Since the evolution of blockchain technology has really improved almost every economic sector, especially the web sectors where it has been implemented. Some of these web sectors where the integration of blockchain technology can improve include: the sharing industry, government services, record keeping, intellectual property protection, internet of things (IoT), management of online identity, information management, stock trading, crowdfunding, smart contracts, etc. Each of these these points are fully elaborated in this article. You will also learn the following: database vs. blockchain, challenge facing Bitcoin, various ways to use Bitcoin, Bitcoin as a new asset class, etc.
The Impact of Blockchain Technology on Various Web Sectors & Businesses
Aside from being a platform for cryptocurrency, blockchain can also provide web users with the capacity to build value and verify digital information. Emerging business applications for the blockchain technology includes the following:
1. The Sharing Industry
With new companies such as AirBnB and Uber becoming global success stories, the sharing industry is now proven as a business model. But at present, customers who like to avail of ride-sharing service have to depend on Uber as a third-party provider. But if payments can be enabled through P2P, the blockchain technology can open the door to direct transaction between the passenger and the driver, which will lead to a genuine sharing industry. One good example is the Open Bazaar, which employs blockchain to build a P2P online platform. Users can download the application on their devices, and they can easily transact with vendors without the need to pay for transaction charges. The protocol implements a no rules policy, which means that personal credibility will be even more significant for these transactions compared to what is currently happening in marketplaces such as eBay.
2. Smart Contracts
Public ledgers allow the coding of simple contracts that will execute if the pre-set conditions are already established. One example of this is the Ethereum network, which is an open-source blockchain, which was created especially for this purpose. Although it is still in its infancy, Ethereum has gained a lot of traction in the last few years, and cryptocurrency experts believe that it has the potential to leverage the power of blockchain on a genuine global-shaping scale.
At the present level of development of blockchain, smart contracts could be designed to perform basic functions. For example, you can pay one derivative if a financial instrument has already met a specific benchmark through the use of blockchain technology and Bitcoin that enables the automation of the payout.
3. Government Services
By improving the transparency and accessibility of information, blockchain technology can become a catalyst in the way government administers its basic services as well as the result on polls or elections. Smart contracts can also help to make the process faster and easier. One example is the application Boardroom, which allows organizational decisions to happen within the blockchain. This could disrupt how organizations govern and how they manage digital assets such as data and equities.
4. Record Keeping
A decentralized method of keeping records online will bring a lot of advantages. Disseminating data throughout the whole platform will safeguard files from getting lost or hacked. For example, the Inter-Planetary File System or IFPS makes it easy to build how a public web could function.
Comparable to how bittorent moves data online, IPFS can eliminate the need for centralized client-server interactions such as the present form of the Internet. A new version of the World Wide Web that is composed of decentralized websites has the potential to expedite the file transfer and streaming. This improvement is not only efficient, but important in upgrading the Internet’s presently overloaded systems for delivering content.
5. Intellectual Property Protection
As you might already know, there is no limit on how you can reproduce and distribute information in the Internet. This has provided many online users around the world a huge reserve of free content. But this is not good news for holders of copyright, because they can lose control over their intellectual property. Through smart contracts, copyright can be protected. It can also automate the sale of creative content via the Web, which eliminates the risk of replication and redistribution.
One good example of this is Mycelia, which employs the blockchain technology to build a P2P music distribution system. Established in the UK by the artist Imogen Heap, the platform allows artists to sell their songs directly to their fan base. It also allows artists to license samples to producers and manage royalties to musicians and songwriters. These functions work through the smart contracts. This use for the blockchain has a robust chance for success because blockchain can be used to release payments in a small percentage of Bitcoin, which are also known as micro-payments.
6. Internet of Things (IoT)
IoT refers to the network-regulated administration of specific forms of electronic devices. One example is the regulation of air temperature within a database facility. Through smart contracts, it is possible to manage the automation of remote systems. This can be done through the integration of network facilities, sensors, and software as well as the exchange of data between systems and objects. The result could improve cost monitoring as well as efficiency of the system.
The most important players in telecommunications, tech, and manufacturing are all looking to dominate the IoT. This includes At&T, IBM, and Samsung. An organic extension of current systems regulated by these companies, IoT apps will be able to be applied in a wide range of purposes from massive management of automated systems, data analytics, and predictive maintenance of mechanized parts.
