What is the Value of Blockchain?
Blockchain is often mentioned and has become a buzzword. In this article, you will understand the main use-cases and what is the value of blockchain.
The blockchain technology allows the emergence of cryptocurrencies, also known as “cryptos”. It also enables the advent of Non Fungible Tokens, the “NFTs”.
Some technical evolutions are also very useful and the main ones are “smart contracts”.
Last but not least, all the buzz regarding this technology would not have been possible without Decentralized Autonomous Organizations (DAOs) and Decentralized Autonomous Companies (DACs).
Cryptocurrency
Transferring money digitally has always been a challenge. Bitcoin, the first cryptocurrency, has made this possible in a decentralized way without going through a third party. Long before the publication of the Bitcoin white paper, many researchers had been trying to find the solution to develop a digital currency. They had never succeeded in doing so in a secure and decentralized way. Since then, new researchers, mathematicians and engineers have invented new cryptocurrencies. Thanks to its new cryptocurrencies, the exchange of value related to money is now done at a lower cost thanks to the distributed register that is the blockchain.
Cryptocurrency is the decentralized digital money. Its creation and management are controlled by cryptography. The underlying technology behind cryptocurrencies is Blockchain, which is a data storage technology that prevents anyone from changing the data stored on the Blockchain.
There is no centralized server to manage the Blockchain. Instead, they are run by thousands of computers distributed around the world. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger.
Digital Tokens and NFTs
NFTs are one of the most famous types of digital tokens. A digital token is aimed for facilitating real-world transactions via decentralized technology.
NFTs are derived from a feature born on Ethereum, the second most used blockchain after Bitcoin. NFTs can represent real-world items like artwork and real estate. The main advantage of NFTs is that they represent an underlying asset, which therefore exists in "real life", outside the "internet". This allows them to give a kind of digital identity to these objects.
Here are some of the most famous NFT projects:
- In EVERYDAYS: THE FIRST 5000 DAYS, Beeple has stitched together recurring themes and color schemes into an aesthetic whole. The individual pieces are organized in loose chronological order: zooming in reveals pictures by turn abstract, fantastical, grotesque or absurd, deeply personal or representative of current events. Recurring themes include society’s obsession with and fear of technology; the desire for and resentment of wealth; and America’s recent political turbulence.
- Nothing signals one’s crypto cachet quite like owning a CryptoPunk. NYC’s Larva Labs gave away the 10,000 pixelated faces for free in 2017, years before they started selling for millions. The characters all have unique combinations of traits, like being an alien, wearing sunglasses, or smoking.
- Founded in 2019 by Nicolas Julia and Adrien Montfort, Sorare is a fantasy football game start-up that set a historic record in French fundraising.
Smart Contracts
Smart Contracts are contracts that rely on Blockchain technology to make their terms and conditions of execution unforgeable.
Think of smart contracts as a vending machine: you insert a coin, type in the number of the desired product and the product falls out for you to pick up.
When you create a smart contract, you indicate the conditions of execution and if the conditions are fulfilled, then you get the desired consequence.
The use of smart contracts makes it possible to keep records and automate actions via autonomous programs. The goal here is generally to :
- Reduce the costs related to the presence of intermediary actors within a transaction process, while defining a new mode of governance considered more fair and ethical;
- Secure transactions with a contract based on strict conditions: if these conditions are not met, the program does not run;
- Improve network transparency by making information 100% accessible.
Note that it is not essential to systematically use smart contracts to create decentralized applications. Some blockchains rely on a different way of working, based on side chains, which also make it very easy to deploy decentralized and secure applications.
Whatever the technology used for a DApp (a Decentralized Application), it generally takes the form of a decentralized platform. Decentralized platforms put the participants of the network in direct contact with each other, thus functioning as a peer-to-peer network. They can concern a vast field of activity.
Some case examples:
- Content creation, by putting authors and artists in direct contact with readers/listeners/viewers. The choice of a blockchain architecture allows a better management of copyrights and a better remuneration of content creators.
- Solar energy, for example by allowing the direct exchange of energy between producers and consumers through the development of smart grids.
- Computing power, by allowing some players to allocate part of their computing power to avoid network users having to use very expensive servers.
- Data storage, to allow some to rent their storage space to other users on a peer-to-peer basis.
DAOs and DACs
DAO, for "decentralized autonomous organization", is a smart contract deployed on the Ethereum blockchain that works like a decentralized venture capital fund.
A DAO (Decentralized Autonomous Organization) is an entity powered by a computer program that provides automated governance rules to a community. The DAO is a smart, complex contract deployed on the Ethereum blockchain, and is similar to a decentralized venture capital fund. These rules are immutably and transparently written into a blockchain, a secure information storage and transmission technology that operates without a central controlling body. A DAO differs, in theory, from a traditional entity in three ways: it cannot be stopped or closed, no one or no organization can control it (and thus manipulate its numbers) and, finally, everything is transparent and auditable, all within a supranational framework. A DAO is based on computer code: its operating rules are public and it does not rely on any jurisdiction.
A decentralized autonomous organization (DAO), sometimes called a decentralized autonomous corporation (DAC), is an organization constructed by rules encoded as a computer program that is often transparent, controlled by the organization's members and not influenced by a central government.
Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.
