17th June 2018

17 June 2018 

Musings.......

Well as promised in my previous flirtations with writing, I have decided to keep to one topic. What has fascinated me for sometime now are the words Cryptocurrency. I have been hearing this word from the beginning of 2014, however had no idea about what it is or how it works. Another word I have been hearing for sometime now is Blockchain.  I read somewhere recently that The World Economic Forum report from 2015, predicted that by 2025 ten percent of global GDP would be stored on blockchain technology. 

So what is this blockchain and how will it be influencing our lives in the near future? 

A blockchain is a continuously growing list of records called BLOCKS which are linked and secured using cryptography. 

Each block contains a cryptographic hash of the previous block ( a cryptographic hash is a mathematical alogarithm that maps data of arbitrary size to a bit string of a fixed size- a hash- and is designed to be a one-way function, that is a function which is infeasible to invert ) a time stamp and a transaction data. ( Trusted Timestamping is the process of securely keeping track of creation and modification time of a document. Security here means that no one -not even the owner of the document - should be able to change it once it has been recorded provided that the timestampers integrity is never compromised.) 

Proof of work schemes and Proof of stake schemes are various time stamping schemes to avoid need for a trusted third party to timestamp transactions added to the Blockchain ledger. 

Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin. Blockchains are secure by design is an example of a distributed computing system with high Byzantine fault tolerance ( BFT is the dependability of a fault tolerant computer system, where components may fail and there is imperfect information on whether the information is failed ) 

This makes blockchains potentially suitable for 

• recording of events, 
• Medical records 
• Record management activities like identity management 
• Transaction processing 
• Document provenance 
• Food traceability ( barcodes/RFID) 
• Voting. 

The opportunities are overwhelming and seeing this list we come to the conclusion that Blockchain is the next revolution on which the world will be depending upon in a big way in the not so far future. 

On the flip side, many feel Blockchain technology will become obsolete. The most notable critic is Hungarian born US geopolitical forecaster and strategist on international affairs, George Friedman.  He believes that the Russian, Chinese, or the US intelligence will be able to decrypt Blockchain. 

Hackers have already stolen $20 million in either from poorly configured Ethereum- the second largest cryptocurrency by market capitalisation- mining rigs and third party applications. 

The term Blockchain 2.0 refer to new applications of the distributed Blockchain database, first emerging in 2014. The Economist describes blockchain 2.0 as a " programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reaches a certain level". Blockchain 2.0 enables "exchange of value without powerful intermediaries acting as arbiters of money and information". They are expected to enable excluded people to enter the global economy, protect privacy of participants, allow people to monetise their own information,  and provide the capability to ensure the creators are compensated for their intellectual property. 

Blockchain 2.0 has the potential to solve the problem of social inequality by "potentially change the way wealth is distributed". Hence we could see a complete socio-political upheaval of enormous proportions once this gets implemented all over the world. 

Currently there are three types of Blockchain -

• public 
• Private and 
• Consortium blockchains. 

What is Litecoin ? 

Litecoin is peer to peer cryptocurrency and open source software project released under the. MIT/X11 license. Creation and transfer of coins is based on an open source cryptographic protocol and is not managed by central authority. The technical details is identical to the Bitcoin. The difference from bitcoin being, that Litecoin aims to process a block every 2.5 minutes, rather than Bitcoins 10 minutes and hence faster transaction confirmation. 

Vertcoin, Emercoin, Namecoin, Peercoin, Syscoin to name a few are different examples of peer to peer cryptocurrency. 

The block time is the average time it takes for the network to generate one extra block in the Blockchain. Some blockchains create a new block as frequently as every five seconds.  By the time of block completion, the included data becomes verifiable. This is when practically the  money transactions takes place which means that a shorter block time means faster transactions. 

What is mining ? 

In cryptocurrency networks, mining is a validation of transactions. For this successful miners obtain new cryptocurrency as a reward. 

The rate of generating hashes have been increased by use of specialised machines such as FPGAs and ASIDs running complex hashing alogarithms. This arms race for cheaper yet efficient machines has been on since the first day the first cryptocurrency, bitcoin was introduced in 2009. 

With more and more people venturing into the world of virtual currency, generating hashes for the validation has become more and more complex over the years, with miners having to invest large sums of money on employing multiple high performance ASICs. 

Thus the value of currency obtained for funding the hash often do not justify the amount of money spent on setting up machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them. 

Given the economic and environmental concerns associated with mining, various "miner less" cryptocurrencies are undergoing development. 

The Chinese government has halted trading of Virtual currency, banned initial coin offerings and shut down mining. 

Iceland has become a haven for cryptocurrency miners and they have cheap electricity. This is from the fact that most of the electricity comes from renewable energy sources 

Cryptocurrency Wallet stores the public and private keys or addresses which can be used to receive or spend the cryptocurrency. With the private key, it is possible to send and receive currency to the wallet and to write the public ledger. 

From the Indian point of view, Blockchains will be in use in sectors such as Banking, Media, Telecom, Travel and Hospitality and PSUs. 

Healthcare sector will be impacted in a big way- 

• certify accuracy in procedures,
• Provide efficient support
• Secured fund transfer 
• Transparency in healthcare 
• Provide high yield 

The RBI tested Bitcoins Blockchain technology successfully recently. 

Hence, all fields and walks of like as we know today could be transformed by the use of Blockchain technology and comes with great promise. 

One this is for sure, Blockchain will do to the society what the new steam engine, or the Internet did to their respective societies.  Hence, to remain relevant in this new world adapting seems to be the only way. 

Food for thought.......

RC