Author: Melony Swan
Blockchain: Who is Satoshi Nakamoto is unknown. But it is known exactly what he did. In 2009, Satoshi published the concept of a new digital currency, bitcoin. He described it in the brochure “Bitcoin. Peer-to-peer electronic money system. Satoshi has also made a bitcoin exchange app freely available. Melony Swan is convinced that the time has come for a new, fifth in a row, computer paradigm.
Here are the previous four concepts. In the beginning there were computers (electronic computers). They were replaced by personal computers. Then came the Internet, social networks and mobile applications. Computer paradigms change about once every 10 years. The breakthrough concept of this decade is the blockchain, and bitcoin is its first practical application.
Blockchain is a technology for exchanging encrypted values through peer-to-peer networks. The largest implementation of the blockchain has become the digital currency Bitcoin. It is the most widely used cryptocurrency in the world.
One of the main achievements of the technology is that bitcoin transactions do not require trust in a partner. Enough for users to trust the technology. Another significant difference of technology is decentralization. No central server is needed to exchange bitcoins.
The significance of the fifth paradigm is that a functionality for the exchange of assets has been created. With the help of blockchain, users can exchange both tangible and intangible assets. The technology can be used to record, store and monitor any assets. Blockchain can be compared to a huge table in which all assets, accounts and transactions are recorded.
According to the American research company Gartner, which is known for its forecasts in the field of technology, by 2020 26 million devices will be connected. For effective interaction between them, a digital unit of value accounting will be required. For example, two cars must determine the order of access to a high-speed highway. One driver is in a hurry, while the other can move in a more relaxed mode. The second driver, having missed the first, will receive compensation. Linked cars will automatically trade with each other. You can create a currency for such trade on the blockchain.
The scale of the impact that the blockchain will have on humanity is comparable to the impact of the Internet. Blockchain will enter our lives faster than the World Wide Web. However, a number of circumstances limit the penetration of technology. One of them is that cryptocurrency is technically difficult for ordinary users.
Blockchain is a breakthrough technology. It will affect every aspect of a person’s life. The revolution will take place in three stages. Blockchain 1.0 will create new cryptocurrencies and payment systems. Blockchain 2.0 will change the assets of the financial market (stocks, bonds, loans, mortgages, property rights, smart contracts). Blockchain 3.0 will lead to the emergence of decentralized applications that will affect such areas of life as government, health, science, education, economics, art, culture and others. Learn more about each of the blockchain stages.
The word “bitcoin” has many meanings. Firstly, it means the platform on which the cryptocurrency exchange system operates. It is built on blockchain technology. The system can be thought of as a huge table that records all transactions between participants. The table is updated with new records, checked and stored by all network participants. Cryptocurrency exchange takes place in a peer-to-peer network. None of the participants has control over this table – the system is decentralized.
The peer-to-peer network is based on the equality of network participants. It does not have dedicated servers. Each node (peer) acts as a client and server.
Secondly, the term “bitcoin” is also used when talking about a data exchange protocol. It describes how assets are transferred on the network. In other words, it’s software.
Thirdly, Bitcoin (BTC for short) is the first and most popular cryptocurrency in the world. Other Top 5 cryptocurrencies include Ethereum, Ripple, Litecoin and Steem. According to coinmarketcap.com, there are over 650 registered cryptocurrencies. Each, like bitcoin, includes three levels: platform, protocol (application) and the currency itself. Some currencies use the same platform as Bitcoin. Others are built on their own platform. For example, the Litecoin cryptocurrency operates on its own Litecoin blockchain platform.
1.1. The problem of the Byzantine generals
Imagine, the Byzantine army laid siege to an enemy city. The generals will have to coordinate the assault on the fortress. They can only exchange messages. However, someone decided to go over to the side of the enemy. The traitors will try to thwart the offensive. The task is to develop an algorithm that will allow the generals to agree on an offensive and win the battle.
The Byzantine Generals Problem is a popular model for building computer systems. Faulty parts of the computer send information to the system. It can be contradictory. The system must be able to process it and make the right decision.
In the case of digital currency, the problem of Byzantine generals is transformed into a problem of double spending. How to check that a certain package of digital currency has been used up? The only way is for a third party to keep a record of transactions. It took cryptographers 40 years to solve the problem of double spending without resorting to a third party. As a result, a new form of digital money has emerged – cryptocurrency.
