be merged. The possibilities of blockchain are somewhat similar to that of smartphone applications.

Initially, apps didn’t catch on but developers soon realized that it could be designed to suit all sorts of needs – it was just programming. Thereafter, applications became all but a necessity for a business if it was wished to influence the market on a larger scale. Apps also gave developing power and outreach to the individual developer, allowing to them achieve what was often only accessible to larger development teams and resources.

Blockchain will further establish a sense of democracy and equality through its disruptive power. It can create a more level playing field, where individuals and small businesses will be able to compete with corporate powers that have established their dominance through the advantage of money.

Here are some of the domains in which the blockchain technology is or can be used (in non-cryptocurrency applications).

Financial Services 

Without a doubt, the most popular application and the launchpad for cryptocurrency into the global economy is the financial industry. The issues with today’s banking systems, which lack inclusion and fairness, have crazy interest rates and transactions are always in favour of financial companies. THat’s why one new customer might be more interested in not interacting with a bank, but trading directing in cryptocurrency.

Individuals are forced into unfair deals. Additionally, there are billions in the world who have no access to a bank at all, which is an even worse circumstance to be in.

Cryptocurrencies and blockchain can universally rectify the situation. With a smartphone and an internet connection, both of which are widely available, anyone can bank, start a business and receive payments. With incorruptible ledgers and no centralized authority for oversight, financial services on the blockchain would place power back in the individual’s hands, offering solutions without exorbitant interest rates and middleman fees. The banking industry even suggests that up to $20 billion can be saved by eliminating infrastructure and middleman costs.

Internet of Things

Along with blockchain and artificial intelligence, the Internet of Things is another technological development that is up and coming, with radically transformative effects.

Essentially an internet connecting all devices, we are soon to live in a world where our smartphones can “talk” to our fridges and cars.

With no central system necessary, blockchain would make this heavy processing much easier to handle while also securing data in an encrypted format. Tokenized mechanisms can monetize transactions between different devices and seamlessly integrate different services. Waltonchain and IOTA (which utilizes Directed Acyclic Graphs, not blockchain) are two of the big names in this niche.

IOTA is shaping up to be a practical, feasible way for machines to communicate with each other. The best way to describe the project is through a potential scenario: imagine driving a car registered on the IOTA network through a toll booth. As you pass through the toll, the car communicates with the toll and automatically makes the transfer. We live in a world that is increasingly dependent on machines, so you can imagine the potential of a system that automatically executes those dependencies.

Hurify is another project in the IoT space that aims to accelerate the growth of the industry. The platform allows developers to find IoT development jobs and improve their skill set more easily. Clients can find the right talent for their IoT projects and lower their overall costs.

Samsung and IBM are also working together to this end, on a blockchain initiative called ADEPT.

Digital Identity

Just imagine never having to worry about your digital security ever again.

Which is now estimated to cost the industry about $18.5 billion annually, according to a report released by Distil Networks.

Blockchain technologies makes tracking and managing digital identities both secure and efficient, resulting in seamless sign-ons and reduced fraud.

Be it banking, healthcare, national security, citizenship documentation or online retailing, identity authentication and authorization is a process intricately woven into commerce and culture worldwide.

The data breach at Target was significantly broader than originally reported: The company said that 70 million customers had information such as their name, address, phone number and e-mail address hacked in the breach.

Events such as hacked databases and breached accounts are shining light on the growing problems of a technologically advanced society, without outpaced identity-based security innovations.

Blockchain technology offers a solution to many digital identity issues, where identity can be uniquely authenticated in an irrefutable, immutable, and secure manner.

Current methods use problematic password-based systems of shared secrets exchanged and stored on insecure systems. Blockchain based authentication systems are based on irrefutable identity verification using digital signatures based on public key cryptography. In blockchain identity authentication, the only check performed is whether or not the transaction was signed by the correct private key. It is inferred that whoever has access to the private key is the owner and the exact identity of the owner is deemed irrelevant.

Blockchain Identity Use Cases

Blockchain technology can be applied to identity applications in the following areas:

  • Digital Identities
  • Passports
  • E-Residency
  • Birth Ceritificates
  • Wedding Certificates
  • IDs
  • Online Account Login

Apartment Rentals/Real Estate

Long-term rental is the norm for the younger generation. Young working adults are in desperate need of a solution that makes housing arrangements simple and as efficient as possible, preferably without any third-party involvement.

The young minds behind Rentberry, a blockchain-based renting solutions platform, have faced the problems themselves: outdated renting platforms, unrecoverable security deposit, bidding wars with other and endless paperwork.

The Rentberry platform employs smart contracts to make finding and renting out a house seamless. Because it directly connects landlords with tenants, it removes brokers and their exorbitant fees from the rental equation. It is also easier for potential tenants and landlords to screen each other, make decisions, establish financial terms and offer payments, because of the auto-enforcing nature of smart contracts.

Like Rentberry, Atlant uses smart contracts to guarantee rental agreements so that neither parties can back out. Atlant turns its focus slightly more towards property purchasing. Sellers can list their property assets on the blockchain and, once verified, tokenizes the property value. It then takes the form of a Property Token Offering, where buyers can buy the property. The tokens of this particular purchase can be traded on a decentralized exchange.

Beetoken is yet another project in the property space. They aim to establish a P2P network of hosts and guests – like Airbnb but on blockchain. Users are assured security through KYC processes. Services like Airbnb do face the problem of fake reviews and such an issue is remedied by blockchain’s immutability and trust.

