Understanding The Basics Of Blockchain And Why Banks Are Keen To Adopt Them

  

Although distributed ledger technology

(DLT) has been making news in recent years, its origin dates back to about 10 years ago.  Of the various options available today, blockchain is the most prominent. As its name suggests, blockchain is a chain of “blocks,” where a single block is a set of verified transactions identified by a unique hash number. When a block is completed, a new one begins, and each block is linked to its predecessor and successor in a chain. Whereas a single verified transaction stands as an independent entity in traditional systems, in blockchain, the independent entity is a set of transactions that together make up a block.

A fundamental difference between a traditional transaction and one conducted through blockchain is the nature of contracting parties. The conventional system needs only two parties, who enter into a contract governed by mutually agreed to terms and conditions and verify each transaction against that covenant. No other party (other than a central intermediary or agency, such as a bank) is required to execute the contract.

In a blockchain transaction, on the other hand, the transacting parties, as well as every member of the network (which can run into hundreds of thousands), must validate each transaction before it can go through.

For this reason, a blockchain transaction is immutable and, hence, highly secure and trustworthy. Any change must be approved by the entire network before it can be executed, and is immediately reflected in every member’s copy of the ledger. Because the network validates every ledger entry by consensus, there is no longer a need for a central monitoring agency or any other intermediary.

What Role Does Blockchain Play In The Bitcoin Ecosystem?

Well, the distributed ledger is not just the technology underlying cryptocurrency, (blockchain underlies bitcoin, for instance), it is the very reason cryptocurrency exists. Without the trust and transparency engendered by blockchain, there is no way a bitcoin transaction, which is totally anonymous and involves no intermediary or supervising authority, would have been accepted by the market. It is the blockchain network that assures the transacting parties that the bitcoin exchange they are undertaking is genuine and shall be honored.

Although blockchain started out recording only financial transactions, it has since diversified into document validation. When digital documents and images are uploaded on blockchain and time-stamped, they are automatically “version-controlled” and proven to be in the possession of an individual or business entity at the time recorded.

Why Blockchain Is Important To Banks

It is easy to see why blockchain could be of enormous significance to banks, which process and document millions of transactions each day. The global financial crisis eroded trust in the banking system to an all-time low, while taking regulation to an all-time high. By ushering in a “trust economy” that assures the security and genuineness of transactions, blockchain is giving financial institutions a chance to redeem the lost faith and confidence of their customers.

And, at a time, when some banks are finding it hard to even meet their cost of equity, blockchain offers a way to reduce the cost and lead time of a transaction: one estimate says it could take between$15 Bn-$20 Bn off banks’ annual infrastructure costs by 2022. Other benefits include new process automation opportunities and the creation of new investible assets. These are the principal reasons why banks the world over are taking a very clear interest in distributed ledger technology, despite being cool towards digital currency. Most big banks worldwide have some blockchain initiative in the works in partnership with other banks, fintech startups or established technology companies.

In January 2017, Infosys presented a survey jointly with LTP, on the use cases and challenges surrounding blockchain adoption in banking. Half of the respondent banks had already started exploring blockchain. 50 percent of the surveyed companies were either working with a fintech firm or with a technology company on blockchain, while 30 percent had opted to be part of blockchain consortiums. Cross-border remittance, digital identity, and clearing & settlement were rated the top three use cases, with more than 40 percent of banks working in these areas.

A good example of blockchain in international remittance is the pilot network from Emirates NBD and ICICI Bank, launched in October 2016 on the busy UAE India corridor, which carries about$ 70 Bn of the world’s total $ 580 Bn worth of remittances. Invoice financing and Letter of Credit processing rounded off the top five use cases.

While the banks in our survey recognized the blockchain opportunity, they cited a few challenges in the way of adoption. Their main concerns were that the blockchain ecosystem — without which transactions can never scale — wasn’t quite ready, and that it would be difficult to integrate blockchain applications with other enterprise applications. The financial services industry will have to find a solution to these challenges to turn the blockchain dream into reality.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

‘The’ Blockchain — Reshaping the
World of Business

  

The first generation of the digital revolution

brought us the Internet of information. The second generation — powered by blockchain technology — is bringing us the Internet of value: a new platform to reshape the world of business and transform the old order of human affairs for the better.

I’m reasonably confident … that the blockchain will change a great deal of financial practice and exchange … 40 years from now, blockchain and all that followed from it will figure more prominently in that story than will bitcoin.

Blockchains come in many shapes and sizes — permissioned vs permissionless, proprietary vs open source, and with a sometimes confusing array of consensus mechanisms underpinning their core functionality. So how does one choose a direction that’s right for different financial applications? Determining how data transparency vs privacy and security plays a role in blockchain choice. We will discuss those topics, and so many more! But, let's get acquainted.

What are Blockchain Technologies?
How do blockchains work?

A Blockchain is a distributed ledger of unchangeable, digitally recorded data. Data of any type can be recorded in a blockchain: financial transactions, titles to real estate, etc. Unlike a traditional database housing the same data, a blockchain does not have to rely on a centralized administrator.