Blockchain is a technology built on peer-to-peer networks. Network exchange members resources that are of a certain value. Examples of resources are: money, hard drive space, computer processing power, stocks, ownership, and any other assets. Each exchange resource is committed as a transaction. All records made on the network are saved, and they are stored by all network participants. Any new resource exchange request is checked against previous entries.
Blockchain can be thought of as a public ledger that stores all transactions made on the system. Transactions are grouped into blocks that line up one after another in chronological order. “Blockchain” is translated from English as “a chain of transaction blocks”.
The network is constantly growing. New blocks are added every 10 minutes. Transactions are verified by the client program. The computer on which such a program is installed contains a copy of all the blocks.
The technology combined peer-to-peer file sharing with public keys from cryptography. There are websites like blockchain.info where you can view any transaction. To do this, just enter the public key. It is a text string consisting of letters and numbers, 27–32 characters long. The public key is like an email address. It specifies the recipient of the money transfer.
1.3. How to manage bitcoins
Bitcoin is digital money. With their help, you can buy and sell goods and services online. In addition to buyers and sellers, there are other participants in the process. These are software developers, miners, exchangers and companies that provide services for processing requests to the system, including web wallets.
A miner is a person who provides a computer to create new cryptocurrency coins. The only way to get a new cryptocurrency is to solve mathematical problems. It is required to select a single block signature from millions of combinations. The miner resembles someone who distributes files on a closed torrent tracker.
The user needs an address to which others will transfer bitcoins, a private key to send cryptocurrency to others, and a “wallet” – an application for managing bitcoins. Thus, there is no need to register an account on a third party server.
“Wallets” were the first applications created to work with the blockchain protocol. They can be installed on a computer, mobile device, or opened in an Internet browser. A voluntary commission is charged for the transfer. The transaction occurs conditionally immediately. However, there is a 10-minute delay to validate the block chain of transactions and confirm them. In reality, this delay may be longer.
For daily small payments, millibitcoins (a thousandth of a bitcoin) and Satoshi (a millionth of a bitcoin) are used.
1.4. Self-managed service
To verify and record transactions in a public ledger, miners provide their computing power. They are needed to generate correct block signatures. This is a complex process that requires iterating through a huge variant of numbers. It’s called mining. It records all transactions made and serves as a source of new bitcoins. Miners are rewarded with bitcoins.
Decentralization of the system requires more responsibility from users than in the case of traditional payment systems. If the private key is lost, bitcoins are lost forever. There is no customer service to contact to recover the private key. Everyone is responsible for the safety of the private key. This hints the development of blockchain technology. However, start-ups such as Circle Internet Financial and Xapo have emerged that are trying to overcome this limitation. Obviously, a new level of computer literacy is required from users.
Cryptocurrency has many advantages. One of them is related to the use of push technology. The latter means that the user sends relevant information to the network. It is more secure than paying with a credit card. In the latter case, personal data is downloaded from the network upon authorization (pool technology). Here, user information is stored on the server and is vulnerable to hacker attacks.
1.5. Sellers accept bitcoins
Like any other currency, bitcoins can be exchanged for fiat money, products and services. As of October 2014, over 30,000 merchants accepted payment in BTC. Examples of applications for accepting payments in bitcoins: BitPay, Coinbase and Coinify. The commission in this case is less than when using a credit card – 1% instead of 3%. In the case of a small number of transactions per day, there may be no commission.
The need to use a separate solution for accepting payments in cryptocurrency limits merchants. Therefore, the task is to integrate bitcoin payments into traditional payment solutions. This will allow small businesses (cafes, restaurants, personal services) to also accept payment in bitcoins. It is also required to expand the functionality of mobile applications used for quick payment at points of sale.
1.6. How much is bitcoin worth?
The historical maximum bitcoins showed on November 29, 2013. Then they gave $1242 for a coin. High demand was provoked by the banking crisis in Cyprus, as well as the Chinese government’s ban on the use of bitcoins by financial institutions, retailers and payment systems.
During 2015, the exchange rate fluctuated around $250 per bitcoin. Since the end of 2015, it has been slowly growing. According to coinmarketcap.com, in mid-2016, the market capitalization of this cryptocurrency was $10.2 billion, which is comparable to the GDP of a small state. The value is calculated as the product of the current price ($649.52 per bitcoin) and the number of coins in circulation (15,773,160 BTC).
The number of bitcoins issued grows at a predetermined rate. This distinguishes cryptocurrencies from fiat money, which the government prints at its own discretion. The maximum number of bitcoins will be 21 million coins. This is expected to happen in 2040.