Healthcare

Healthcare is a pillar of any national economy. In America, it contributes to a fifth of the national economy, which amounts to roughly $3.8 trillion. Unfortunately, the industry is difficult to modernize on a large scale and is hindered by obsolete processes, legacy data management systems and outdated infrastructure.

Patient data is a crucial part of the medical industry. Secure storage and data access, which could protect and make an efficient diagnosis, is possible with blockchain. There are possibilities for the healthcare industry to partner with tangential services of other industries, such as insurance. ICON (ICX) is working on creating an ecosystem where this kind of inter-industry collaboration can exist.

The existence of legacy systems is especially noticeable in developing nations, which are many steps behind their developed counterparts. Blockchain could quickly bring these nations up to speed, rapidly modernizing their healthcare services, which would better patient healthcare and generate revenue.

Patientory, which raised over $7 million in 3 days in their ICO, aims to improve the healthcare space by offering a secure space for stakeholders to store and manage data. Their target audience is patients, providers and healthcare organizations. Patients can easily access their data and hand it over to providers, who may not have a complete history of the patient’s health but will be able to view notes from previous providers and organizations.

DokChain aims to provide cheaper and more efficient solutions to patient data processing. They are operating on a slightly larger scale, developing a platform for a broader range of industries including insurance.

Gem and Tierion are two other blockchain projects working in the healthcare space.

Insurance

Insurance policies are approved through the verification of the insured party’s data. The approval of insurance and payout of claims are still severe pain points for the industry.

InsureX (IXT) markets itself as an alternative marketplace for insurance. The insurance market has several layers of intermediaries, making approval a frustrating chore. InsureX’s goal is to encourage new business models, increase transaction speed and insurance approval, reduce risk through better data access, and improve customer experience.

Etherisc is an insurance platform that puts an emphasis on decentralized applications. They already have a few dapps up and running, including crop insurance, social insurance and flight delay. Crop insurance protects the insured party against drought or flood, social insurance is similar to life insurance and the flight delay dapp issues policies and pay out claims against flight delay delays autonomously. They will host a marketplace for the capitalization of risks and insurance related services. In other words, what other marketplace-based projects are doing for computer resources, dapps and digital identity, Etherisc is doing for insurance.

Machine learning can also be integrated with smart contracts, as it is being done with SafeShare. This project has partnered with Vrumi to protect property owners against damage and theft to their homes caused by tenants registered on the Vrumi platform. SafeShare employs MetroGnoma, an open-source timestamping service, to validate claims in real time.

Publishing

An example of a rather unexpected application of blockchain, the publishing industry too can benefit from decentralization.

Today’s publishing industry is largely in the control of a small group of publishers. It can be difficult for a yet unrecognized writer to break into the industry. Digital publishing and the internet has made it easier for writers but even then, the scale and recognition of traditional publishing is still lacking.

A platform like Authorship is set to overturn the current system, where influence is in the hands of publishers, by using a tokenized system that recognizes the work of any writer. Publishers can choose to digitally publish writers and print their books, should they feel convinced of their quality and should demand exist. The token system ensures that writers get their fair share of pay. Writers can also write and publish without the assistance of publishers. Translators will also receive payment and approval from publishers if they choose to translate a work.

The lesson here is, in whatever industry financial mechanisms favour one party over the other, blockchain can come in to equalize the system and ensure that everyone gets their fair cut.

Music

Like publishing which favours publishing companies, the music industry is also unfairly structured in favour of recording labels.

Musicians have frequently derided streaming services, stating that they have siphoned a lot of earnings away from them. This is sadly true, but we have crossed the point of no return in this matter. Streaming is the way of the future but it behoves us to ensure artists earn their fair share of royalties.

Much of the earnings from music sales go to recording labels. Some musicians have therefore directly released their albums to fans. Thom Yorke and Nine Inch Nails have released their albums on P2P networks, and Bjork has even permitted fans to pay for her album Utopia with cryptocurrency.

Blockchain now allows fans to connect directly with artists in a manner that is efficient and secure.

Two popular blockchain startups operating in this space are Mycelia and Ujo Music.

There are a number of ways in which Mycelia could benefit artists. Imogen Heap, who founded Mycelia, wrote she believes blockchain can help license copyrighted music in an easy manner that suits both the requestor and the artist.

A noteworthy element of Mycelia’s platform is the “creative passport”, which serves as a record of an artist, their works, tour dates – it is very social media-like, all but a necessity for artists today.

Ujo Music has also received the backing of Imogen Heap. With their “Creator’s Portal”, artists can publish, license and be compensated for their work through Ethereum. It will also make it easier for artists to be discovered and supported by the community. Voise, a platform that has a concentrated focus on streaming, operates with similar intentions.

Supply Chain Management

The supply chain industry is one fraught with many challenges, most of which are concerned with curtailing rising costs and efficiently supplying products to retailers and customers. It is valued in the hundreds of billion dollars worldwide and is set to grow as demand increases proportionally with spending power.

However, the industry faces several obstacles. Fuel costs are ever on the rise, overproduction of products wastes precious resources, as well as taking up space and eventually becoming harmful waste. It is an industry whose challenges affect our very planet.

Smart contracts offer a potential solution to this problem. Imagine if an industry as significant as the automobile industry utilized a system in which cars would be manufactured only when a fixed number of requests were received.

