Blockchain and Bitcoin (Part 2 of 3)

In this Part 2, I would explore and answer some common questions about Blockchain and cryptocurrencies – the whys?

Bitcoin has value? Why?

Let’s go back to our common currencies, where do they derive their value?

Why currencies have value? As countries left the gold standard in an effort to curb concerns about runs on federal gold supplies, many global currencies are now classified as fiat. Fiat currency (法定貨幣) is issued by a government and not backed by any commodity, but rather by the faith that individuals and governments have that parties will accept that currency. Each valued common currency has the following characteristics-

Scarcity, Divisibility, Utility and Transferability

and Bitcoin has all these. Bitcoin is divisible up to 8 decimal points. The smallest unit, equal to 0.00000001 Bitcoin, is called a “Satoshi”
But challenges, e.g  if Bitcoin does not achieve success as a medium of exchange, it will have no practical utility and thus no intrinsic value and won’t be appealing as a store of value. Like fiat currencies, Bitcoin is not backed by any physical commodity or precious metal. Throughout much of its history, the current value of Bitcoin has been driven primarily by speculative interest. Bitcoin has exhibited characteristics of a bubble with drastic price run-ups and a craze of media attention. As it’s decentralised and not monitored by any government agency, it’s favoured by many dubious organisations.

Blockchain technology has huge POTENTIAL- Huge potential in many applications, just remember it supports decentralisation, obviates the need for intermediaries (drastically minimizes overheads), data (encrypted) can be made open, anonymous, robust transactions with proof-of-work, cannot be tampered with or altered, immensely trustworthy, honest and fair…

Immediate use examples: prevent illegal selling of tickets for exorbitant prices – Tokyo Olympic is considering – as all change of hands will be traceable and can’t be tempered. also in sportsmen’s test reports which were rumoured to be targets for hackers to alter. Once amended, his footprints will be known/recorded.

Examples of actual and ongoing uses include

• for individual-controlled Identification,
• there have been many small community based solar projects (e.g. 15 of these already in Australia by 2015), such community group can generate solar power and sell back to the community without fear of  rip off, fraud, and it’s all fair  (no one can cheat)
• UNICEF, world food bank just use eyes retina to ID and do transactions with all honest records and small overheads

But then frenzy in crazy cryptocurrencies prices- initial coin offerings, …. bubbles speculation lead to greed and chaos, also attacks/hecks on cryptocurrency agencies with millions of cryptocurrencies stolen. (this should be noted that the cryptocurrencies themselves based on Blockchain are robust and it’snot that these were hacked, it was the agencies and their systems were hacked with losses. The attack occurred in 2014, when Mt. Gox was handling about 70% of the world’s Bitcoin exchanges. Soon after that, Mt. Gox ceased operations and filed for bankruptcy. More than 750,000 BTCs (around $350 million) were stolen from the exchange.(Reuters). All these mean that some regulatory actions are warranted, but on what and by whom?

Some said Blockchain is a technology that allows people to run their own life without centralised government, BUT
Imagine countries fear!
Russia has its own cryptocurrencies. Venezuela has Petro …….China once banned them, but now taking the lead (accentuated by President Xi’s advocate), there are about 500 projects in late 2019, also devising it’s own Digital Currency. China is looking to apply the technology to areas such as fraud prevention, food safety and its supply chain, as well as using blockchain to track charity donations, among other things.
Other terms such as “distributed ledger technology” or DLT are now often used in these cases and they bear differences to the original bitcoin blockchain. But the promise of a system in which transactions can happen across a single record aimed at authentication is still attractive. In October 25, 2019, Xi gave a speech saying China needs to “seize the opportunities” presented by blockchain,  Blockchain technology advocate is similar to other strategies – Artificial intelligence- AI (aim to be leader in 2030), announced in 2017, 6G communication announced in 2019. Now Hainan is the test ground. It’s a bet China is now leading and US lacking, Switzerland, Gilbratar have introduced encouraging policies such as tax incentives for research and development and applications, etc.  Blockchain is simply too useful and important to be ignored. While still rudimentary as some predict that it’d be around 2028 before it becomes scalable for general use. However, as said, the potentials are immense

POTENTIALS, interesting facts and Statistics
Computer scientists and business leaders think it has the potential to transform global commerce, law, politics, and more. Some predict that traditional banks will become extinct.
Thousands or millions of ways blockchain technology can transform the way we live by making data open, anonymous, and unalterable.
Many countries governments are paranoid as it’s decentralized ecosystem – peer to peer basis. No organization, body controls it, no need for banks or other intermediaries. People in Kenya, …..China, mid-Siberia, mined bitcoins and got rich or at least improve the living.