70% of all bitcoin conversions are in Chinese yuan. Chinese exchangers do not charge commissions, so it is difficult to assess the economic effect in this case. People change cryptocurrency to yuan and back for free. The high volatility of the price of bitcoins is a barrier to the penetration of cryptocurrencies into the masses.
2. More than a cash transaction
A possible path for the development of blockchain technology is as follows: cryptocurrency exchange, all types of financial transactions, smart property objects (real estate, cars), government document registries and, finally, smart contracts, thanks to which all of the above will become possible.
2.1. smart contracts
A smart contract (smart contract) is an agreement between the parties implemented on the blockchain. Traditionally, a contract is an agreement between two or more parties to do or not do something in exchange for something.
Each party to the agreement must trust the other party, hoping that it will fulfill the obligations of the agreement. A smart contract is the same as a regular contract, except that there is no need for trust between the parties. The terms of a smart contract are executed automatically by computer code without any exceptions.
The main differences between smart contracts are: autonomy, self-sufficiency and decentralization. A classic example of a smart contract is a vending machine. A bet between two people about what the weather will be like tomorrow is another clear example of a smart contract.
With the help of smart contracts, you can conclude not only purchase and sale transactions for money, but also solve a number of general issues. In this case, the need for trust in the other party also disappears. Here are examples of situations in which smart contracts can be used:
• donation of property due to some event (coming of age, marriage, etc.);
• betting, rates; • payment of awards in crowdfunding (“crowdfunding”).
2.2. Blockchain Ecosystem
Blockchain technology itself needs an ecosystem. The latter includes solutions for data storage, communications and settlements. Examples of such projects are Storj (file storage), IPFS (file service, link management, storage), Maidsafe and Ethereum (storage, communications, file management).
It also requires a blockchain archiving system. For example, someone bequeathed property in 2014 using blockchain. How to check the existence of a will after 60 years? You will need tools to archive blocks that are no longer in use.
Ethereum is a platform and programming language for building and hosting distributed applications. It meets the requirements of a Turing complete machine – it supports any tokens, scripts and currencies. This is an open source project. The platform is distinguished by a deep vision of the future development of blockchain technology.
2.4. Decentralized Applications (Dapp)
Over time, smart contracts will become more complex and autonomous. The future of blockchain technology is represented by the following application concepts:
• decentralized applications (Dapp);
• decentralized autonomous organizations (DAO); • Decentralized Autonomous Corporations (DACs); • decentralized autonomous communities (DAS).
A generally accepted definition and understanding of a decentralized application does not yet exist. The Ethereum project defines smart contracts and Dapps as a protocol that fulfills the terms of a contract through encrypted chains of transaction blocks. Other projects may interpret the Dapp concept differently.
However, in general, there is an understanding that Darp must meet the following requirements: the code is placed in the public domain, it is executed automatically, no one controls most of the tokens, all records are encrypted and placed in the form of chains of transaction blocks.
Decentralized Autonomous Organizations and Corporations are DAPs that have more complex functionality. Autonomous agents united in a decentralized network will perform various tasks. To illustrate, imagine a real corporation that operates without people, strictly following a set of business rules. These rules are framed in the form of a constitution, which also includes the mechanisms for financing the organization, for example, the sale of company shares through crowdfunding.
An example of the practical implementation of the DAO / DAC concept is the Storj platform. It is a decentralized alternative to Dropbox and Google file storage. The files are encrypted, divided into small parts and stored on computers that are connected in a decentralized network around the world. Users can rent free hard drive space in exchange for Storjcoin X (SJCX), a cryptocurrency similar to Bitcoin. Since there is no central server, Storj offers a safer and cheaper way to store files in the cloud.
The concepts of DAO and DAC are derivatives of artificial intelligence (AI) – the science of creating intelligent machines.
2.5. Forward to artificial intelligence
Blockchain is a potential path to artificial intelligence. Existing rule-based systems can be implemented on the blockchain. This will increase their degree of automation, the power of operations. In addition, AI models such as Stephen Wolfram’s cellular automaton, John Conway’s Game of Life and others can also be implemented using the blockchain.
One of the longstanding challenges of AI is proving the existence of digital intelligence in real life. Perhaps it can be solved with smart contracts. They allow you to create the necessary evidence base. In the future, where billions of digital minds will live, there will be a need for Oracles, information arbiters that will function on blockchain technology.
3. Beyond currency, economy and markets
3.1. problem solving in science
How to use blockchain technology to solve scientific problems? The main direction is peer-to-peer networks with the possibility of distributed computing.