With smart contracts, it is possible for funds to be locked into a contract, whereupon manufacturers would begin production only after a certain number has been reached. It would eliminate the worry of overestimating demand and resource consumption, and could also eliminate middlemen by directly connecting consumers with manufacturers.

VeChain and ShipChain are two blockchain projects that want to transform this industry.

VeChain aims to establish a business ecosystem that is autonomous and self-circulating. The use of NFC chips to counter theft and fraud has been popular with markets like liquor and tobacco, and they have partnered with China’s National Research Consulting Center (NRCC) to this end.

ShipChain is also striving for the same goals with its platform, with its solution of “track and trace” being implemented from end to end on shipping and logistics. This will let small carriers operate independently and shift reliance away from larger, better-financed shipping parties. ShipChain is also incentivizing operators by rewarding them for efficient transport routes and timely deliveries.

Government

In many parts of the world and, even in America which has long been held as the gold standard for democracy, voting power is manipulated and contorted to favour parties or even certain individuals. Nowhere is the principle of “one individual, one vote” more desired than in political voting systems.

Democracy Earth has created a peer-to-peer governance protocol for organizations. Budgeting takes place with bitcoins and smart contracts, and only you, the voter, have access to your voter information.

Horizon State is oriented towards actual voting for the purposes of governance. The platform allows for immediate recognition of votes at a fraction of the cost of traditional voting systems. The tokens of the platform are used as the ‘gas’ for voting and other services, which includes funding for campaigns.

Boule is another voting platform that is similar to Democracy Earth and Horizon State in its basic purpose.

Cloud Computing/Distributed Computing

Computing power is quickly becoming a fundamental necessity, like electricity and the internet. Many of the tasks that we do today, and certainly those in the scientific and entertainment industries, require heavy computation.  The trouble is that it requires resources that are currently only accessible to major corporate powers who have the funds to operate powerful systems.

The distributed nature of blockchain changes that, as it lets any user across the world utilize the computing power of ordinary computers to perform computationally-intensive tasks. Golem Network is working on precisely this, letting people rent out idle computing resources like bandwidth and processing power to others who can use it to render CGI and perform scientific calculations.

SONM (Supercomputer Organized by Network Mining) targets similar goals. Distributed computing will let users offer their idle computing resources for general purpose computing. SONM also envisions the use cases of video rendering and scientific processes like DNA analysis.

Elastic is an open-source P2P platform that works on a proprietary language called ElasticPL. The key difference here is that users are able to model their problems with the programming language.

Distributed cloud storage

Blockchain data storage will become a massive disruptor in the near future. (3-5 years)

Current cloud storage services are centralized — thus you the users must place trust in a single storage provider. “They” control all of your online assets.

On the other hand with the Blockchain, this can become decentralized. For instance, Storj is beta-testing cloud storage using a Blockchain-powered network to improve security and decrease dependency. Additionally, users can rent out their excess storage capacity, Airbnb-style, creating new marketplaces.

Anyone on the internet can store your data at a pre-agreed price. Hashing and having the data in multiple locations are the keys to securing it.

There are at least 2 start-ups exploring this idea. After encrypting your data, it is sent out to a network with easy to track basic metadata.

Decentralized notary

One interesting feature of the blockchain is its timestamp feature. The whole network essentially validates the state of a wrapped piece of data (called a hash) at a certain specific time.

As a trustless decentralized network, it essentially confirms the existence of [something] at a stated time that is further provable in a court of law. Until now, only centralized notary services could serve this purpose.

Manuel Aráoz, a Buenos Aires, Argentina-based developer, who built Proof of Existence as a decentralized method of verification, a kind of cryptographic notary service explained:

“As the blockchain is a public database, it is a distributed sort of consensus, your document becomes certified in a distributed sort of way.”

Proof of Existence allows users to upload a file and pay a transaction fee to have a cryptographic proof of it included on the bitcoin blockchain. The actual file is not stored online and therefore does not risk unwanted publication of the user’s material.

After anonymously uploading the document and paying the network fee, a hash of the document (or any other type of digital file) is generated as part of the transaction.

The Proof of Existence website shows recently uploaded files that have hashes on the blockchain.

This, in effect, uses the public and ledger-like nature of the blockchain to store the proof of your file, which can later be verified should an issue of authorship or dating arise.

“Basically, by inserting the cryptographic hash of the document in a transaction, when that transaction is mined into a block, the block timestamp becomes the document’s timestamp,” said Aráoz.

Smart contracts

What if you could cut your mortgage rate, make it easier to update your will?

The world of smart contracts is fast approaching.

These are legally binding programmable digitized contracts entered on the blockchain. They are smart because they are automated and can self-execute. What developers do is to implement legal contracts as variables and statements that can release of funds using the bitcoin network as a ‘3rd party executor’, rather than trusting a single central authority.

For example, if two people want to exchange $100 at a specific time in future when a set of preconditions are met, the conditions, payout and parties’ details would be programmed into a smart contract. Once the defined conditions are met, funds would be released and sent to the appropriate party as per terms.

By giving computers control over contracts, we can make business more efficient and make the legal system more equitable.

“Smart contracts solve the problem of intermediary trust between parties to an agreement, whether that is between people transferring assets like gold, or executing decisions between two parties in a betting contract,” explained Vitalik Buterin, a founder of Ethereum.

