Blockchain for Cryptocurrency

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We all know bitcoin is the first application of Blockchain Technology. Bitcoin and Blockchain together have proven to the world that it is possible to have a trusted financial transaction between two unknown members beside integrity protected and transparent data storage. This proof has paved the way for Blockchain to become a disruptive technology with many new applications.

The basic fabric of Cryptocurrency is Public Peer to Peer Network. Bitcoin, Etherum, Ripple, Monero, etc., Cryptocurrencies are tokens of cryptocurrency mechanism. And these tokens are the "means" by which one participates in the Public Blockchain protocols of the CC Network. Until recently, BCT was not optional for CC applications, but now Directed Acyclic graph is being tried as an alternative to Blockchain. Cryptocurrency, a form of online money not controlled by Government is successfully functioning because of the complex technology called DLT backed Blockchain Technology along with Cryptography and Hash. BCT presents a self-sustaining system for Cryptocurrency. CC is an e-cash which is based on Cryptographic proof instead of a trusted third party, allowing two parties to directly transact with each other. BCT as a platform brings Cryptocurrency into practice.

After the success of Blockchain Technology for the use-case of Cryptocurrency, it has become a disruptive technology that now mankind and technology cannot do away with it. Each evolution from 1.0 to 4.0 has made the technology more efficient, scalable, more optimized data structure for blocks and also new consensus methods as demanded by the Application Industry. Figure 9.1 summarizes the evolution of Blockchain Technology. Blockchain 2.0 is successful with Smart Contracts making it useful for digitalized assets transactions. Blockchain 3.0 enabled Distributed Apps. Blockchain 3.0 is an integration of solutions to daily lives in healthcare, education, e-commerce and finance like. This is the time tech-users become familiar and appreciate the strength of BCT. Blockchain 4.0 uses Hashgraph as a data structure and removes almost all the limitations in the Previous blockchain. 4.0 enables mass adoption by simplifying and making BCT designer-friendly. It has reduced latency and improved transactions per second. The progress of BCT answers the question "whether Cryptocurrency without BCT?" with a big "NO".

Evolution of Blockchain Technology
Figure.9.1 Evolution of Blockchain Technology

Advantages of BCT for Cryptocurrency

The Cryptocurrency system uses Blockchain technology and block as the data structure. Therefore the benefits of BCT are inherited by the CC system. The goal of Blockchain in the CC system is to record and distribute all the transactions but not allow editing of the transactions. It is to be noted that in the following discussions, a transaction means both mining coins and using the mined coins.

Integrity: Integrity problems associated with CC transactions are avoided by the use of BCT. The integrity can be spoiled only if a miscreant gains 51% stake of the network. This seems to be impossible with the BCT for CC implementation.

Control: Users are in command over their transactions in the network.

Security: The Distributed nature of the network ensures that there is no single point entry and blocks all the manipulative points. Cryptography functions add to the security aspect. Both the merchants and the users protected from potential frauds.

Privacy: BCT transactions do not carry personnel information; the identity revealed is similar to email i.e. like emailed and IP login is public, the personal details underneath the mail id are not openly known.

Transparent: All finalized transactions are available for verification as read-only records. And is verifiable by anyone in the network.

Finality: Finalised transactions are not reversible. Applicable to both Coin Mining and Coin transactions.

Trust: The consensus protocol mechanism delivers trust among participants without the need for a central authority. Every transaction is managed by the network. The most important activity of mining coins is approved by consensus.

Recording: Every transaction is recorded in the Blockchain DLT. This DLT is replicated among the members which increases transparency and trust.

Immutable: Time stamping of DLT blocks in the Blockchain is an important factor in the creation of irreversible and verifiable records. In particular, timestamping help identify the winning miner to be rewarded and the incentives to other miners. Disputes are eliminated from the system by the timestamping practice.

Double-spending: BCT for CC solves the problem of double-spending, which otherwise was monitored by Banks by validating transactions and account balance. The consensus mechanism and timestamp ensure protection against double spend.

Lower Transaction fees: The fabric of BCT is a P2P distributed network and the elimination of a trusted third party. This, in turn, reduces the transaction fees and largely due to the elimination of the service charges levied by the trusted third party.

A much sharper comparison between Fiat Currency and Cryptocurrency is given in table below. This boosts the confidence that the Cryptocurrencies are here to stay in the current form.

PropertyFiat CurrencyCryptocurrency
TransportationInconvenientEasy
SecurityInstitutionalCryptographic
Record keepingManual – needs entry at some pointAutomatic
CounterfeitingFeasible and inevitable nuisanceImpossible
IssuanceThe political system and the Central bankAlgorithm
ScarcityArbitraryFixed – 21 Million in the case of Bitcoin
Payment ClearingCentralizedCheap and Distributed
AuthenticationTrust CounterpartyBuilt-in
Double-SpendingControlled by Centralized AuthorityPeers in the network resolve this by the consensus mechanism
PrivacyIdentity needs to be disclosed to the monitoring authority by KYCPseudonymous. Not so much open

Can CC do away with BCT?

Time will only answer this question. Cryptocurrency is the first and early application of BCT. Every technology is always looked upon for alternatives. BCT is no exception, in spite of its evolution. There are cryptocurrencies which do not use BCT as a technology. IOTA uses Directed Acyclic Graph as the technology. However, most of the CC use BCT technology to run the CC application. If it is not for Blockchain technology and the Bitcoin model, it would not have been possible to have a successful and lasting transaction between two mistrusted parties. Rather, what is achieved with blockchain technology is a trusted transaction between two mistrusted parties.

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