SETI@home (search for extraterrestrial civilizations) helps to analyze radio signals from space. Folding@home aims to calculate the conformation of proteins. The results are valuable in the development of new drugs. In both projects, volunteers provide the processing power of their computers and are rewarded in the form of a special cryptocurrency.
Note that in these projects, participants cannot choose a research topic, for example, a specific protein, for which various variants of its structure will be calculated. In order for a person to determine the topic of research, a mechanism for allocating resources is needed. As soon as it is implemented, anyone (even those not associated with a scientific institution) will be able to solve their problem using the supercomputing capabilities of the network. And the first project that provides such an opportunity – Zennet – has already been announced.
The authors of Zennet offer those who wish to share their computers. When you sleep, you don’t use the computer. So why not leave it enabled and allow others to compute on it? In return, you will receive a pre-agreed fee. In turn, people who need large-scale computing, for example, data analysts, scientists, get access to computing power, the cost of which is much lower compared to renting traditional cloud computing.
Another area of scientific application of blockchain is to use mining more efficiently. This process is energy-intensive, with most of the electricity being wasted. It turns out that sorting through a huge array of numbers can be combined with solving scientific problems.
Contributors to the Primecoin project are contributing to the search for sequences of prime numbers known as Cunningham chains of the first and second orders. The distribution of such chains has not yet been fully investigated. The Gridcoin project inspires miners to provide computer resources to solve scientific problems in mathematics, physics, biology, medicine, earth science. However, such use of blockchain for scientific purposes is limited. The mining algorithm creates chains of codes that can only be verified in one direction. The structure of traditional scientific computing is different.
3.2. Human DNA sequencing
In most European countries and the US, citizens do not have access to their genetic data. Knowledge of the genetic predisposition to the disease affects lifestyle. To reduce the risk of the disease, a person is engaged in physical exercises, takes vitamins, and refuses bad habits. Services built on the blockchain could provide access to the results of DNA sequencing on an individual basis. The data is encrypted and accessed using a private key.
Genecoin is developing a service for storing genetic data on the blockchain. The service includes sampling for DNA analysis, sequencing, storage of the received data in the bitcoin network.
The DNA.bits startup encodes patient DNA records into transaction block chains. Researchers access them using a private key.
The data obtained as a result of DNA analysis is a real challenge for humanity. Potentially, we are interested not only in the 7 billion people of the Earth, but also in plants, animals, viruses, bacteria and other organisms. This will require large-scale models for storing and accessing data. Effective solutions will be transnational and “cloud”. They will be the first high-order models, truly big data.
Blockchain technology allows you to automatically embed an element of the economy into the system. As a result, the cost of the study becomes more adequate. Tokens expand access to data, a mechanism for sponsoring research appears.
3.3. The era of health and longevity
Applications for the healthcare sector are being developed. The idea is to create a structure for storing health data on the blockchain. They can be analyzed, safety guaranteed. The built-in economic component will compensate for the management and use of data.
Many people are open to providing personal health data to researchers. Blockchain can be used to organize such a process. Integrating big data streams containing health information with machine learning methods will be useful for developing preventive medicine measures.
The technology accumulates data on the health of a huge community of people. The economic component of blockchain will speed up research. Doctors will bargain for the provision of medical services. “Health Coins” will make pricing transparent and universal.
Electronic health records can be stored and managed through the blockchain. Individuals give doctors, pharmacists, insurance companies access to records through private keys. The universal format will allow using one medical card in different institutions.
In the event of epidemics, such as Ebola, financial assistance will come immediately. Both individuals and organizations can donate funds to help victims.
Seans’s Outpost is the most famous charitable project in the world that exists due to donations in bitcoins. Volunteers feed the homeless in Escambia, Florida.
In developing countries, the mobile financial platform M-Pesa is actively used. It allows you to transfer money using SMS messages. For countries with low smartphone penetration, this is the only mobile payment method available. M-Pesa wallets integrate bitcoin. People who previously could not open bank accounts now have the opportunity to save money.
3.4. Education contracts
One of the many uses of blockchain is literacy smart contracts. Technology is making online education courses available to citizens of developing countries. Students receive financial aid directly from sponsors around the world. Funds raised cover tuition fees.
The existing mechanism allows you to track student progress. According to the terms of the smart contract, the completion of the next level of training is fixed automatically after passing the test.