Platforms like Ethereum are bringing smart contracts closer to reality. Additionally, because data stored in the Blockchain cannot be tampered with, basic contracts like marriages have already been recorded in code.

Digital voting

The greatest barrier to getting electoral processes online, according to its detractors, is security. Using blockchain, a voter could check that her or his vote was successfully transmitted while remaining anonymous to the rest of the world.

In 2014, Liberal Alliance, a political party in Denmark, became the first organization to use blockchain to vote. With American voter turnout still shockingly low, distributed digital voting may represent a way to enfranchise non-participants.

“Many states use voting machines that are over 10 years old that are not only antiquated and failing, they are also becoming increasingly expensive to maintain as parts are no longer manufactured. Election fraud undermines the very fabric of democracy.” -BTC

Last year a team accredited to observe the 2013 municipal elections in Estonia – the only country to run Internet voting on a wide scale – revealed that they observed election officials downloading key software over insecure Internet connections, typing PINs and passwords in view of cameras, and preparing election software on insecure PCs.

Norway also cancelled trials of e-voting systems in local and national elections, concluding that voters’ fears about their votes becoming public could undermine democratic processes. (Source: A security analysis of Estonia’s Internet voting system by international e-voting experts.)

Just imagine a society where your vote is guaranteed from the comfort of your phone.

Can you imagine how the landscape of the political system would change?

Blockchain technologies will become the gold standard for all nations of the world in the near future. It is time for our system and governments to become more transparent.

Charity

Charitable organizations purportedly use the funds they receive to benefit the cause they are supporting. However, in more than a few cases, the money is misspent or outright corruption occurs.

Blockchain’s ability to transparently showcase transactions on its public ledger makes it ideal for use in charities. The public, donating their hard-earned money for a good cause, can see how and where their donations are being spent.

There are several blockchain projects operating in this niche. Alice is a project that aims to help cash-strapped social endeavours through its blockchain-based crowdfunding platform. Giveth is an open-source, Ethereum-based platform that is similar to Alice, but also features a mechanism called LiquidPledging. This is when a donation is made via a delegate. Likewise, AidCoin is another platform that is aiming to make charity donations more transparent and immediate.

Energy

The energy industry is also hampered by middlemen. Blockchain technology could change that by letting individuals buy and sell energy through smart contracts. The energy used by individuals in homes could form a microgrid where communities become resilient to power outages, as well as reduce the drain on the environment.

This is exactly what LO3 Energy has done by establishing the Brooklyn Microgrid. The company itself states it best – they want to reimagine how power can be generated, conserved, traded and shared.

Power Ledger claims to be the world’s first commercially-available energy trading platform of its kind. Users can trade electricity with each other and receive payment in real time. What’s interesting is that users can sell power that they’ve stored on their solar panels. Any excess power that isn’t essential could be sold for money.

Grid+ works with Artificial Intelligence to study your energy consumption pattern and purchase energy accordingly. This platform involves a hardware unit. The AI-based smart energy agent has access to multiple energy markets and can also extra energy generated from solar panels.

Job Marketplaces

For a while now, the systems of employment have been changing. Studies have shown that employees, along with demands for good pay, wish for flexibility with work and the freedom to work from home. Employers have begun to take note that the mindset of employees and their criteria for happiness have changed while other studies have noted that the happiest employees are the ones who perform best.

Freelancing has grown immensely in popularity. While professionalism has grown on both sides, trust always remains an issue because there is currently no way to enforce it.

Blocklancer wants to change that. The platform is essentially a freelance job portal where clients and freelancers can interact. Through the power of smart contracts, both parties are assured of their requested services. It is the freelancing portal freelancers love, but with the assurance of pay and delivery of work.

Are there other use cases of blockchain technology? YES.

Messaging, Blockchain-as-a-Service, Digital Advertising, Credit, Trading, Fishing, Hedge funds, Ridesharing, Crypto exchanges, Human resources, Gaming. There are all fields in which we can use blockchain applications.

As mentioned above, most of these applications are still underdeveloped.  The future potential of the blockchain applications is still unravelling. The next couples of years will be all about experimenting and applying to all aspects of society. Regardless of which application comes first on a global scale. The bottom line is, Blockchain is here to stay and will and is transforming how our society functions. Caught your interest? Then find out right now how you can earn free cryptocurrency.

What is a smart contract in the Ethereum blockchain?

What is a smart contract in the Ethereum blockchain?

by | Nov 29, 2018 | Blockchain, Crypto wiki, Ethereum

A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible.

Proponents of smart contracts claim that many kinds of contractual clauses may be made partially or fully self-executing, self-enforcing, or both. The aim of smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting. Various cryptocurrencies have implemented types of smart contracts.

Smart contracts were first proposed by Nick Szabo, who coined the term.

With the present implementations, based on blockchains, “smart contract” is mostly used more specifically in the sense of general purpose computation that takes place on a blockchain or distributed ledger.

In this interpretation, used for example by the Ethereum Foundation or IBM, a smart contract is not necessarily related to the classical concept of a contract, but can be any kind of computer program.

In 2018, a US Senate report said: “While smart contracts might sound new, the concept is rooted in basic contract law. Usually, the judicial system adjudicates contractual disputes and enforces terms, but it is also common to have another arbitration method, especially for international transactions. With smart contracts, a program enforces the contract built into the code.”