• By the end of 2024, it’s expected that corporations will spend $20 billion per year for blockchain technical services.(Grand View Research, Transparency Market Research)
• And when it comes to blockchain technology market size, a recent report suggests that it will reach $7.59 billion by 2024. That’s a compound annual growth rate of 37.4%. Such rapid market growth is explained by increasing demand for this technology across all industries, from financial services, through consumer and industrial goods, all the way to media, telecom, transport, healthcare, and public services.
• About 90% of U.S. and European banks had started exploring blockchain’s potential by 2018.
• 74% of tech-savvy executive teams say they believe there’s huge business potential in blockchain technology.(Deloitte)
• An even higher number (84%) of business leaders responded that this technology is scalable and that it will eventually become mainstream. Survey author Linda Pawczuk argues that Blockchain is “a versatile technology that can record financial transactions, store medical records, or even track the flow of goods, information, and payments through a supply chain.”
• 23% of companies expect to invest between $5 million and $10 million in blockchain during 2019.(Bitcoin Market Journal)
• Bitmain was valued at $14 billion in 2018. Other entries on the list of the biggest blockchain companies are the digital currency exchange Coinbase (valued at $8 billion), stock trading organization Robinhood ($5.6 billion), crypto network Ripple ($5 billion), EOS coin creator Block. One ($4 billion), cryptocurrency trade platform Circle ($2.9 billion), and major crypto exchange Binance (over $2 billion).
• Financial institutions alone have spent about $552 million on blockchain-powered projects. (Statista)
• The technology has spread to other sectors as well: manufacturing (17.6% of the market share), distribution and services (14.6%), public sector (4.2%), and infrastructure (3.1%). Nearly every industry has adopted blockchain tech to some extent.(Etherscan, Reddit)
• For example, the transaction fee for transferring 849,999.99939168 Ether (which is equal to $261,833,999.81) is only $0.19.(Accenture Consulting)
• Blockchain could reduce investment banks’ infrastructure costs by 30%.(Accenture Consulting)
• According to a survey of eight banks by Accenture Consulting, the potential savings on a cost base of $30 billion are more than $8 billion.

Blockchain could reduce investment banks’ infrastructure costs by 30%.

(Accenture Consulting)

According to a survey of eight banks by Accenture Consulting, the potential savings on a cost base of $30 billion are more than $8 billion.

