Blockchains, cryptocurrencies and decentralisation are already disrupting major industries and many long standing traditions at the core of our world’s business and social systems. These technologies add transparency and dependability to the storing, sharing and processing of information, plus often lower costs and empower people in the process too.
We at Crucial Web have been involved in the cryptocurrency community since early on (though, sadly, we didn’t become overnight millionaires like so many did!) and we feel real excitement at working with innovative blockchain solutions. We know that we can dramatically and ethically improve our world through wise use of decentralised technology, which we see as forming a significant part of the future of online commerce, communication, marketing and beyond.
Database: A (computerised) system used to store, arrange and manage information in useful ways.
Decentralisation: The process of distributing power within a network and/or organisation such that there is no central element that can use authority to overpower the other elements.
Blockchain technology has evolved since the mid 1990s and is, in essence, a powerful way of running a decentralised, computerised database. Information is stored in records that are then combined as ‘blocks’
of records which are then linked to one another to form a ‘chain’
. Building and managing the blockchain database is handled by any number of remotely located computers working together, but without any one of them being a centralised ‘leader’ of the process.
Data stored in a blockchain is usually public and is resistant to being modified without agreement among the many distributed computers that combine to run the system. Typically, any retroactive editing of the records in the blockchain ‘ledger’
(database) results in all subsequent records also needing to be updated too by all participating computers.
Each computer must all run the same software but may be operated by people who do not personally know or communicate with each other. The software manages a process of reaching ‘consensus’
between the computers as to what the correct data is within the blockchain database at any given moment. Typically, the network’s operators are rewarded financially for their participation in the process and this occurs automatically as part of the normal operation of the blockchain software.
At first glance this may not sound hugely revolutionary, but in practice has allowed a diverse range of people, globally, to co-create a wide variety of applications that use blockchains to solve some of humanity’s challenges in exciting new ways. The first blockchain based application was Bitcoin
, the famous cryptocurrency (digital money token), which has proven to be a reliable way to process large scale financial transactions in a transparent and low cost way.
More recent blockchain projects have focused on both improving the digital currency concept and also solving a variety of other challenges in many other fields. Notable blockchain projects have included solutions for such varied challenges as improving security in political elections and running social networks - right through to tracing the supply chain of products to ensure standards of ethics are upheld.
Some common features of blockchain technologies are:
Decentralised network structure (topology).
A consensus algorithm that manages system resources and storage/retrieval of information..
Open source software to run the system – freely available for all to use. & many others.
Publicly accessible computer hardware infrastructure to facilitate interaction with the network.
An inherent financial element that rewards network operators for their participation.
Permissionless (Public) database access – allowing anyone to add applications to the system.
Changes to the system are handled by voter majority and the introduction of software ‘forks’. (Network operators ‘vote’ to accept or reject proposed changes by either running the new version of the software or not).
‘Smart Contracts’ that allow for transparent and automated handling of real world contractual obligations with less risk of malfeasance.
Benefits of Blockchain Technology
Blockchain’s ability to empower people and inspire mass collaboration is allowing for many novel solutions to complex global challenges. While many blockchain projects are public, they also offer great advantage to private groups too. Businesses can tap into the power of blockchains directly by using public blockchain services or by creating their own private (permissioned) blockchains.
New benefits may yet emerge, yet the following are common ones found in most blockchain projects:
Data Integity: Low cost of data auditing.
Low cost of data handling: Including transfer and backup.
Flexible use of computing power: Often in the public interest.
Transparency & Immutability of data: Allows for uncensored communication and data storage.
Equality: Decentralised systems and services can go some way towards levelling the playing field across many industries by taking power away from central authorities.
Reliability: No central point of failure.
Centralised vs decentralised
Centralised networks and systems rely on power being focused into one or more controlling entities, which may be a central computer in the context of computer networks or some kind of governing body in the context of human societies. Subordination and hierarchy are inherent to centralised systems, with the less central ‘nodes’ in the network tending to be less empowered than those in positions of authority. A benefit of centralisation is found in the increased speed of decision making it can allow (in some circumstances) and so centralisation may sometimes be necessary in order to achieve certain objectives (for example, when needing to calculate trading activity at very high speed). The costs of centralisation are wide reaching and include an increase in the risk of systemic failure and a decrease in the potential for change within a system or group, which also often limits potential for diversity and overall growth/sustainability.
Decentralised networks and systems are designed to ensure that, as far as possible, power and decision making is not centralised and controlled by a singular entity or group of central entities. Decision making takes place across the entire network and each member (node) of the network can have input into the future of the entire network. Decentralised networks may, however, include a degree of centralisation and in the case of blockchains this tends to mean that there are different types of nodes on the network that perform different roles. Special computer nodes (called ‘Miners’ or ‘Witnesses’) have responsibility for keeping the network running, while the other nodes are simply users of the network.
There is, additionally, another possible form of network layout too, known as ‘distributed’ networks. These are even more decentralised than mere ‘decentralised’ networks in that each node or member of the network in not a mere user and is required to participate in the running of the network itself. This design maximises the resilience of the network and potentially spreads power even more widely – however, current levels of technological development make this a less common design, so it is something to watch out for in the near future.
Generally, decentralised systems mean a lower barrier of entry for participation than tends to be the case with many centralised systems – particularly commercial and financial systems. The underlying dynamic of our inherited societal structures and establishments has often been one of competition and even a scarcity mentality that often results power being deliberately only made accessible to a chosen few. Decentralisation provides an opportunity for this to change and for a much larger number of people to have an increasing say in how their information is used, how their lives are shaped and ultimately in how the world is run too.