Implementations

Byzantine fault tolerant algorithms allowed digital security through decentralization to form smart contracts. Additionally, the programming languages with various degrees of  Turing-completeness as a built-in feature of some blockchains make the creation of custom sophisticated logic possible.

Notable examples of implementation of smart contracts are:

  • Bitcoin also provides a Turing-incomplete Script language that allows the creation of custom smart contracts on top of Bitcoin like multisignature accounts, payment channels, escrows, time locks, atomic cross-chain trading, oracles, or multi-party lottery with no operator.
  • Ethereum implements a nearly Turing-complete language on its blockchain, a prominent smart contract framework.
  • RootStock (RSK) is a smart contract platform that is connected to the Bitcoin blockchain through sidechain technology. RSK is compatible with smart contracts created for Ethereum.
  • Ripple (Codius), smart contract development halted in 2015

Replicated titles and contract execution

Szabo proposes that smart contract infrastructure can be implemented by replicated asset registries and contract execution using cryptographic hash chains and Byzantine fault tolerant replication.  Askemos implemented this approach in 2002 using Scheme (later adding SQLite) as contract script language.

One proposal for using bitcoin for replicated asset registration and contract execution is called “colored coins”. Replicated titles for potentially arbitrary forms of property, along with replicated contract execution, are implemented in different projects.

As of 2015, UBS was experimenting with “smart bonds” that use the bitcoin blockchain in which payment streams could hypothetically be fully automated, creating a self-paying instrument.

smart contract

Security issues

A smart contract is “a computerized transaction protocol that executes the terms of a contract”. A blockchain-based smart contract is visible to all users of said blockchain. However, this leads to a situation where bugs, including security holes, are visible to all yet may not be quickly fixed.

Such an attack, difficult to fix quickly, was successfully executed on The DAO in June 2016, draining US$50 million in Ether while developers attempted to come to a solution that would gain consensus. The DAO program had a time delay in place before the hacker could remove the funds; a hard fork of the Ethereum software was done to claw back the funds from the attacker before the time limit expired.

Issues in Ethereum smart contracts, in particular, include ambiguities and easy-but-insecure constructs in its contract language Solidity, compiler bugs, Ethereum Virtual Machine bugs, attacks on the blockchain network, the immutability of bugs and that there is no central source documenting known vulnerabilities, attacks and problematic constructs.

What is “Proof of Work” and “Proof of Stake”?

What is “Proof of Work” and “Proof of Stake”?

by | Nov 23, 2018 | Blockchain, Crypto wiki

Bitcoin and Etherium are the two most renowned cryptocurrencies and the hottest examples of blockchain technology in use.

Both use the ‘proof of work’ (POW) consensus algorithm. Information currently available indicates that Bitcoin will still continue to utilize POW, but the Ethereum project group is working in their projected transition into the’evidence of bet’ (PoS) algorithm.

What is the Proof of Work?

The Proof of Work theory existed before bitcoin, however, Satoshi Nakamoto implemented this method to the digital money revolutionizing the way traditional transactions are set.

Actually, PoW idea was initially published by Cynthia Dwork and Moni Naor back in 1993, but the expression”proof of work” was commissioned by Markus Jakobsson and Ari Juels at a document published in 1999.

The Proof of work theory existed even before bitcoin, but Satoshi Nakamoto applied this technique to the digital money revolutionizing how traditional transactions are put.

Proof of work is maybe the largest idea behind the Nakamoto’s Bitcoin white newspaper — printed back in 2008 — since it allows trustless and distributed consensus.

Proof of work and mining

Going deeper, proof of work is a requirement to define an expensive computer calculation, also called mining, that needs to be performed in order to create a new group of trustless transactions (the so-called block) on a distributed ledger called blockchain.

Mining serves as two purposes:

  1. To verify the legitimacy of a transaction, or avoiding the so-called double-spending;

  2. To create new digital currencies by rewarding miners for performing the previous task.

When you want to set a transaction this is what happens behind the scenes:

  • Transactions are bundled together into what we call a block;

  • Miners verify that transactions within each block are legitimate;

  • To do so, miners should solve a mathematical puzzle known as proof-of-work problem;

  • A reward is given to the first miner who solves each blocks problem;

  • Verified transactions are stored in the public blockchain

This “mathematical puzzle” has a key feature: asymmetry. The work, in fact, must be moderately hard on the requester side but easy to check for the network. This idea is also known as a CPU cost function, client puzzle, computational puzzle or CPU pricing function.

All the network miners compete to be the first to find a solution for the mathematical problem that concerns the candidate block, a problem that cannot be solved in other ways than through brute force so that essentially requires a huge number of attempts.

When a miner finally finds the right solution, he announces it to the whole network at the same time, receiving a cryptocurrency prize (the reward) provided by the protocol.

From a technical point of view, mining process is an operation of inverse hashing: it determines a number (nonce), so the cryptographic hash algorithm of block data results in less than a given threshold.

This threshold, called difficulty, is what determines the competitive nature of mining: more computing power is added to the network, the higher this parameter increases, increasing also the average number of calculations needed to create a new block. This method also increases the cost of the block creation, pushing miners to improve the efficiency of their mining systems to maintain a positive economic balance. This parameter update should occur approximately every 14 days, and a new block is generated every 10 minutes.

Proof of work is not only used by the Bitcoin blockchain but also by Ethereum and many other blockchains.

Some functions of the proof of work system are different because created specifically for each blockchain, but now I don’t want to confuse your ideas with too technical data.

