The root of all blockchain evolution, Bitcoin, was created solely for the purpose of acting as an independent currency which existed entirely over the Internet. The definition of truly independent currency implies decentralized, borderless, open, censorship-resistant and neutral currency. (defined by Andreas Antonopoulos and widely accepted) To achieve such potential, the underlying blockchain was kept heavily confined and restricted in its operability to ensure maximum robustness against any type of exploitation. Technically speaking, to minimize the attack vector. Security at the cost of scalability, applicability and convenience. Bitcoin maximalists to-this-day believe bitcoin to be the only truly independent currency.
With the growth in userbase, the limitations of Bitcoin turned relevant. The difference in opinions and ideals led to division of the Bitcoin community. The community willing to treat bitcoin as a currency over store of value, being concerned over the rising transaction fees on bitcoin network, proposed a change in protocol to increase the block size limit. This network was called Bitcoin Cash(Aug 1st 2017), a better transactional currency. Adaption of the proposed protocol resulted in a split in bitcoin network with miners divided in two different blockchains – following two different protocols; aka the hardfork. Bitcoin Cash later hardforked into Bitcoin ABC– Adjustable Blocksize Cap and Bitcoin SV– Satoshi’s Vision, over further modification in block-size, in November 2018. Bitcoin Gold was another hardfork of bitcoin which was purposed for restoring mining functionality with GPU’s in place of the dominating specialized ASICs used to mine Bitcoin.
One of the most performing blockchain Ethereum(July 2015) leverages blockchain technology for distributed computing. Ethereum allows for smart-contracts, the programmable transactions which trigger over certain conditions. Programmable logic powered by blockchain opens up room for decentralized applications. Opening up such feature also creates potential for exploits, which have come to surface in past. However since it wasn’t created to serve as a currency, the damage due to exploitation depends on the stakes of involved use case. One major event of an exploit in a smart contract was in The DAO– Decentralized Autonomous Organization project in June 2016 where US$50 million were stolen. The community divided over a consideration to re-appropriate the exploit by reversing back to previous state of blockchain. The Ethereum network continued over the forked blockchain that reversed the exploit losses, while the original blockchain was termed Ethereum Classic.
On the parallel grounds, Litecoin(Oct 2011), forked from Bitcoin, with (then) faster transaction confirmation and hashing algorithm scrypt (as compared to SHA-256 in Bitcoin) was released. Namecoin(Apr 2011), another Bitcoin fork, had the functionality to store data on blockchain, mainly to create censorship-resistant top level domain .bit, was released. First cryptocurrency linked (pegged) to USD, Tether(Jan 2012) a stablecoin was conceptualized. Ripple(2012), then OpenCoin, a payment protocol was released. PeerCoin(Aug 2012) utilized both proof-of-work and proof-of-stake consensus. Bytecoin(Jul 2012) the first CryptoNote based cryptocurrency providing absolute anonymity using ring signature and one-time addresses was released. Monero(Apr 2014) , a consumer grade hardware supported mining cryptocurrency focused on fungibility, privacy and decentralization was forked from Bytecoin. The meme culture’s “joke currency” Dogecoin(Dec 2013) developed its online community. Dash(Jan 2014) a form of Decentralized Autonomous Organization was released, forked from Bitcoin. Privacy focused cryptocurrency Zcash(Oct 2016), where transactions are auditable but disclosure remains under participant’s control, was released.
The next wave of coins or tokens were introduced in the market after a massive adaption of Ethereum for decentralized projects. Ethereum powers an open source development community over github where major development takes place under EIPs or Ethereum Improvement Proposals. The standardization of silo’d protocols takes place whilst widely accepted and supported protocols are released as ERC Ethereum Request for Comment protocols. Certain such protocols like ERC20 for fungible token offerings, and ERC721 for non-fungible token offerings opened up opportunities to create new tokens over the Ethereum blockchain itself, leading to the wave of token offerings. Starting with raising funds and engagement for projects developing the blockchain infrastructure, the wave expanded to wide range of start-ups relevant and irrelevant to blockchain. Essentially, the technology opened up a new vehicle for fundraising, albeit, pending compliance. There exist a major population in the Ethereum community that believes in growing Ethereum as a platform for blockchain applications, as opposed to creating a different blockchain, with a purpose to leveraging and adding to the robustness and network effect of Ethereum. The following foundations follow this vision.
Ethereum Foundation :
Founded by Vitalik Buterin, one of the creator of Ethereum and a former active member of Bitcoin community, Ethereum Foundation focuses on eliminating the major frictions of Ethuereum to keep up with the rising adoption of the platform, Currently the focus being the community management, and protocol development for scalability.
Consensys is a start-up incubator for blockchain based projects, focused entirely over Ethereum blockchain. It provides development libraries, tutorials and further incubatory support for upcoming projects.
Many organizations and other blockchain applications have developed over Ethereum platform. The most relevant ethereum based projects follow.
DAO with a lending platform and a stable coin Dai was introduced in 2015. The Collateralized Debt Positions in MakerDAO platform provides loans in form of stablecoin Dai, pegged to USD, accepting certain cryptocurrencies as collaterals. The loans are over-collateralized to support the global settlement mechanism which deals with the volatility of cryptocurrency used as the collateral.
Basic Attention Token (2017)
Focuses on decentralizing the digital advertising space. With BAT token being the currency between publishers, users and advertisers. The project offers Brave browser focused on privacy. Moreover, the browser also rewards users in BAT for their ‘attention’ to advertiser.
A decentralized prediciton market which leverages game theory and crowd-sourcing ‘claims’ from users, run by a value system of Augur Coins aka REP. The coins allow people to report or weigh outcomes of events.
An identity management platform purposed for digital transactions. uPort has been used for digital identification of Switzerland citizenship. It remains one of the promising ID management platform for future usecases of blockchain where single identity verification can be leveraged universally.
The infamous cat-breeding apps is supposedly one of the first blockchain based game allowing the trade of cryptocollectibles ever. Despite having no legitimate use case, it acted as a significant proof-of-concept for non-fungible tokenization.
To overcome the frictions of Ethereum, there have been alternatives to the platform, which again lead the convenience at the cost of core security and decentralization principles. EOS(2017) is one such platform that uses delegated proof of stake (DPoS) consensus mechanism allowing the platform to operate at no transaction fees, while compromising absolute decentralization. NEO (2016), then known as AntShares is an Ethereum alternative dominated by the Chinese community. Waves(2016), another alternative supported by Russian community claims to be the fastest decentralized blockchain.
Coming to 2019, one of the most promising financial use case of blockchain is rather evolutionary than revolutionary.
Tokenization and globalization of assets.
With the wave of ICO’s in 2017 and early 2018, the regulatory institutions world-wide actively got involved in the scrutiny of token offerings. Whilst many offerings were deemed non-compliant, which were being offered as Utility Token Offerings, the regulatory framework paved path for compliant fund-raising via Security Token Offerings. Still under a native stage, the aim forward is to incorporate blockchain in the markets to eliminate existing frictions and open up the traditionally illiquid assets for retail investors. With the blockchain technology and features of token offerings, an illiquid asset can be tokenized with fractional ownerships and can be allowed a partial trade. Major asset-class under such opportunities are real-estate, fine-arts and private equity. Tokenization of such assets, despite having the technical infrastructure ready, lacks the regulatory framework. Currently, pioneers have tokenized assets for validation purposes whilst opening such features at scale still remains a future distant enough. ( To be continued )