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Blockchain and Bitcoin (Part 2 of 3)

Calvin Lam

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

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.

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.

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

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