The important thing you need to understand is that now Ethereum developers want to turn the tables, using a new consensus system called proof of stake.

What is Proof of stake?

Proof of stake is a different way to validate transactions based and achieve the distributed consensus.

It is still an algorithm, and the purpose is the same as the proof of work, but the process to reach the goal is quite different.

proof of work vs proof of stake

Proof of stake first idea was suggested on the bitcointalk forum back in 2011, but the first digital currency to use this method was Peercoin in 2012, together with ShadowCash, Nxt, BlackCoin, NuShares/NuBits, Qora and Nav Coin.

Unlike the proof-of-Work, where the algorithm rewards miners who solve mathematical problems with the goal of validating transactions and creating new blocks, with the proof of stake, the creator of a new block is chosen in a deterministic way, depending on its wealth, also defined as stake.

No block reward.

Also, all the digital currencies are previously created in the beginning, and their number never changes.

This means that in the PoS system there is no block reward, so, the miners take the transaction fees.

This is why, in fact, in this PoS system miners are called forgers, instead.

Why Ethereum wants to use PoS?

The Ethereum community and its creator, Vitalik Buterin, are planning to do a hard fork to make a transition from proof of work to proof of stake.

In a distributed consensus-based on the proof of Work, miners need a lot of energy. One Bitcoin transaction required the same amount of electricity as powering 1.57 American households for one day (data from 2015).

And these energy costs are paid with fiat currencies, leading to a constant downward pressure on the digital currency value.

In a recent research, experts argued that bitcoin transactions may consume as much electricity as Denmark by 2020.

Developers are pretty worried about this problem, and the Ethereum community wants to exploit the proof of stake method for a more greener and cheaper distributed form of consensus.

Also, rewards for the creation of a new block are different: with Proof-of-Work, the miner may potentially own none of the digital currency he/she is mining.

In Proof-of-Stake, forgers are always those who own the coins minted.

How are forgers selected?

If Casper (the new proof of stake consensus protocol) will be implemented, there will exist a validator pool. Users can join this pool to be selected as the forger. This process will be available through a function of calling the Casper contract and sending Ether – or the coin who powers the Ethereum network – together with it.

What is Blockchain Technology? A step-by-step guide than anyone can understand

“You automatically get inducted after some time,” explained Vitalik Buterin himself on a post shared on Reddit.

“There is no priority scheme for getting inducted into the validator pool itself; anyone can join in any round they want, irrespective of the number of other joiners,” he continued.

The reward of each validator will be “somewhere around 2-15%, ” but he is not sure yet.

Also, Buterin argued that there will be no imposed limit on the number of active validators (or forgers), but it will be regulated economically by cutting the interest rate if there are too many validators and increasing the reward if there are too few.

Is Proof of Stake safer than Proof of Work?

Using a Proof-of-Work system, bad actors are cut out thanks to technological and economic disincentives.

In fact, programming an attack to a PoW network is very expensive, and you would need more money than you can be able to steal.

Instead, the underlying PoS algorithm must be as bulletproof as possible because, without especially penalties, a proof of stake-based network could be cheaper to attack.

To solve this issue, Buterin created the Casper protocol, designing an algorithm that can use the set some circumstances under which a bad validator might lose their deposit.

He explained: “Economic finality is accomplished in Casper by requiring validators to submit deposits to participate, and taking away their deposits if the protocol determines that they acted in some way that violates some set of rules (‘slashing conditions’).”

Slashing conditions refer to the circumstances above or laws that a user is not supposed to break.

Proof of Work vs Proof of Stake: Conclusion

Thanks to a PoS system validators do not have to use their computing power because the only factors that influence their chances are the total number of their own coins and current complexity of the network.

So this possible future switch from PoW to PoS may provide the following benefits:

  1. Energy savings.

  2. A safer network as attacks become more expensive: if a hacker would like to buy 51% of the total number of coins, the market reacts by fast price appreciation.

This way, CASPER will be a security deposit protocol that relies on an economic consensus system. Nodes (or the validators) must pay a security deposit in order to be part of the consensus thanks to the creation of the new block.

Casper protocol will determine the specific amount of rewards received by the validators thanks to its control over security deposits.

If one validator creates an “invalid” block, his security deposit will be deleted, as well as his privilege to be part of the network consensus.

In other words, the Casper security system is based on something like bets. In a PoS-based system, bets are the transactions that, according to the consensus rules, will reward their validator with a money prize together with each chain that the validator has bet on.

So, Casper is based on the idea that validators will bet according to the others’ bets and leave positive feedbacks that are able accelerates consensus.

What is a distributed ledger technology (DLT)?

What is a distributed ledger technology (DLT)?

by | Nov 22, 2018 | Blockchain, Crypto wiki

What is a distributed ledger technology? 

(also called a shared ledger, or Distributed Ledger Technology, DLT)

Ledgers, the basis of bookkeeping, are as historical as money and writing.

distrubuted ledger technology

Source lca-net.com

These ancient digital ledgers mimicked the cataloguing and bookkeeping of this paper-based planet, and it might be stated that digitization was implemented more into the logistics of paper files instead of their own creation. Paper-based associations remain the backbone of the society: cash, seals, written signatures, invoices, certificates and using double-entry accounting.

In its simplest form, a dispersed ledger is a database stored and upgraded independently by each user (or node) in a huge community.