7. Management of Online Identity
We have a specific requirement for improved management of our online identity. The capacity to confirm your identity is the cornerstone technology of financial transactions that could occur online. However, the resolution for the risks involved in security that come with online portals are not completely perfect. Public ledgers can provide better ways for proving who you are, alongside the possibility of digitizing personal files. Securing personal identity is also crucial for internet communications in the sharing industry for example. Nevertheless, an outstanding reputation is the most crucial condition for conducting online transactions.
Establishing standards for digital identity can be a highly sophisticated protocol. Aside from the technical challenges, an encompassing web identity solution will require the cooperation between the government as well as private organizations. The problem can be exponentially challenging if we factor in the requirement to navigate the legal systems in various countries. At present, online stores depend on the SSL certificate to ensure that the transactions online are safe.
8. Information Management
Using social media platforms such as Facebook and Twitter is free, right? This is not completely true. In exchange for using these platforms, you are paying these companies with your personal information. But through blockchain, you can have the capacity to administer and sell the information that their web activities produce. And because this can be easily disseminated in micro currencies, Bitcoin will be used to facilitate this transaction.
For instance, Enigma—a project in MIT—has the capacity to understand that the privacy of the user is key in creating a marketplace for personal information. It uses cryptographic strategies to allow individual information sets to be divided between nodes, and also at the same time process massive calculations over the data group in general. Scalability can be achieved by fragmenting the information, unlike in blockchain technology where information could be replicated on each node.
9. Stock Trading
Stock trading can also take advantage of the blockchain technology through the improved efficiency of the shared platform. Once implemented, P2P trade confirmation could become more instant against the usual clearance time of three days. However, this could eliminate the need for custodians, auditors, and clearing houses.
Several commodities and stock exchanges are now using early forms of blockchain technology for the services they provide. This includes the Japan Exchange Group (JPX), Frankfurt Stock Exchange (Deutsche Borse), Australian Securities Exchange (ASX), etc.
Crowdfunding projects such as Gofundme and Kickstarter are now implementing the comprehensive framework for the rising P2P economy. The popularity of these platforms signifies the increasing interest of people who want to have a direct involvement in the development of specific products. The blockchain technology is elevating this interest to the next level by building venture capital funds through crowdfunding.
For example, in 2016, the Decentralized Autonomous Organization (DAO) of Ethereum managed to raise as much as $200 million within 60 days. Crowdfunders bought DAO tokens, which allow them to choose the smart contract project they are interested in. However, the project was hacked and compromised because of poor due diligence. But nonetheless, the test suggests that the technology has the ability to drive new ways for people to cooperate.
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Database vs. Blockchain
The difference between a blockchain and a conventional or relational database starts with the structure or how the technology is organized. The database that runs on the World Wide Web usually uses a client-server network structure.
A registered database user who has the right permissions will be able to change the entries that are stored on a central server. In changing the master copy, each time the client is accessing a database through a device such as a computer or a smartphone, they can work on an updated version of the database entry. Database control is still within the circle of administrators, which allows for access and authorizations to be confined by a central entity.
This is not the case with blockchain. For a blockchain database, every participant could maintain, update, and compute new items within. The nodes could work together to make certain that they are all coming from the same sources, which provide built-in security for the system.
The effect of this difference is that the blockchain is well-suited as a way of recording specific functions, while a central server is completely proper for other purposes.
Basically, blockchain permits various parties that don’t necessarily trust each other to access the same information without the need for authority from a centralized administration. The transactions could be processed by the users that serve as a mechanism for consensus so that everyone could create the same sharing system of record all at the same time.
The main advantage of decentralized control is that it could eliminate the risks of centralized regulation. In a centralized database, anyone with enough level of access could easily corrupt or even wipe out the data. Hence, the system will highly rely on human administrators.
Many human administrators have earned enough trust that they can have full access to the database. This makes it easy for bank databases to record the money they have in their vaults. There is also a reasonable purpose for a centralized administration, and it is actually more ideal to use in special instances than blockchain technology.
However, this also means that those who need to run centralized administration have to spend substantial amounts of money to make sure that the databases will not be compromised. If the system fails, then the data could be leaked out or even stolen.
Many centralized databases are keeping information that is updated at a certain period of time. But more often than not, these are snapshot of a period that contains outdated information. On the other hand, blockchain systems are capable of keeping relevant information. Blockchain technology could create databases, which can create records of past transactions. They are capable of expanding its previous transactions into an archive while simultaneously offering real-time images.
While you can use blockchain systems to act as a records system as well as a platform for facilitating transactions, they are regarded as slow when you compare them to current technologies for digital transactions such as the technologies used by PayPal and Visa. Although it is also certain that the blockchain technology will be further improved in the future, the core structure of the blockchain technology calls for some speed to be left on the wayside.