• More than 20 countries including China have adopted or at least researched the concept of a national cryptocurrency.
• Blockchain is so versatile that besides recording financial transactions, it can be used for storing medical records, concluding binding agreements, tracking the flow of goods, storing personal credit records, tracking the provenance of artwork, verifying payments through a supply chain, and much more.(Wall Street Journal, Reuters)
• Walmart has partnered with Nestle, Dole, Unilever, and Tyson Foods to implement blockchain in the food industry. Statistics show that blockchain implementation could generate $700 million in increased productivity. In one pilot project, blockchain made it possible to trace individual mangoes back to the farm in 2.2 seconds. Walmart says that without blockchain it would take more than six days to identify the original farm.
• A European retailer, Carrefour, is the first company on the continent to introduce blockchain for food products. The company believes that the technology will revolutionize its supply chains, helping raise $5 billion in organic food sales by 2022.(BIS Research)
• According to projections of blockchain trends, the early adoption phase (research & development) will end in 2022. The regulatory and commercialization phase will last from 2023 to 2025. Beyond 2025, it’s expected that blockchain will become a mainstream technology in these industries.(Medici, Cryptopolitan, Blockchain.com, PwC)
• As of June 2019, about 430,000,000 blockchain-based transactions have been made. What’s also interesting is the emergence of fiat money-transfer companies that operate on blockchain, such as San Francisco-based Veem. Following this trend, Western Union has partnered with a Stellar (XLM) blockchain platform with a goal of speeding up transactions between different locations around the world.
• The percentage of companies that have already implemented blockchain technology is the largest in consumer products & manufacturing (29% of companies).(Statista)
• Life sciences industries (including biotech, medical devices and pharma) take second place, with 23% of companies already using blockchain.
•  Blockchain adoption statistics: Technology implementation phases in organizations worldwide as of April 2018, by industry. (Statista)
• There are social networks that run on blockchains.
  • Every time a user uploads articles or posts comments, he or she is rewarded with the network’s native token.
• There are more than 39,000,000 blockchain wallet users as of June 2019.(Blockchain.com, Investopedia)
  • A blockchain wallet, or e-wallet, is a software program that lets users receive, store, and spend digital currencies.(Forbes)
• Pierce, the co-founder of the EOS cryptocurrency platform, says that significant decentralized apps will hit millions of users in the near future. Another significant aspect of further blockchain growth will be security token offerings, which work in a more regulated manner than ICOs. The former EOS blockchain chief strategy officer predicts the tokenization of fiat money, the debt market, real estate, equities, and even art is just around the corner. The gaming industry will be a major driver of blockchain adoption as well, since gamers were among the earliest crypto adopters.(Asia Times, CNBC, Statista)
• It seems that mobile blockchain is on its way. Statistics show that the number of mobile phone users will hit 5 billion in 2019, which is a huge, attractive market for blockchain innovators.(CNBC, Deloitte, ICOService)
• There are, however, many issues that need to be addressed:- Issue #1: In numerous blockchain usage scenarios, performance issues must be addressed before widespread application deployment. While traditional systems are able to process thousands of transactions per second, the Bitcoin blockchain can handle up to seven transactions per second. The Ethereum network is able to process 15 per second.
• Issue #2: The blockchain industry is expanding rapidly, but still there is no standard that will allow different networks to cooperate with each other.
• Issue #3: Reducing costs are one of the challenges of blockchain. Statistics from Elite Fixtures suggest that it costs more than $26,000 to mine just one bitcoin in South Korea.
• Issue #4: Existing regulations around the world do not cover some of the main components of blockchain technology, such as smart contracts and international transactions. This uncertainty can slow down investments in technology and adoption of solutions.
• Issue #5: Deloitte’s report about the state of blockchain in 2018 suggests that blockchain companies need to collaborate so technology can promote further development of applications, education, and standardization.(CNN, IBM)
• The industries in which IBM implements the technology are shipping, banking, healthcare, and food safety.
• For example, IBM’s intelligent logistics platform RoadLaunch integrates Internet of Things technology, Linux Foundation’s Hyperledger blockchain, and AI. Statistics and other data sets, automation, finance transactions, freight and fleet visibility, and all other logistics aspects will be covered by a single platform and revolutionize the way logistics and transportation companies operate.(ResearchAndMarkets.com)
• Blockchain spending in the United States increased by 110% during 2018. The compound annual growth rate for blockchain spending is forecast to be 44.5%.(Gartner)
• Gartner predicts that the projects’ value will surge to over $3.1 trillion by 2030, when blockchain has become a mainstream technology.(Statista)
• The blockchain-powered gaming marketplace has some serious advantages over traditional solutions.
• The system is called Fnality and it aims to improve the efficiency of clearing and settlement in the financial market. Fnality could launch in 2020.(BIS Research)
• Fnality International has been founded to create a network of decentralised Financial Market Infrastructures (dFMIs) to deliver the means of payment-on-chain in tomorrow’s wholesale banking markets. Fnality, backed by a consortium of Financial Institutions, including many of the Globally Systemically Important Banks (GSIBs), who sponsored the “USC Project” believe that there will be widespread adoption of tokenisation, both for new and for existing assets, creating new Value Chains. A means of payment is an essential need for those Value Chains. The shareholders of Fnality comprise: Banco Santander, Bank of New York Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, Mizuho Bank, MUFG Group, Nasdaq, Sumitomo Mitsui Banking Corporation, State Street Bank & Trust, and UBS. 
• When it comes to data breach-related costs, IT costs, operations, personnel, and reductions in fraud or counterfeit products, the adoption of blockchain could save the healthcare industry up to $150 billion.