The supply is exceptional: documents aren’t communicated to several nodes with a central authority but are rather independently assembled and held by each node. In other words, each and every node on the system procedures every trade, coming into its conclusions and then voting on these decisions to make sure the majority concur with all the decisions.

Distributed Ledgers are a lively kind of media and also have qualities and capacities that go far beyond inactive paper-based ledgers.

A peer-reviewed network is necessary for addition to consensus algorithms to guarantee replication across nodes is undertaken. 1 form of dispersed ledger layout is your blockchain system, which is either private or public.

How does the Distributed Ledger work?

The distributed ledger database is dispersed across multiple nodes (devices) on a peer-reviewed system, where every copy and retains an identical replica of the ledger and upgrades itself independently.

The main benefit is the absence of central power. When a ledger update occurs, every node constructs the new trade, then the nodes vote from consensus algorithm where copy is accurate.

After a consensus has been decided, each of the other nodes upgrades themselves with all the new, correct replica of the ledger. Safety is accomplished via cryptographic signatures and keys.

In 2016, a few banks examined dispersed ledgers for payments to determine if investing in dispersed ledgers is encouraged by their own usefulness.

Distributed ledgers might be permissioned or even permissionless seeing if anybody or only approved individuals can conduct a node to confirm transactions. (Proof of Function, Proof of Stake, or Voting programs ). They might also be mineable (it’s possible to claim ownership of fresh coins leading using a node) or not mineable (the inventor of the cryptocurrency possesses all in the start ).

distrubuted ledger technology

Why do we need Distributed Ledger Technology (DLT)?

The creation of distributed ledgers signifies a revolution in how data is accumulated and hauled.

Distributed ledgers make it possible for users to move past the straightforward custodianship of a database and also divert energy to the way people utilize, control and extract significance from databases – not as about keeping up a database, even more about handling a system of document.

What Is the Basic Attention Token (BAT)?

What Is the Basic Attention Token (BAT)?

by | Nov 21, 2018 | Blockchain, Crypto wiki

With an ever-increasing struggle for internet users’ attention, more groups are considering innovative ways of using marketing for the benefit of the consumer. BAT (Basic Attention Token) hopes to position itself as the token of the world of digital advertising.

How does BAT work and what problems does it try to solve?

BAT promises to create a transparent network, where those interested in receiving or selling advertising services, are free to do so without the involvement of intermediaries, in a healthy, competitive environment.

what is BAT?

The BAT token is meant to be used to power the Brave network, set up by the developers using the ERC20 technical standard. Brave is a browser service that can also act as a marketplace to be used by those selling or buying advertising.

How does BAT hope to meet its objectives?

The project’s biggest calling card is the involvement of Brendan Eich, BAT’s founder. Eich is best known for his participation in the developing of Mozilla and Firefox, projects he helped co-found. Eich’s reputation alone was enough to garner a lot of attention for BAT.

The other members of the BAT team share an impressive background in the world of services and internet services, having worked for the likes of Yahoo, Evernote, or AOL.

There is another element that works in favour of BAT. It’s the general anti-ad attitude of the vast majority of internet users. BAT promises to offer a revenue system for those targeted by ads. As the name suggests, BAT’s objective is to convince users to provide them with their attention in exchange for BATs. And similarly, advertisers will receive BATs in proportion with the level of attention users provide them.

Competitors and possible drawbacks

BAT was conceived with the ERC20 system in mind. At the time of writing, Ethereum blockchain technology continues to be highly popular in the crypto world. BAT will to remain dependent on Ethereum and subject to be influenced by the possibility of its popularity fluctuating.

The Brave network will also need to fight against several high profile competitors, among them CDX (a representative of alt-media), Bitclave, or AdEx (a company with a similar vision to BAT).

Distribution and roadmap

BAT set an ambitious roadmap, with confidence helped by the company able to raise a large sum of money in the ICO stage ( $35M). Initially, 1 billion tokens, of the total amount of 1.5 billion, were put on sale.

The developers held a further giveaway at the start of 2018. The number of users on the Brave network also increased, with an estimated 5 million downloads at the time of writing. The company also claims to have over 18,000 verified Brave publishers.

Basic Attention Token (BAT)

Conclusion

Yes, there is undoubtedly a real market need for advertisers and their customers to connect without additional interference. There also exists a real need for the consumers to feel they are genuinely rewarded for the amount of attention they decide to invest in various marketing campaigns.

The Brave browser and the accompanying BAT token aim to offer a solution to these issues. Indeed, the hurdles they will need to overcome will be high, and the competitors they face will present a challenge. However, how the project has developed, the level of interest it has garnered from users, promises to make it an exciting prospect for the future.

What is Cryptography?

What is Cryptography?

by | Nov 9, 2018 | Blockchain, Crypto wiki

Cryptography is a system of protecting data and communications through the use of codes that only individuals for whom the data is meant can read and procedure. The pre-fix “crypt” means “hidden” or “vault” and the suffix “graphy” stands for “writing.”

Information security employs cryptography on several degrees. Cryptography also assists in non-repudiation.

Cryptography can also be referred to as cryptology.

An early illustration of cryptography was that the Caesar cypher, used by Julius Caesar to shield Roman army secrets. Every letter in a message has been substituted using the letter 3 spaces to the left from the bible, this understanding has been basically the key that encrypted the message. Caesar’s generals understood this to decode the letters that they just had to change each into the right, whilst the data stayed secure if intercepted by Caesar’s enemies.