The system of distributing the networks is used in blockchain so they compound and not share processing speed and power. They each separately provide service to the whole network, and then do some comparison checks with the whole network, until the whole system agrees that the transactions are genuine. On the other hand, centralized databases are used and have been improved significantly ever since their advent in many industries.
Take note that Bitcoin is a read-uncontrolled, write-uncontrolled database. This enables everyone to add a fresh block into the ledger, which everyone could also read. An accessed-granted blockchain, similar to a centralized database could be read-controlled and write-controlled. The protocol or the network can be established so only authorized users could add new entries in the database or read the whole database.
But if trust is not an issue and confidentiality matters most, blockchain databases have no actual advantage over conventional databases with centralized administration.
Adding a concealment system to the blockchain will require complex cryptography, and this calls for more computational power for the network nodes. The best way to do this is to just completely hide the data in a private database, which does not even require connecting with the network.
Challenges Facing Bitcoin
Bitcoin is just a decade-old digital currency, but it has still a long way before it can be accepted by the general public. As a matter of fact, the challenges that this cryptocurrency is facing today are quite the same that it has experienced when it was still in its introductory phase.
When Bitcoin was first released, the primary hindrance was the computer skills and understanding of the blockchain jargon required to scrutinize the platform itself. This revolutionary technology involves solving complex algorithms for verification of transactions, which was quite difficult for a layman to chew.
Since then, the Bitcoin’s disruptive features made it enticing for users of the underground market or those who are using the Dark Web. Bitcoin became a popular currency for illegal transactions such as criminal activities like drug deals and money laundering.
As a result, Bitcoin was placed in a bad light, which was worsened by the fact that it can be difficult for government agencies and financial authorities to monitor the transactions in the Bitcoin’s blockchain. While some governments such as China have issued an outright ban for Bitcoins, other governments such as Japan and the United States still made their due diligence to understand how this cryptocurrency works.
The price volatility also added another layer of challenge for people to accept Bitcoin as payments. In order for widespread adoption to occur, Bitcoins should be stable, should be usable, and should be easily accessible by the general public.
Some advocates believe that there must be changes in the Bitcoin ecosystem in order to capture the mainstream users. For once, the concept should be simplified to earn the public’s trust and interest. At present, around 80% of the global population are still not aware of the existence of the Bitcoin.
Why Hackers Request their Victims to Pay Ransom with Bitcoin
Just recently, the series of attacks on private serves has stirred again a long-time discussion on the vulnerabilities of virtual currencies. Just in case you are still not aware, a dangerous malware has been released and spread over 150 countries around the world. The mechanism of the ransomware attack was quite simple. A personal computer will be infected with a virus, which will encrypt files until the owner pays a certain amount as ransom.
In the recent attacks, the people behind the ransomware are asking victims to pay around $1000 in Bitcoins. And it doesn’t end there. If the victim does not pay after three days, the ransom will be doubled, and after seven days and no payment has been received, all the files will be deleted from the computers. Meanwhile, there is no actual guarantee that the files will be restored again and will be safe if the victim pays the ransom.
The involvement of Bitcoin as a mode of paying the ransom again placed this digital currency in bad light. It becomes an easy tool for hackers because of its special features as a virtual currency. In sending money over digital channels, you can either use your credit cards or online banking, which is linked to your personal information such as your name and address.
But this is not the case with Bitcoin. All the dealings you make via this currency can be concealed. Remember, when you choose to trade in BTCs, a private key that is linked to your wallet will be used to create an encrypted code. This code will be publicly linked with the transaction but not with the people behind the dealings.
Hence, each deal is recorded in a public ledger, which anyone could access and check. Security experts believe that among the possible reasons why hackers and cybercriminals are using BTC as a mode of payment is because it is designed to conceal identity.
In the past, hackers preferred PayPal for their unscrupulous transactions, but because of stricter guidelines in using online platform such as PayPal, they now prefer Bitcoins.
Various Ways to use Bitcoin
1. Send and Receive Money
As a purely digital currency, Bitcoin is borderless. Because it’s available nearly everywhere, you can send money around the world just as easily as you send it across the room.
Really all people need to be able to send and receive money internationally using a smartphone and each party to the transaction needs to have a Bitcoin wallet. Sending money is nearly instantaneous — it can take between 10 minutes or up to a couple of hours for the transaction to be processed on the Bitcoin blockchain and then available on the other side of the transactions.
Even with a slight lag, this is still way faster than trying to do a complex international bank transfer or for using an international wire service such as Western Union.
