Cryptocurrency basics – 3 key characteristics and why they matter

In order to believe in the crypto revolution, it’s important to understand the fundamental aspects of cryptocurrencies and blockchain technology that makes it so revolutionary. The 3 key characteristics of cryptocurrencies are that they are trustless, immutable, and decentralized.

Bitcoin: our first and most prominent example

Bitcoin is a cryptographically secure currency that was created to be used universally for payments, similar to cash. It was also created with the vision of Bitcoin replacing of all forms of fiat currency in mind.

As Bitcoin is the first cryptocurrency ever created, it is the first to exhibit the 3 key characteristics we will cover later on.

Because the Bitcoin code is open source, people have been creating their own versions of Bitcoin, a.k.a. “Alt-coins” for the past few years. The vision of Bitcoin replacing all fiat currency is becoming less realistic with bitcoin’s current dominance at 45% (less than half) of the total cryptocurrency market. 

As you can see from the trend, there have been some tremendous altcoin rallies that have chopped Bitcoin’s dominance down over time, bringing in a number of other strong projects to the market.

However, bitcoin and altcoins share very similar blockchain technology and the 3 key characteristics also apply across the board (in most cases).

These 3 characteristics we will discuss are the answers to the questions you might often hear from skeptics such as: “what makes cryptocurrencies so special?” and “How are cryptocurrencies any different than fiat currencies?”

1) Trustless

Bitcoin is trustless because it was designed in a way that nobody has to trust anybody else in order for the network to function.

Every form of currency before bitcoin required a central authority that you had to trust in order to use it. In all cases, that central authority becomes the central weakness that leads to the demise of the currency.

With bitcoin, each part of the ecosystem validates what the other parts are telling it without needing to trust anybody. If you broadcast a bitcoin transaction, all nodes receive it and verify that the signatures are valid. If the signatures are not valid, they discard the transaction.

Everyone on the network has a copy of the ledger so we no longer need to trust a single entity/organization/third-party because there is no need to trust when you can just verify against this ledger because you have a copy of it. The decentralized ledger is known as the blockchain.

The incentivization of individual network actors though the proof-of-work (PoW) consensus algorithm is one of the most groundbreaking ideas in modern economics.

“The incentive may help encourage nodes to stay honest. If a greedy attacker is able to assemble more CPU proof-of-worker than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins.

He ought to find it more profitable to play by the rules, such rules that favor him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.”

— Satoshi Nakamoto

Although we are still figuring out exactly how we use cryptocurrencies and and what for, they are here to stay. Aside from the other major benefits of cryptocurrencies and blockchain tech, solving the centralized trust issue alone is a big enough innovation to give crypto staying power.

2) Immutable

“Immutable”, in its simplest sense, means “cannot be undone.”

Immutability in regards to blockchain and cryptocurrency should follow 3 principles:

  • It should be highly improbable or difficult to rewrite history.
  • It should be impossible for anyone but the owner of a private key to move funds.
  • All transactions are recorded on the blockchain. (to guarantee the above 2 principles)

 

When we want to check how money has been spent from our bank accounts, we check our transaction history with the bank. We trust our banks not to fabricate transactions or manipulate our money as we trust them to deliver our transactions to recipients.

If there are fraudulent transactions, the bank also needs to be trusted to change them and fix the situation.

Since the elements of centralization and trust are removed from cryptocurrency, there is no longer a third party for us to trust to do these things. Therefore, transaction records are made public and unchangeable (immutable).

Although it isn’t impossible to change the transaction ledger, cryptographic security makes it extremely difficult. It require you to compromise the entire network of cryptocurrency users.

3) Decentralized

Since “decentralization” is such a relevant buzzword in the crypto community, it’s important to define it well. It can take on different meanings.

“Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer).” – Vitalik Buterin

So, why is decentralization useful in the first place?

  • Fault tolerance: decentralized systems are less likely to fail accidentally because they rely on networks of separate components.
  • Attack resistance: decentralized systems are more expensive to attack and destroy or manipulate because they don’t have vulnerable central points that can be attacked at much lower cost than the surrounding system.
  • Collusion resistance : it‘s harder for members of decentralized systems to act in ways that benefit them at the expense of others. On the other hand, corporations and governments collude in ways that benefit themselves but hurt others all the time.

 

With central banks and governments, the supply and creation of money through mints and interest rates are controlled only by the banks. Users of fiat currencies are at the mercy of the central banks’ money-printing whims.

The problem in this world is to avoid concentration of power — we must have a dispersion of power .

— Milton Friedman

If you are not yet outraged by the central banking money-printing scam, it is helpful to think of it as a hidden tax when they print and destroy the wealth you have stored in those fiat currencies.

With cryptocurrency however, no individual or consortium is able to affect the supply of currency or exert significant influence over it without the approval of the majority.

Maximum Supply & Infinite Supply with pre-defined production

Many top cryptocurrencies such as Bitcoin, Litecoin, and Dash have a maximum supply, making them deflationary by nature. Any increase in the demand or adoption of the cryptocurrency will cause a corresponding increase in the price.