Modern cryptography functions on precisely the exact same degree, albeit with much greater levels of sophistication.

In computer engineering, cryptography describes protected communication and information techniques based on mathematical theories and a pair of rule-based calculations known as calculations to change messages in a way that are tough to decode. These deterministic algorithms are utilized for cryptographic key generation and electronic signing and verification to protect data privacy, internet browsing online and confidential communications like credit card transactions and also email.

Cryptography techniques

Cryptography is closely linked to the areas of cryptology and cryptanalysis. It includes methods like microdots, merging words using pictures, and other strategies to hide data in transit or storage. Nonetheless, in the modern computer-centric planet, cryptography is most frequently connected with scrambling plaintext (standard text, sometimes known as cleartext) into ciphertext (a process called encryption), then again (called decryption). People who practice this area are called cryptographers.

  1. Confidentiality: the data Can’t Be realized by anybody for whom it had been accidental
  2. Integrity: the data Can’t be changed in storage or transit between sender and intended recipient with no alteration being discovered
  3. Non-repudiation: the creator/sender of this data Cannot deny at a later point Their intentions in the production or transmission of this data
  4. Authentication: the sender and recipient may verify each other’s identity and the origin/destination of this data

Procedures and protocols which fulfil some or all the above-mentioned criteria are called cryptosystems. Cryptosystems are often considered to refer solely to mathematical processes and computer applications nonetheless, they also contain the regulation of individual behaviours, like picking hard-to-guess passwords, logging away systems that are artificial, rather than talking sensitive processes with outsiders.

Cryptographic algorithms

Cryptosystems utilize a set of processes called cryptographic algorithms, or cyphers, to encrypt and decrypt messages to procure communications among computer programs, devices like telephones, and software. A cypher package utilizes one particular algorithm for security, yet another algorithm for message authentication and another for key trade.

This procedure, embedded in protocols and composed in applications that run on operating systems and networked computer programs, involves private and public key generation for information encryption/decryption, digital signing and verification for information authentication, and key exchange.

Types of cryptography

Single-key or symmetric-key encryption algorithms produce a predetermined length of pieces called a block cypher using a secret key the creator/sender utilizes to encipher information (encryption) and the recipient uses to decode it. The standard is mandated by the U.S. government and broadly utilized in the private industry.

In June 2003, AES was accepted by the U.S. government for classified information. It is a royalty-free specification employed in hardware and software worldwide. AES is the successor to the Data Encryption Standard (DES) and DES3. It uses more key lengths (128-bit, 192-bit, 256-bit) to prevent brute force and other attacks.

Public-key or asymmetric-key encryption algorithms utilize a set of keys, a public key associated with the creator/sender for encrypting messages and a private key that only the originator knows (unless it is exposed or they opt to discuss it) for decrypting that information.

The kinds of public-key cryptography include RSA, used extensively on the internet; Elliptic Curve Digital Signature Algorithm (ECDSA) used by Bitcoin; Digital Signature Algorithm (DSA) adopted as a Federal Information Processing Standard for digital signatures by NIST in FIPS 186-4, and Diffie-Hellman key trade.

To preserve data integrity in cryptography, hash functions, which yield a deterministic output signal from an input value, are utilized to map information to predetermined data size.

In a blockchain, cryptography is primarily utilized for two functions:

  1. Securing the identity of the sender of trades.
  2. Ensuring the previous records can’t be corrected with.

Blockchain technologies use cryptography as a method of shielding the identities of consumers, ensuring transactions are done securely and procuring all data and storages of significance. Consequently, anyone using blockchain may have absolute confidence that once a thing is listed on a blockchain, it’s done so legally and in a fashion that keeps safety.

Read more about the Blockchain tech.

Despite being based upon a similar frame, the sort of cryptography employed in blockchain, specifically public-key cryptography, is much better suited to the purposes linked to the technologies compared to symmetric-key cryptography.

What is Public-Key Cryptography?

Public-key cryptography, also called asymmetric cryptography, signifies an improvement on conventional symmetric-key cryptography since it allows data to be moved via a public key which could be shared with anybody.

Rather than using a single key for encryption and decryption, as is the case with symmetric key cryptography, separate keys (a public key and a private key) are used.

A combination of a user’s public key and personal encrypt the data, whereas the recipients private key and sender’s public key decrypt it. It’s not possible to figure out exactly what the private key is based on the public key. Thus, a user may send their public key to anyone without worrying that somebody will access their own private key. The sender may encrypt files they may be convinced will simply be decrypted by the intended party.

Additional via public-key cryptography, a digital signature is generated, procuring the integrity of this information which has been exhibited. This is accomplished by mixing a consumer’s’ private key together with the information they want to signal, via a mathematical algorithm.

Considering that the actual data itself is a part of the electronic signature, the system won’t recognize it as legitimate if any portion of it’s tampered with. Editing the smallest aspect of this information reshapes the entire signature, which makes it obsolete and false. By these means, blockchain technologies are capable of ensuring any information being recorded onto it’s correct, accurate and untampered with. Digital signatures are what provide the information listed on a blockchain its own immutability.

Cryptography concerns

Attackers can bypass cryptography, hack computers which are accountable for data encryption and decryption, and exploit weak implementations, like the use of default keys. But, cryptography makes it more difficult for attackers to get data and messages protected by encryption algorithms.