Blockchain Applications
These applications are powered by blockchains

These are the use cases where blockchain technologies can be applied to improve efficiency or unlock capabilities for new technologies.

Blockchain Companies
Innovative companies building with blockchain technologies

200+ Blockchain Companies … and counting….With blockchain venture capital funding well past the $1 Billion mark, the amount of invested capital into new startups is pointing towards blockchain companies being around for quite a while.The following blockchain technology companies are a subset of the many who are blazing the trail for global distributed ledger technology adoption.

Blockchain Venture Investing
Fund Promising Blockchain Startups

Overall blockchain related venture capital funding just crossed over the $1 Billion mark. This method of blockchain investing can have various levels of entry, with initial seed investments (as little as $5,000), up to Series A investments ($1M+). Venture capitalists can play a more dynamic role, such as providing mentorship and/or providing introductions. If a company is able to drive growth with promising results, a venture capitalist may opt to become a partner in the company, owning equity and joining the company’s board.

Cryptocurrency

Cryptocurrency is the next evolution of money. We know that in ancient days, commodities essential to daily living were considered money (e.g. cows and chickens) and traded among micro-economies. Then the modernization of society and urban cities brought the need to track money and value across large territories of land, which resulted in the birth of paper and coin money issued from the ruling governments. A quarter of a century ago, an invention called the world wide web made it possible for people to buy and sell virtually anything, to anyone around the world using bank-issued credit cards, which are a substitute for paper and coin issued currencies and provide electronic payment. Finally, several years ago, a new form of money that is native to the internet was born — cryptocurrency. Below we explore what this new type of money is, how it works, and how you can get involved.

Cryptocurrencies

can be thought of as a new type of digital commodity or digital money. They can act as a fuel for distributed ledger networks and also be used as mediums of exchange to purchase goods and services. Depending on intent, cryptocurrencies can also be treated as an appreciating long-or-short-term investment. Cryptocurrency values have been subject to extreme periods of volatility (in some cases up to 20%±), creating both risk and opportunity. As such, it is a worthwhile effort to perform in-depth due diligence before making any investments in cryptocurrencies.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

China’s Blockchain Invasion

Alan Zibluk Markethive Founding Member

How to fix the blockchain
‘fail whale’ problem

If you’ve spent any amount of time on the internet

over the past several years, you’re no doubt familiar with the “fail whale” that plagued Twitter in its formative years. Users would log into the service, only to be confronted by a graphic of a whale with the message: “Twitter is over capacity.” Ultimately, Twitter’s fail whale problem came down to scalability, and it’s the same issue that’s facing blockchains today.

Blockchains are in a promising, yet precarious state. As more governments and private entities seek to understand and harness the technology, their shortcomings become more glaring. Growing pains are real indeed, and companies seeking to leverage the undeniable power of the blockchain are being confronted by its scalability limitations. Just as Twitter had to answer tough questions as it prepared to go public, the blockchain industry now must adapt to concerns that accompany many burgeoning new technologies.

So, how do we as an industry confront the scalability issue? Bitcoin and Ethereum were not built to successfully scale because all their transactions and smart contracts exist on a single public blockchain, rather than on state channels. State channels are a two-way transaction channel between users or between machines. Smart contracts inside these state channels dictate how value flows and what's executed automatically, while still keeping the cryptographic properties of a single public blockchain: trustless transactions without intermediaries, here even with the speed of light. Blockchains of the future will require private state channels to scale, in a similar way to how the public court system only deals with contract infringements (edge cases) and not every single contract that's written.

Beyond the issue of state channels, successful blockchains must be willing to provide a platform for applications by third-party developers. Just as Bitcoin was introduced by Satoshi, every decentralized system starts as centralized, and innovations work best when there’s an individual party at the helm.

Whichever blockchain achieves mainstream adoption will also be adopted for private use cases, and the blockchain that is suitable for both public and private use will instill guidelines to build a user-friendly experience. Ethereum has thus far failed at this. Ethereum’s blockchain architecture offers only a ground layer, providing no coherent design, no coherent API for web apps and no straightforward naming system. Much like Apple took over the computing industry by incorporating hardware and software with design and user experience in mind, successful blockchains will need to do better in enforcing guidelines for developers.

By incorporating state channels to enable trustless smart contracts, and maintaining standards for design, blockchains can overcome scalability roadblocks and tackle the “fail whale” issue head-on. We’ve created a modular yet holistic approach to blockchain technology, built from the ground up to be scalable for mainstream adoption and private use cases. Developers will be able to introduce apps (æpps) using private state channels, benefiting from trustless smart contracts and instant transactions. We hope to set a new standard for blockchain development, one that can usher in a new era of decentralization.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Reasons Social Media Marketing
Is Still Underrated

Unmeasurable effects.