• Blockchain has the potential to make the drug supply chain more efficient, improve data accuracy and management, find the most appropriate professionals more quickly, and help providers stay on top of compliance and government regulations.(8-bit.io)
• Researchers agree that the technology will not reach mainstream adoption for at least five years. However, investing in blockchain represents a smart step in the long term.(CoinSutra)
• Blockchain by Country Stats & Facts
• More than 20 countries have adopted, rejected, or researched the concept of a national cryptocurrency.(Cointelegraph)
• Tunisia was the first country in the world to issue a blockchain-backed national currency, back in 2015. In December of the following year, Senegal issued its own blockchain-based digital currency called eCFA, named after its regular currency, the CFA Franc. The Marshall Islands adopted another legal tender next to the U.S. dollar in March 2018, a cryptocurrency called Sovereign or SOV. Among the countries that have considered but dismissed the idea of a central bank digital currency are Ecuador, Estonia, Switzerland, Hong Kong, and Germany. Japan says it won’t issue its own cryptocurrency but it has recognized Bitcoin as an official means of payment. Uruguay, Dubai, Singapore, and Iran are reportedly involved in ongoing experiments with central bank-issued digital currencies. Developed economies such as Canada, the United Kingdom, Norway, Sweden, China, and Israel are in the research phase.
• Ten countries are leading the way when it comes to blockchain implementation.(Blockchain Council)In Australia, all taxes for transactions using cryptocurrencies have been removed. The Australian Securities Exchange plans to fully adopt blockchain technology after a two-year testing period. The Chinese government is actively supporting crypto and smart contract platforms that were developed on its territory, namely TRON, NEO, VeChain, and many others. China is the home of thousands of blockchain-based startup companies, and the largest banking institutions in the country are implementing the technology as well. Dubai’s government has set 2020 as a deadline for adding all government-related data and documentation onto the blockchain. In accord with its ongoing efforts to position itself as a global cryptocurrency leader, Malta has introduced a regulatory framework for crypto service providers. The Swiss town of Zug became the first city in the world to accept crypto payments for tax purposes. Known as CryptoValley, Zug is home to some of the world’s leading blockchain companies. The first test of a blockchain-based voting system was successfully completed here in 2018. Zug authorities have announced the launch of a decentralized digital ID system that will work on the Ethereum platform. Zug-based non-profit Crypto Valley Association is working to create the world’s leading blockchain ecosystem. Japan is a global leader in Bitcoin adoption. Many retail stores in this country are accepting cryptocurrencies as a regular payment method. The Estonian government has used blockchain technology to digitize all its services, including the health records of around 1.3 million citizens. The country’s business environment is extremely favourable for crypto companies, featuring tax-free undistributed profits and 100% online cross-border management. Thus, top blockchain companies have chosen to do business in this country. The UK’s National Archives has partnered with the University of Surrey in a project called ARCHANGEL, which allows archiving documents on the blockchain (and thereby eliminating the possibility of tampering with the information). The government of the United Kingdom plans to implement blockchain in healthcare and voting systems. In Singapore, efforts are being made toward implementing blockchain in the financial and healthcare sectors. For example, cross-border payments using distributed ledger technology are already possible in this country. Singaporean insurance companies are operating using smart contracts. In the United States, the IRS has issued official guidelines for the taxation of cryptocurrencies. The Securities and Exchange Commission monitors all activities related to ICOs in America,
• Although the United States is currently seen as the clear leader in terms of blockchain technology, China is expected to take over this role by the early 2020s. China’s spending on blockchain technology is nearly doubling each year, and an increasing number of Chinese startups are vying for shares of the country’s massive market.

Credits and Sources

Topic: Blockchain. (2020). Retrieved 25 January 2020, from https://www.statista.com/topics/5122/blockchain/

Blockchain Stats, Facts & Trends in 2019 and Beyond. (2020). Retrieved 25 January 2020, from https://www.yourtechdiet.com/blogs/blockchain-stats-facts-trends-2019/

45 Blockchain Statistics & Facts That Will Make You Think. (2019). Retrieved 25 January 2020, from https://fortunly.com/statistics/blockchain-statistics/#gref