☑ Blockchain: The good, the bad and the ugly🔗

 

I get asked a lot to explain what blockchain and cryptocurrency are.

What are its benefits and risks? How will it affect us? Although it would

take a book to really explain in great detail all of this, I've put together

this short post in hopes that this helps somewhat. There is a lot more to

this tech, but it requires a lot of background understanding, but, at the

core is what is listed below.

Simply put, blockchain is basically a distributed database that cannot be

tampered with, and tokens (Bitcoin) are generated by this blockchain. It

is hacking and counterfeiting proof.

That's the super short description. Now, assuming we are talking about

Bitcoin and its blockchain, here are some of its properties.

 

Pros:                 

Bitcoin is decentralized, meaning it is not housed in one location.

Bitcoin does not have a central authority. No government or company

owns or runs it.

There is no central server; the bitcoin network is peer-to-peer, meaning

everyone can participate in the network.

There is no central storage; the bitcoin ledger is distributed.

The ledger is public; anybody can store it on their computer.

There is no single administrator, the ledger is maintained by a network

of equally privileged miners, that validate transactions.

Anybody can become a miner.

Any additional transaction blocks to the ledger are maintained through

competition. Until a new block is added to the ledger, it is not known

which miner will create the block.

The issuance of bitcoins is decentralized. They are issued as a reward

for the creation of a new block.

Anybody can create a new bitcoin address (a counterpart of a bank

account) without needing any approval.

Anybody can send a transaction to the network without needing any

approval; the network merely confirms that the transaction is legitimate.

Anonymity (or pseudo-anonymity) of a person is maintained on a

blockchain.

 

Definitions:            

Blockchain  

Public record-keeping book, database or ledger that

records transactions.

 

Block-blockchains  

Are broken up into blocks. Each block containing a

list of transaction made duringa time period and each block containg a

cryptographic key or hash of the previous block up to the genesis block

of the chain.

 

Nodes 

 Network of communicating nodes, or servers, running bitcoin

software maintains the blockchain.

 

Network nodes  

Can validate transactions and then add them to their

copy of the blockchain, and then broadcast these ledger additions to

other nodes every 10 mins.

 

Mining 

In order to determine randomly who gets to write a block to the

blockchain nodes or miners, do proof-of-work. This PoW requires miners

to find a number (or lottery) called a nonce.

 

Wallets 

Contains both private and public addresses for transactions,

which are like an email address and password.

 

Tokens

          Entries on blockchain that represent transactions and can be

traded.

 

Cryptocurrency  

Tokens traded as money.

 

Smart-Contracts 

Entries on blockchain that are programmable code

and that represent and behave as contracts.

 

Cons (Criticism):                

Forking debasement, meaning anyone can copy the blockchain code

and create their own blockchain and money.

Fraud at Exchanges, with crypto keys and funds easily stolen or

manipulated.

Mining pools controlled and manipulated by big tech and people with

money.

Energy consumption. The amount of energy needed to mine crypto is staggering!

Open-source developers need approval by programmers in order to

make changes by the people in charge of the project. Those that

approve can be corrupted and can add their own code.

Over 50% node attack can change ledger contents. This can happen if all

miners collude with each other.

Blockchains can be modified via forking with additional layers, much

like what happened to bitcoin in 2017 and when the Lightning Network

2nd layer protocol was added, that allowed the bypass of blockchain

consensus.

There are more... just to name a few.

 

There are institutional blockchains and variants I call hybrids. Here are

some of the features:

Hybrid systems blockchains are centralized.

Hybrid systems have central authorities.

Hybrid systems are not P2P and have central servers.

Hybrid systems storage is distributed only on centralized servers.

Hybrid systems storage is possible if you are a node, and nodes/servers

are housed in central locations and expensive.

Miners are servers/nodes and they can all be pooled, managed and

centralized.

There is no mining in Hybrid systems and if the node belongs to a bank

or any other central system.

In a hybrid system the centralized system is not obliged to use proof of

work for competition.

In Hybrid systems, they can mint as many coins as they wish anytime

they choose.

In Hybrid systems, you only get public address key (bank account) but

not the private key.

In hybrid systems, there may be a need to be approved or some contract

fulfillment before a transaction can take place and recorded.

In hybrid systems, there is no anonymity.

And then there is the big issue l have, is what happens to your

cryptocurrency if it is delisted from all exchanges, blocked at vending

machines and blocked by online merchants? Especially when the central

banks create their own version of crypto in a cashless society? 

Whata happens if the entire supply chain becomes digitally inaccessible to your

crypto?

Applications - such as human capital bonds.

Commoditization and tokenization of nature.

Tokenizing behavior such as workforce and educational space.

Buying and selling crypto as "gas" for smart-contract networks, such as

Al-as-a-Service (AaaS) that requires crypto ETH for fulfillment of Al used

in surveillance state operations and systems.

Again, these are just some of the pros, cons and concerns of

blockchains. There are many more, but it requires more discussion.

....end