Funds for schooling can be collected in Learncoin, the currency for literacy smart contracts. Students publish study contracts in a special system for exchanging study contracts. This system brings together organizations that raise funds for education and students who want to get an education. By publishing a study contract, the student declares his intention to receive an education. The sponsor selects the contract and pays for it. The system automatically controls the fulfillment of obligations by the parties.
This model can become universal in education. According to this scheme, state retraining of specialists, training of company employees, students and graduate students can take place.
4. Peace as an opportunity
Blockchain has been given rise to a large number of new ideas and rethinking of existing concepts. It turned out that concepts that have remained unchanged for years, and even centuries, require revision. Such concepts include money, currency, private property, government, sovereignty, and intellectual property.
Blockchain forces us to reconsider reality in a more general way. People began to look at the world as an opportunity. For example, Bitcoin is an instance of decentralization as a digital currency. However, there are other instances of decentralization, such as smart private property, delegated public services, and community-based credit bureaus. Tools are required to implement new features.
4.1. A new way of organizing activities
Blockchain is a new paradigm for organizing activities, more efficient, requiring less effort. It offers a universal and global scope not previously available. Technology is accelerating all ways of communication between people. All models of human activity can probably be coordinated through the blockchain. More freedom, equality, rights and opportunities are the characteristics of the new approach.
Blockchain has brought a new understanding of things – every system in life is an economy to some extent. It’s a resource allocation system. Such systems include mechanisms for the exchange of currency or tokens, power, energy or concentration, as in biological systems. The basic economic structures are universal.
Blockchain is the supercomputer of reality. Any phenomenon that can be defined as discrete units can be transmitted through the blockchain. Venture capitalist David Johnston believes that anything that can be decentralized will be decentralized.
4.2. Everyone has their own currency
The traditional definition of a currency as “a nation’s monetary system” is outdated. “Quality or condition used or accepted by most people” is more appropriate. There is nothing behind bitcoins. They are not tied to any physical product. Fiat money is also worth nothing. They are provided exclusively with trust in the state. The high degree of diffusion accepted by the majority is what makes the currency.
The word “currency” generally means “a unit of value that can be earned and used in certain economic systems.” For example, the Counterparty currency (XCP) provides the ability to create new assets – application coins. The LTBCoin currency, issued by the Let’s Talk Bitcoin media project, allows transactions in the form of sponsorship, donations, tips.
Now everyone can have their own currency. It’s like blogging, opening an account on Twitter, Instagram. Tatiana Moroz, songwriter and performer, launched Tatianacoin, the artist’s first cryptocurrency. Perhaps in the future there will be an explosion of cryptocurrencies, there will be millions of them.
4.3. mixed government
The value of the state is another issue to reconsider in the context of blockchain. In today’s world of big data, governments are unable to fulfill the responsibility of maintaining registries. Blockchain can potentially solve this problem. Technology will help governments do their jobs better. However, some traditional government functions will become redundant.
Hybrid governments may emerge in the future. Blockchain-based registries and smart contracts automate repetitive procedures, officials will be left to promote the value of services.
5.Main technology barriers
Blockchain is at an early stage of development. There are internal and external barriers to the further penetration of technology into society: technical restrictions, hacks and scandals, public perception, government regulation, and mass adoption of technology.
5.1. Technical limitations
The maximum number of bitcoin transactions is 7 per second. The main challenge is to increase this figure. For comparison, the VISA payment system at the time of peak load can process 10,000 transactions per second. Each block of transactions is processed every 10 minutes. Large transfers can take up to 1 hour.
There is also a size issue. Blockchain is 40 GB. It takes 1 day to download it. The more users, the larger the blockchain size. As a solution, they propose to place the blockchain on one server or compress it. In the first case, the concept is lost – the technology becomes centralized. The second is not yet possible. The blockchain cannot be compressed in the traditional way due to security reasons. Perhaps in the future a special blockchain compression algorithm will be developed.
There are also concerns about attack 51. There is a possibility that one miner could seize control of the blockchain and retransmit previously transferred coins into their account. There are also vulnerabilities in the cryptographic standards used in bitcoin.
Mining makes the system trustworthy, but consumes a huge amount of energy that is wasted. According to some estimates, mining costs up to $15 million per day.
5.2. good and evil
The reputation of bitcoin in the eyes of the public is influenced by the facts of illegal activities, namely money laundering, drug trafficking. Which is also a barrier to cryptocurrency adoption. Technology itself is neutral. However, like any technology, it can be used for good and bad.