Currency: A store of value and medium of exchange that simplifies the process of trading.
Cryptography: The art and science of creating (and solving) codes to allow secrecy and privacy while communicating information.
The term ‘cryptocurrency’ refers to a system for digitally storing value that uses a combination of cryptography and other technologies, including blockchains. Practically, this translates to a form of digital money that can be exchanged and traded with other people using smartphones and personal computing devices, securely and for little or no cost. Most cryptocurrencies (or ‘Crypto coins’) operate on public blockchains, meaning that all transactions are publicly visible, although in most cases there is a degree of anonymity involved.
Cryptocurrencies represent a relatively new form of money which is not directly controlled by a central bank, government or other such group. Instead, the monetary system and it’s governance are managed by it’s users. Power to guide the rules of the system is allotted to the users in one of several possible ways (specifically, the form of blockchain algorithm that is in use – see below).
The first cryptocurrency was Bitcoin, although there are now several thousand alternative cryptocurrencies (sometimes known as ‘alt-coins’), each with their own strengths and weaknesses. Some crypto tokens are only intended to act as a form of money, while others also act as a utility token that enables access to services or other benefits. In general, all cryptocurrencies are stored in a specialised form of software or hardware ‘wallet’ and while it was originally the case that users would need a specific Bitcoin wallet to hold Bitcoin and other specialised wallets to hold other coins – there are now numerous software applications that can hold multiple coins simultaneously.
The value of crypto tokens fluctuates constantly in response to real-time trading that takes place on numerous cryptocurrency exchanges around the world.
Cryptocurrency prices can be volatile and have historically often risen and fall dramatically over short spaces of time – allowing for huge profits and losses to be recorded along the way. As cryptocurrency adoption increases and more money moves away from traditional ‘fiat’ currencies and into crypto, price volatility is expected to decrease.
Trading typically occurs between individuals and organisations either one-to-one via private agreement or more publicly through one of many online trading exchanges. These trading systems operate in a similar way to traditional currency exchanges and often provide their users with a variety of trading tools and a large number of different tokens to exchange.
Transfer of tokens between users of a blockchain based cryptocurrency may be nearly instant, take several seconds or in some cases may take a few minutes. The time taken depends on various factors, including the overall level of network activity and the resulting processing load being placed on the network at the time. Transfers may incur a small network fee, however, some cryptocurrencies make transfers totally free. Most commercial crypto exchanges will charge users a fee for each trade they make, though these fees tend to be quite low. Zero fee exchanges also exist, as do totally decentralised exchanges.
Decentralised crypto exchanges promise additional security to users due to the absence of a single point of failure and that tokens are not held by an intermediary who could misuse them. This is important since, historically, several exchanges have collapsed or been the victim of hackers - leaving many users out of pocket. Today, the larger exchanges are often backed up by forms of insurance to prevent customer losses in the event that the exchange experiences a catastrophic event!
Applications of blockchain technology
There are many diverse ways that blockchains can be used and a review of the many whitepapers (project plans) that have been published in the last few years makes clear that the majority of organisations could decentralise and be run from a blockchain.
There are over 2000 cryptocurrency projects currently active and many can be tracked via Coin Market Cap
and other similar sites. A small selection of the aims of various projects include the decentralisation of:
Personal Banking - including loans and mortgages.
Marketplaces - including novel ways of trading solar and alternative energy.
Computer Operating Systems.
Social Networking & Social Media Platforms.
Property ownership records.
Education and qualifications.
General Distributed Application development and hosting (DApps).
Gold and precious metal trading.
Examples of decentralised applications (DApps)
A huge array of Distributed Applications already exist across numerous blockchains. DApps are just like other apps you may use online, but they benefit for the unique features of blockchains too and so often provide new angles on old ideas. There are currently over 3000 different DApps listed at State Of The Dapps
across diverse categories, including replacements for existing centralised services such as Facebook and Youtube. Many of the more successful among the current wave of decentralised applications provide solutions for the following categories:
Gaming & Gambling.
The accessibility of developing applications for use with blockchain technology, in concert with the ease of receiving payment for doing so is very attractive to programmers. We expect to see the list of available DApps continuing to diversify and expand into the foreseeable future.
Decentralisation in Marketing & eCommerce
The application of blockchains to marketing is still in the early stages, however, it is clear that there is great potential for using them to help the promotion of products and services. There have been several projects that aim to allow website owners to monetise their site with advertising processes that utilise cryptocurrencies and novel reward systems based on user engagement and activity. The connection of advertising to crypto and blockchains will no doubt increase in prominence as the industry expands over the coming years.
Blockchain based social networking solutions such as Hive
(Previously known as 'Steem') already allow content creators to publish text and multimedia, including advertising material, while being paid by the network for doing so. Hive also offers Smart Media Tokens (SMTs) and community features, which allow organisations to launch their own tokens and build highly engaged communities surrounding their own projects that reward their customers and supporters directly in novel ways.
Beyond technologies that directly aid in marketing, there are also gains to be made in eCommerce through accepting cryptocurrency payment options. The low transaction costs and high security makes this an attractive alternative to traditional payment gateways and banking systems.
CRUCIAL Cryptocurrency & Blockchain Services
We at Crucial Web intend to support ethical crypto and blockchain projects that stand a chance of making life better and ideally that are profitable too! We are happy to consult with projects and organisations who are curious as to how they might benefit from these new technologies and also provide a whitepaper review service too for new crypto projects seeking feedback.
We fully support many cryptocurrencies and related service providers when developing eCommerce websites too, so receiving crypto payments in your online shop can be an effortless and simple process.