Most of the other major cryptocurrencies such as ethereum, monero etc., that have infinite supply have pre-defined rules for how many coins will be produced each year. Therefore they are predictable in nature. If these currencies are successful in the long-term, it’s highly unlikely that the rate of production of more currency will result in any sort of inflation.

The increasing demand, adoption, and destruction of coins in the form of lost private keys will likely offset any moderate increase in supply due to PoW/PoS mining rewards.

Conclusion

So there you have it, the 3 key characteristics that make cryptocurrencies and blockchain technology so revolutionary. Plus the bonus economic characteristic of being deflationary through limited supply.

Next time anyone asks you those pesky questions like “what’s so special about crypto?” or “what makes them any different”, you can take them to school on the 3 key characteristics: trustlessness, immutability, and decentralization.

Hold On for Dear Life

BLUZELLE ($BLZ) to disrupt data storage industry leaders Dropbox & Google?

As we know, blockchain tech has many use cases and the potential to replace a long list of existing technologies. One of these is data storage and that’s exactly what Bluzelle is focused on.

bluzelle banner

BLUZELLE’S GOAL

Bluzelle wants to combine the best of the sharing economy with the token economy. Anyone can rent out excess computer storage space while dApp (decentralized application) developers can use this space to store and manage their applications’ data.  Centralized cloud-based databases won’t cut it for dApps because of major scaling issues. If Bluzelle succeeds, its technology has the potential to disrupt data storage leaders like Dropbox & Google.

 

BLUZELLE description

BLUZELLE’S PLAN FOR SUCCESS

Bluzell has already proved competence by building blockchain technology for Temenos, HSBC, Microsoft, and BT. Now there is a growing need for data storage solutions and Bluzelle plans to be there to fill that need with their own blockchain technology.

Key Features of Bluzelle’s Tech:

  1. Data is stored in groups of nodes, a.k.a. swarms. This removes concerns about a central point of failure, a very real threat in the world of cloud computing. The reality is that a “cloud” is just someone else’s computer or server.
  2. Bluzelle uses an algorithm that provides infinite scaling. By storing the dApp data using a unique network model, it can provide scalable database servers regardless for any level of demand. The only limit to scaling is how much excess storage space people choose to share with Bluzelle.
  3. These two features are coupled with a dynamic performance solution. Bluzelle dynamically adjusts the number and location of nodes sharing data to reduce request times. This improves the overall performance of the ecosystem.

USER ADOPTION IS CRITICAL FOR SUCCESS

So now that we know that Bluzelle’s tech can scale with no boundaries let’s return to address the most important driver of Bluzelle’s future success: user adoption.

We certainly wouldn’t want to end up like these guys:

user-adoption-we-forgot-about-it

Considering the ecosystem will depend entirely on the amount of data storage users commit to the platform, we want to find any metric we can get our hands on to gauge how likely users will be to adopt the technology. Here’s what I’ve found.

  1. A strong Telegram group with 25K+ members and countingJust to emphasize for those who may not be familiar with telegram in the cryptospace… 25K members is an elite level for a cryptocurrency project. The average for an ICO project might be around ~5K members.
  2. An active Twitter account with also 25K+ followers and counting and updates directly from CEO Pavel Bains
  3. Strong partnerships emerging with other strong blockchain projects
    • 0x – a decentralized exchange protocol (San Francisco)
    • Zilliqa – a blockchain protocol focused on delivering high throughput (Singapore)
    • Bee Token – this home sharing platform team comes from Uber, Google amongst others (San Francisco)

 

THE BLZ TOKEN

Bluzelle has its own native cryptocurrency, BLZ. BLZ can be exchanged for database services or earned by users who share computing resources.

Bluzelle’s ICO sold 33% of the total 500,000,000 BLZ tokens for $0.12 USD. Currently BLZ is valued at $0.64, a solid 5X increase from the ICO price. This puts the market cap at over $100M USD, and its current rank is #145.

BLUZELLE coinmarketcap

BLZ was listed on Binance and coinmarketcap on Feb 6th. Binance is currently where most of the trading volume is. Once the initial price pump tabled out, early investors have taken profits and now BLZ is trading at about a 30% discount in the BLZ/BTC pair from all-time-highs.

My opinion is that this is a case of a project where the price will follow the hype cycle and key roadmap dates. Until the next milestone, who knows which direction the price will move in.

WHAT’S NEXT ON THE ROADMAP FOR BLUZELLE?

A minimum viable product is expected to be revealed in April of this year. Building out the infrastructure required to serve as a distributed database for dApps will not be easy.

More improvements will be made through 2019. Some of the upcoming features include:

  • smart contracts
  • mobile apps
  • proof of stake requirements
  • Sybil attack tolerance
Bluzelle road map
Bluzelle’s 2018 road map

Bluzelle has an exciting couple years ahead of it, and although there is a lot of work to be done still, they have a lot going for them. It’s definitely worth taking a look at. If you decide to get involved, it should be an interesting ride. Always remember to DYOR. Whitepaper (PDF)

Hold on for dear life

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