Repeated cryptocurrency thefts, scandals, scams also hide the development of technology. In 2014, the largest cryptocurrency exchange, MtGox Tokyo, went bankrupt. The company has become a victim of hackers. By exploiting a vulnerability in the system (transaction malleability), attackers circumvented the prohibition on double spending. Bitcoins were transferred to the scammers’ accounts again, but MtGox qualified the situation as a transaction failure.
In 2014, the disappearance of the Moolah exchange CEO was reported along with $1.4 million. In the same year, $2 million Vericoin (VCR), $620,000 Dogecoin (DOGE) disappeared as a result of cyber attacks.
The industry is expected to regulate itself, as happens in the film industry, video games, comics. Decentralized voting, control and monitoring systems should complement the blockchain ecosystem.
5.3. State regulation
Whether blockchain becomes a full-fledged financial service and industry depends on government regulation. Some countries have completely banned bitcoin (Bangladesh, Bolivia, Ecuador, Iceland and others). The UK classified bitcoin as a currency, which means that bitcoin is not subject to VAT. In Australia, bitcoin is also treated as a currency, but it is subject to VAT and GST.
For the IRS, bitcoin is private property. Therefore, bitcoin users must pay taxes on their income. However, other government agencies in the country regulate bitcoin as a currency.
If bitcoin is a currency, then it is subject to legislative restrictions aimed, for example, at countering money laundering. Formally, a person who sold bitcoins for cash will fall under this type of violation. The US Secret Service periodically catches cryptocurrency traders for cash. However, the court in such cases is more likely to take the side of the defendant, motivating the verdict of not guilty by the fact that, according to the law, bitcoins are not money. Clearly, laws are not keeping pace with technology.
Many countries have come to the conclusion that cryptocurrencies do not fit into the existing regulatory system – laws need to be adjusted. Existing methods of taxation have proven to be practically useless for collecting taxes from entities using cryptocurrency. This affects the GDP. Traditional control points (consumption tracking) may be a thing of the past. Checkpoints should be tax transparent. An income-based taxation system could potentially be replaced by a consumption-based one.
Blockchain is a new, revolutionary, computer paradigm. This is a decentralized network where trust in the participants is built into the protocol level. None of the networks before had built-in economic relationships between participants. The technology has combined computing, communication networks, cryptography and artificial intelligence.
Bitcoin is the first and most massive cryptocurrency in the world. Fiat money and cryptocurrency will exist on an equal footing. There will be a huge number of cryptocurrencies issued by individuals and communities. Blockchain can become the “Internet of Money”. It will link finance in the same way that the Internet of Things links cars.
Bitcoin accounts for up to 90% of the cryptocurrency market capitalization. New projects that are created within the framework of the Blockchain 3.0 concept give preference to bitcoin.
Blockchain integrates and automates human/machine and machine/machine interactions. The technology will create payment networks for the Internet of Things. It will become a link in the world of automatic machines. Blockchain will open the way to artificial intelligence.
Blockchain is applicable to a wide range of different tasks. The technology is already applied in science and other aspects of human life. Blockchain will change healthcare and medicine. The era of data will shift the paradigm from curing identified diseases to preventing disease. This will lead to the improvement of people, an increase in life expectancy.
Sequencing data from 7 billion people will require large-scale models. Blockchain will create solutions for storing and accessing such data.
The key function of the blockchain is the ability to carry out any transaction between two participants using the Internet. This allows participants to trade resources in a decentralized and distributed manner and on a global level.
The blockchain economy has already made itself known in a serious way. However, there is a possibility that it may fail due to a number of problems with predictable consequences. Thus, the industry needs better protection to protect itself from unscrupulous market participants. Another serious problem is the data encryption vulnerability, namely, there are several scenarios in which the secret key can be stolen or disclosed.
There are no decentralized models outside the Internet. Decentralization is one of the key features of blockchain technology. However, there are forces within the blockchain industry leading to centralization and decentralization.
In particular, mining is subject to pressure, which may result in the centralization of the process. Large associations of miners have been created. They are aiming for a threshold of 51% of the total computing power of the network, when control over the creation of new crypto-keys can be obtained. Anyone who is looking for a quick way to get rich, having 51% of the total block signature generation power on the network, can bypass the ban on double spending. The mining community monitors the attacks and takes appropriate action. However, the structural problem that could lead to the collapse of the cryptocurrency remains.
It is expected that multidirectional forces, namely the desire for centralization and decentralization, will bring the system to balance. The world of the future will consist of models of both types.