SIN3: Blockchain/Cryptocurrency and True Decentralization
Blockchain can be called decentralized technology. It is a ledger of records organized in blocks that are linked together by cryptographic validation. The ledger is not managed by any single entity, giving rise to its distributedness. Transactions are not reversible and preserved forever making it transparent and resilient. Cryptocurrency is an internet-based medium of exchange which applies cryptography functions (encryption) to conduct financial transactions. It leverages on blockchain technology to gain decentralization, transparency, and immutability.
Features of Cryptocurrency
- It is not controlled by any central authority. The goal is to make everything that needs to be decentralized to become truly decentralized.
- The decentralized nature of the blockchain makes cryptocurrency theoretically immune to the old ways of the government control and interference (they can't freeze your assets when you speak against them anymore).
- Cryptocurrency can be sent directly between two parties via the use of private and public keys
- These transfers can be done with minimal processing fees, allowing users to avoid the high fees charged by traditional financial institutions.
What are DApps?
A software application is a program or group of programs designed to solve a problem for the end-user. Traditional software applications include Word Processing App, PowerPoint, Facebook, Whatsapp, Wordpress. They are traditional because they are centralized. A DApp is open-source software that leverages on the blockchain technology. There is a paradigm shift about the way we view software modules. If you are coming up with a blockchain app, it must be decentralized and to qualify as a decentralized app a piece of software must have all of the following qualities:
Open-source - A Dapp must operate autonomously, independent without any authority controlling it. Its source code must be open and anybody can access it and contribute to it. All participants can keep track of the happenings on the network and have a say in decision making. So changes are decided through the consensus or by the majority of the DApps stakeholders.
Decentralized - All data and records should be stored on a decentralized public blockchain protected by cryptography. This ensures that there is no central failure point because the backend codes run on a distributed network, of multiple computers.
Token-based - Decentralized applications need to be fueled by crypto tokens rewarded to miners for their contributions to the network. The incentive-based system encourages users to participate to ensure the continuity of the chain. Tokens are also essential for accessing the application.
Consensus - Blockchain DApps use consensus or protocol mechanism to regulate interactions between their users eg the proof of work and the proof of stake consensus. With POW (Proof of work) changes are made based on how much a miner contributes to the DApps operation. POS (Proof of stake), on the other hand, is used to make decisions based on the percentage of ownership a stakeholder has on the platform.
- The first-ever DApp was Bitcoin. It came to resolve problems around centralization and censorship. It came to allow efficient transactions without intermediaries and centralized authorities. Bitcoin is self-sustaining
- Ethereum came to show the true capacity on the blockchain. The allowed programmers to build their DApps on their blockchain tech. Ethereum is the mother of DApps because it allowed developers to build DApps using 1) development time, 2) security and 3) scaling. eg Ethereum based DApps like Golem, BAT (basic attention token). On BAT, you are rewarded for viewing adverts.
- EOS is one of the most exciting projects out there. They focus on higher scalability than Ethereum. EOS is the highest-ranked based on users
Benefits of Dapps
- No more third parties
- We become censorship-free
- We become free of security concerns
- Enhanced efficiency. The larger it becomes, the more secure it becomes.
- We no more have outages because they are not powered by a single system, ensuring that it works seamlessly and so there are no outages and downtimes
Dapps are the future just around the corner. It is a progressive movement. High technology companies like Microsoft and Oracle and Centralized Facebook are all positioning themselves to become blockchain projects.