The return on investment (ROI) of social media is hard to measure, and I’ll be the first to admit it. One of your biggest goals is attracting a large following of people who are enthusiastic about your brand, and improving both your brand’s reputation and brand awareness. These aren’t as objectively measurable as on-site conversions, but they can and do lead to greater consumer interest, which manifests as sales eventually. Trying to pin down an exact value for all these benefits is next to impossible, even for the pros, so the value of a social media campaign is almost always underreported.

Anecdotes.

People also use anecdotal evidence as a basis for their opinions about the strategy. For example, they may know of another business who used social media and didn’t see any results, so they stay away from it in the present. However, these anecdotal examples often don’t examine the types of tactics these businesses used, and they certainly don’t represent the average across multiple businesses.

Apples and oranges.

Ironically, these same business owners often cite the fact that anecdotal evidence can’t prove a strategy’s effectiveness for everybody. They point to major influencers or big businesses in the social media world and explain that social media works for them because it fits naturally with their industry, or because they have the resources to invest in a heavy campaign. It’s true that some industries may be naturally inclined to perform better on social media than others; tech companies and consumer-facing businesses are two good examples. However, social media marketing can be used by practically any company—it may just require an adjustment to your approach.

Poor targeting.

Some businesses look at their own results and use those results as a gauge of the long-term potential of their campaign. But they may not realise that their strategic targeting is interfering with their results. For example, if you buy 1,000 followers using some super cheap follower-adding service, but only 4 or 5 of them ever interact with your posts or visit your site, it could be that the remaining 995 don’t belong to demographics relevant for your business, or that you haven’t been using the right engagement strategies to cultivate interest. Don’t underestimate the potential of a well-researched, strategically focused campaign.

 Lack of investment.

Effective social media marketing can’t be done on a whim. It needs to be planned, researched, and strategically executed. That means you’ll need to spend a significant amount of time or a significant amount of money to see results; and since many business owners aren’t willing to make that investment, they never see a fraction of their potential results. By that point, they’ve seen what a small investment does, and they’re unwilling to make the jump to a larger investment.

Social media marketing isn’t an “underground” strategy; it’s talked about heavily (and I should know), and there’s no shortage of content covering its feasibility and best tactics. But the perceptions of marketers and business owners are still lagging behind the evidence, and they’re only hurting themselves in the process. The more you learn about the effective implementation of social media marketing, the more plainly beneficial it seems—but you have to treat it as a legitimate marketing strategy if you want to research it appropriately.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Ways to monetize your
social media followings

Turn your social media presence into a way to generate revenue — even if you don't have a massive following on Facebook or Twitter.

Alan Zibluk Markethive Founding Member

Alan Zibluk Markethive Founding Member

Alan Zibluk Markethive Founding Member

Does Your Company Really Need to Focus on SEO?

Q: Is search engine optimioptimisation important to your digital marketing strategy?
A: Yes and no.

Alan Zibluk Markethive Founding Member

Cryptocurrency exchange Poloniex

recently announced that it will be delisting 17 altcoins, effective May 2, which saw the price of the coins drop significantly.

On Twitter, the U.S.-based cryptocurrency exchange said:

On May 2, 2017, the following will be delisted: BBR, BITS, C2, CURE, HZ, IOC, MYR, NOBL, NSR, QBK, QORA, OTL, RBY, SDC, UNITY, VOX [and] XMG.

Since Poloniex’s tweet, the prices of the listed currencies have dropped in value by between 31 percent and 92 percent over the past seven days. The biggest drop in value was C2, which is currently ranked 323rd on CoinMarketCap. Over the last seven days, it fell by 91.08 percent. Boolberry, who was one of the altcoins mentioned to be delisted, and who has had a 64 percent price drop over the past seven days, responded to Poloniex’s tweet., and asked:

“Hey Poloniex, anything we can do to avoid delisting?”

Coin Magi XMG, which suffered a 58 percent drop following the announcement, also reached out to Poloniex via Twitter, stating:

Poloniex Magi is with you for a long time. Last months volume is growing, new developments are in progress. Pls reconsider!!

Many, however, have taken to Twitter to either voice their support in the expected removal of the announced altcoins while others have voiced their anger in how Poloniex have handled the situation.

One person responded by saying:

They opened a company to make money … @Poloniex in the same breathe [sic] screw people over …

While another said:

Lol our hedge group only lost like $250000 in earnings in like 20 minutes … 11 failed transactions trying to close positions!!! All gone.

A third said:

@Poloniex who the F%^& makes these decisions? I see at least 4 with active develop, solid community & solid project that should remain.

Criticisms of Poloniex

In the past, the cryptocurrency exchange has received its critics about its security procedures. Last October, an anonymous security review undertaken by Xavier59, revealed three vulnerabilities after alleging that Poloniex had failed to reply to his emails with information relating to security bugs. Furthermore, last year, the exchange announced that it was suspending its services in New Hampshire due to that state’s digital currency regulations. It added the same suspension to the state of Washington earlier this month for the same reasons.

Of course, while the cryptocurrency exchange is considered one of the biggest, this latest news from Poloniex and its planned delisting of 17 altcoins is not going to do any favours for the exchange. It begs the question, then: is this the start of more delistings from the exchange?

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member