Similar to buying gold or stocks, some people like to buy bitcoin as an investment in hopes that its value will go up. Historically, the price of bitcoin has been very volatile but overall, as mining has become more difficult and buying has become easier and more popular, the price has gone up over time.
There are a few different investment ideas surrounding the Bitcoin network and the bitcoin currency. Here are a couple of high-level ideas about why people around the world are excited about investing in Bitcoin.
3. Reserve Currency
A reserve currency is used to settle international trade and is viewed as strong and stable. Right now, the dollar is the world’s most dominant reserve currency, followed by the euro. At other times in history, other national currencies — and for a long time gold — have been used to settle international debts, hold as a long term store of value, and are used to denominate values for trade.
Some Bitcoin investors think that because of Bitcoin’s digital, open, decentralized, and apolitical nature, it has the necessary attributes to become a global reserve currency. Over time, as adoption and liquidity increases, the price of bitcoin could become less volatile.
4. Digital Gold or Digital Store of Value
Another potential outcome for Bitcoin is its use as a form of digital gold or a digital store of value. As more and more of everyday life unfolds on the internet, it’s only natural that people will start wanting to store value on a digital platform. This allows for easy access, greater liquidity, and the ability to take the value literally anywhere across both the physical and virtual worlds.
Having a single source of digital wealth as an idea is growing in popularity, and even despite its volatility on a month-to-month basis, bitcoin has shown that it is a good store of value over its lifetime.
5. Protocol Adoption
Bitcoin investors are also bullish on the idea is that the Bitcoin network or protocol will only continue to evolve, mature, and grow. As it does, and as more companies, projects, and people start using the network and building on the protocol, then it will continue to grow in value. A very basic comparison is often made between the growth of the internet and the potential for the Bitcoin to grow.
Bitcoin as a New Asset Class
One way to think about Bitcoin is as a new asset class. In terms of investing, that means Bitcoin and other cryptocurrencies can be useful as a hedge against investments in other asset classes, and also provide a useful diversification function in traditional investment portfolios.
Financial asset classes usually share characteristics among themselves, but they are distinctive from members of other asset classes in the way they behave. This makes them useful in a portfolio context because if one asset class is losing value, other asset classes might be able to withstand the losses, or if they are completely uncorrelated, some asset classes might increase in value as other assets lose value.
There will only ever be 21 million bitcoin ever produced. Now, this doesn’t exactly tell the whole story, because as you might remember from reading earlier, each bitcoin can be divided by eight decimal places, but the fact that Bitcoin has a set schedule for creation (the final bitcoin will be mined in 2140) and that there is no entity that can change to underlying Bitcoin network numbers means that it is a deflationary currency and that as time goes on it will become more scarce, and likely more valuable.
2. Adoption Curve
Studying previous technological shifts shows that there are distinctive phases of tech adoption: Innovators, early adopters, early majority, late majority, and then the laggards. This cycle has happened again and again and is particularly applicable to internet technologies and products.
Depending on where you think Bitcoin is in the technology adoption cycle should help guide potential investment decisions. While identifying the exact phase of Bitcoin’s trajectory is difficult — by all accounts, the Bitcoin network and the bitcoin currency are still in the pre-mass adoption phase.
3. Network Effect
Bitcoin benefits from a network effect. This effect will impact future growth in two ways. The first impact of the network effect is that new growth fuels future growth. Just like the way social networks grow — new users invite other users to interact with — new Bitcoin users help convert other users so that they can share value over the network. Since Bitcoin’s total addressable market is the whole world, there is really no limit to the potential spread of the network other than basic infrastructure.
Bitcoin’s network effect also works to keep it competitive in the crypto market place. As mentioned earlier, Bitcoin is the oldest cryptocurrency and enjoys a first-mover advantage, but it also has a very active developer community (not to mention its solid design foundation) which means that Bitcoin continues to be number one cryptocurrency by market capitalization. The longer Bitcoin stays in this position, the more it reinforces its dominance. Ethereum is the second-place cryptocurrency by market cap, but it has completely different economics.
You can read more about Bitcoin at Binance Academy.
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The blockchain technology is really a “game changer” for all the web and business sectors it has been integrated. It improves both the security and efficiency of these systems. Blockchain being a decentralized database has many advantages that ordinary databases don’t have. That is why more business sectors will utilize the power of blockchains to improve the nature and standards of their business in the nearest future. You can check out the future of blockchain and its use cases.
Do you any question about the topic of this article? Feel free to drop it in the comment section below. Enjoy!
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