“Bitcoin is a technological tour de force.” — Bill Gates, co-founder of Microsoft, investor, and philanthropist.
Over the last few years, two unavoidable buzzwords in technical or investment conversations have been “blockchain” and “bitcoin”. Blockchain and Bitcoin are polarising topics with most people being either extremely bullish or bearish on these technologies. In this blog, I’d like to share my position, and my stand on these technologies.
Before we do that, let us first understand what these technologies are. Bitcoin is simply a digital currency or cryptocurrency . The blockchain is the ledger behind this currency. The blockchain essentially keeps a record of each transaction involving the currency. The special thing about this ledger is that each and every user has a copy of the ledger. This ensures that it is near impossible for one person to fake a transaction and claim what is not his or her’s. Each blockchain has its own consensus algorithm which helps ascertain if a transaction is legitimate or not. This is what the basic cryptocurrency looks like.
Since Bitcoin, currencies have added two key features to their blockchains — smart contracts, and decentralized autonomous organizations. Smart Contracts are contracts between multiple users embedded into the blockchain that can be triggered by some event. One example is using a smart contract, one can automate monthly payments to another user. Decentralized Autonomous Organizations (DAOs) are — in a very distilled, non exhaustive definition — a collection of smart contracts that loosely binds users into an organization with various relations. Bitcoin, as an example of a DAO, functions as a bank which does not have have any owners, employees, or branches, but still provides all the utilities of a bank.
Now that we’re up — to — date with the definitions and the jargon, let’s talk why I am bullish about blockchain. I see a lot of potential for disruption in this technology as it matures.
What sort of disruptions are we at Mehta Ventures are looking at:
– Bitcoin can handle the processing of 3–7 transactions per second (TPS), Visa can handle about 1,600 TPS, the EOS blockchain has at its best time handles nearly 4,000 TPS (eosnetworkmonitor.io) Let that sink in. The blockchain can handle double the TPS as the Visa system can, and it’s still developing. We see this changing the financial landscape because it is a superior technology in speed, reliability, and security. The aim of the EOS platform is to provide decentralized application hosting, smart contract capability and decentralized storage of enterprise solutions that solve the scalability issues of blockchains like Bitcoin and Ethereum, as well as eliminating all fees for users.
– Ownership and Digital asset management will change. CryptoKitties are collectible digital assets on the Ethereum blockchain. They have been created on the blockchain, exist there, are generated, and traded there. They have shown that digital assets can live on the blockchain and true digital ownership is possible. As we go ahead, the technology will become the de facto for DRM. We will also see assets specifically created for and distributed through the blockchain.
– Currently the blockchain ledger needs heavy computing power and memory. The technology is however improving to support machines with lesser resources. The day is not far off when the blockchain will be integrated into the mobile OS of each individual and is ubiquitous technology. That is when the mobile phone will truly become the wallet for each individual.
“Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi drivers work with the customer directly.” — Vitalik Buterin, co-founder Ethereum and Bitcoin Magazine
With these improvements in speed, asset management, and ubiquity, we will start seeing innovations and applications that we can not even currently envision. That is why we are bullish on the blockchain. Its not a panacea. But the problems it solves, it solves them very well.
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