It is no longer news that the Blockchain Technology – the Bitcoin backing technology – is smart and useful but cryptocurrency is a scam or a fraud and should be stopped. This is a fallacy that needs to be debunked.
When Bitcoin was introduced in 2009, it included a fairly novel idea: a network of nodes would share a state (distributed ledger) securely. These nodes are independent, heterogeneous and no one approves them when they join the network. As such, each of them is a threat and cannot be trusted. This implied that Bitcoin, if it was to scale beyond a “friendly” network needed some kind of security model.
This is what proof of work concept provides: in order to “decide” what node will decide what the new state of the data would be, each node has to compete in solving a complicated puzzle. Solving should be hard so that a solution happens only every couple minute across the whole network but verifying should be easy so that every node should be able to verify the validity of that solution.
In cryptography, this is a fairly common pattern (hashing) and Bitcoin uses it. What’s interesting is that, as the number of nodes grows, the problem needs to become more complicated, because more nodes are competing to solve that problem and the network wants to only “set” the new state every couple minute in order for everyone else to check its validity.
As the network grows in size, it can be expected that the value of the stored “state” also grows: if not, why would people be part of that network if there was no value in the stored data? Since people running the node value the data, they have an incentive to make the network more secure. In order to make the network more secure, they run nodes which validate transactions… using the complicated hashing puzzle.
It turns out, that, with our current knowledge of computing, solving this complicated problem requires a lot of energy which somebody has to pay for. This is where Bitcoin cryptocurrency becomes a necessity: it provides a payment mechanism for securing the network.
Bitcoin cryptocurrency provides a payment mechanism for securing the Bitcoin blockchain.
In other words, Bitcoin cryptocurrency is used to pay for the labor to secure the network. Asking for the network without the currency is asking for something without actually paying for it. It turns out that humankind has tried this over and over, from slavery, to, more recently, web advertising.
This week is particularly intense on the front of privacy, influence and data breaches, but recent years have all proven that the web is a single point of failure for humanity. It’s our shared record of knowledge our main means of communication, and yet, it is incredibly fragile.
Most of the web applications are provided “for free” to their users. This implies that users are not customers… and, as money as an incentive seems to trump everything else, eventually, customers’ interests end up “above” the user’s interests. More specifically, whoever pays Facebook is served by Facebook, not their users. Re-aligning incentives between producers (of software and content) and consumers will not solve all the problems, but it will reshuffle the cards by giving an opportunity to compete to smaller players who cannot afford to deploy massive advertising networks.
In that regard, Bitcoin and other cryptocurrencies, in general, are a real breakthrough as they provide both the technology and the business model for the technology. Splitting the two would only result in more of the same problems that the web faces: centralization, monopolies, and disproportionate influence of capital over labor. Blockchain or Cryptocurrencies
Gaurav elaborates that the distinctive consideration of Cryptocurrencies and blockchain in most quarters should be seen neutral, not based on ideology but simply on legal and practicality reasons according to where a cryptocurrency is possible and needed and where not.
In government, for example, blockchain technology has many use cases in which it can help achieve better efficiency and transparency, which do not have anything to do with cryptocurrencies. Recently, the Indian Finance Minister Arun Jaitley acknowledged blockchain’s potential, stating that the Government will “explore the use of blockchain technology for ushering in the digital economy”.
Kumar explains that Auxledger, the largest private ledger with 54+ million users onboard already, resulting of Auxesis Group’s work with the State Government of India has custom plugins for different sectors which allow companies to adopt faster based on their needs. These solutions include a Distributed Ledger Protocol for financial institutions, Benefit Distribution Program for government bodies, Darwinsurance for Insurance settlement; Genuinity, an anti-counterfeiting program for supply chain and Reservoir, which addresses issues of products availability.
Despite these solutions, Gaurav explains that had it not been for cryptocurrencies, we may have never seen the ongoing blockchain involvement throughout the institutions, as it was what sparked everyone’s interest, and also as it created the wealth enabling the ongoing innovations in the industry since its beginning, even before traditional investors came in.
First there needed to be cryptocurrency as the first use of blockchain technology to enable further use cases. However, with the latest development of blockchain without mining, blockchain technology may eventually exist without cryptocurrency.
Millions of people around the world perceive that the concept of “mining” for Bitcoin and blockchain are something similar, if not the same. However, Blockchain technology can exist without digital currency mining, but not many are currently aware of this. How is it implemented? Why do we need mining and how does it work? These are some of the common questions asked by digital currency users today.
Is Mining Necessary in The Blockchain?
To make the whole concept easier to understand, we need to assume that a group of developers decided to launch their own digital currency in a blockchain mining system. As the digital coin doesn’t have any centralized storage or other issues, all users have an equal right to the network. It becomes important to introduce a system that will ensure the irreversibility of transactions and the possibility of verifying the validity of every member of the network. This mechanism is called mining. With this process, the user of the distributed network is able to check transactions and add it to the blocks on the distributed ledger.
In addition, Bitcoin’s algorithm has certain conditions, for instance:
The timing for creating new blocks and increasing the complexity of production as the block number increases. Network users who create a valid transaction block-abiding by all the rules will then receive a certain reward.
The block which has the most valid transactions is then added to the chain.
The creation of new units and the verification of transactions are all stimulated by the network through accrual of awards. The use of cryptocurrency namely, hash in mining, allows a limit in the growth of a blockchain by introducing complex calculations. Moreover, the mining issue is a digital currency issue. Credit should be given to those engaged in mining, because of their work, the number of digital coins in circulation is increasing.
Why Mining Is Not Ideal
It may seem that everything within the system is flawless – emissions are evenly distributed, all transactions are properly checked, etc. But the question is why is blockchain, or rather Bitcoin mining, causing doubts? Here are some of the reasons this happens:
It takes a long time to test any transaction and add it to the chain. One transaction can take anywhere from one to thirty minutes, provided that the user established a normal commission.
Mining has become expensive. Over time and due to the growth of the network, more computing power is needed, which leads to an increase in the overall cost of this process on a global scale.
Blockchain with mining won’t be suitable for creating a system that could record over billions of transactions on a given day. The poor scalability has also raised some eyebrows.
Is it possible to overcome these shortcomings, preserving the quality of blockchain that is used by people around the world?
Definitely! Already, there are many projects that are offering new approaches to blockchain technology without bringing into play the concept of mining. One of these projects or ideas is Credits.
Credits: A New Blockchain Platform
Credits is a blockchain platform, unlike other popular digital currencies, Credits functions without mining. This comes with a lot of advantages too, these include, but are not limited to:
Commission within the system is up to 0.001 USD.
The technical feature of the blockchain allows you to bring the speed of operations to a different level.
The volume of transactions also increases because of its internal architecture.
Users won’t have to spend a huge amount of money to upgrade their mining devices or equipment.
This new platform, Credits, is a good example of how the blockchain system can exist without mining. This new technology comes with great aspects, and in the future, it will be able to turn the crypto exchange industry upside down.