ABSTRACT:
The Internet has allowed millions of people to access a greater amount of information, improving the education and quality of life of many people around the planet. This process has made it easier for citizens from all over the world to join a network for the exchange of ideas, concepts, and projects. Just as the Internet facilitated this exchange of ideas, cryptocurrencies and blockchain will provide people with access to a new decentralized economic and financial model.
According to World Bank reports, approximately 2.5 billion people around the world do not have access to the traditional financial system. There are many reasons that prevent a person from requesting an account to protect their savings or a credit card that allows them to pay for goods or services over the Internet.
The reality is that access to the financial system is not designed for people with limited resources; they are not creditworthy. Most banks require direct debiting to open an account, and if they do not have one, they request a minimum deposit or operate with a specific amount of money over a period of time to avoid commissions, contract settlements, and other surcharges. The situation is aggravated in developing countries, where it is possible to find citizens who are not registered in civil registries and do not have identification documentation.
How can these people join a global network of exchange or transfer of goods and services if they do not meet the established requirements to contract a banking product? Are they vetoed from the financial system? DeFi and cryptocurrency applications break down this access barrier and allow people with limited resources to integrate, operate and benefit from international markets, access microcredit, or deposit their savings without the possibility that a third party may limit this access for not meeting certain requirements. .
Other business models have emerged from the decentralization of databases, allowing the creation of new companies adapted to our digital age. Likewise, States will have the obligation to be fundamental participants in this change, either by implementing public Blockchains that replace traditional registries or by facilitating the promotion and development of new protocols based on this technology.
KEYWORDS:
Blockchain, Cryptocurrencies, Smart Contracts, Tokens, DeFi.
INDEX:
1. Brief history of cryptocurrencies
2. About Blockchain 2.0 and Digital Assets
3. A New Dapps Ecosystem
4. Decentralized Finance (DeFi)
5. Not all that glitters is Bitcoin
6. Decentralized Public Administration
During the last few years we have seen quite interesting blockchain projects and decentralized applications (Dapps) have been developed.
From instant credit lines, decentralized cloud storage, market predictions in geopolitical events, or making money through video games, more and more projects and platforms are called to disrupt traditional business models.
In this article, we are going to discuss some of the most interesting blockchains, cryptocurrency, and decentralized applications projects today, which would allow millions of people access to a new decentralized and free-market financial ecosystem.
1. A BRIEF HISTORY OF CRYPTOCURRENCIES
To better understand the world of cryptocurrencies and blockchain, we must know a little about their history. Cryptocurrencies like Bitcoin, Ethereum, or Litecoin are not the first virtual representation of money.
In 1982 David Chaum published the essay "Blind Signatures for Untraceable Payments", in which he proposed the creation of a new type of cryptography and blind signature that would allow anonymous electronic payments.
Later, Chaum set out to create DigiCash, the first electronic cash system through a computer network that was impossible to track by banks, governments, and other institutions.
In 1998, two very important articles were published that would serve as the foundation for the creation of blockchain and cryptocurrencies:
• Wei Dai published an article called "b-money" in which he describes in detail what would be the necessary requirements for a decentralized payment system to function.
• Nick Szabo proposed the creation of “Bit-Gold, a digital currency that contained most of the fundamental concepts of cryptocurrencies (cryptography, mining, decentralization, etc.), including a solution to double-spending.
Although it never moved from theory to practice, many of Bit-Gold's ideas were later integrated into the development of Bitcoin.
It was not until a decade later in 2008 when the creator of Bitcoin, known by the pseudonym Satoshi Nakamoto, published the essay called "Bitcoin: A Peer-to-Peer Electronic Cash System", giving rise to Bitcoin and the concept of blockchain.
On January 13, 2009, the Genesis Block, the first block of the Bitcoin blockchain was generated.
The following message was written in the Genesis block: "The Times 03 / Jan / 2009 Chancellor on brink of second bailout for banks", in a clear protest to the monetary policies Taken by UK Chancellor Alistair Darling during the 2008 financial crisis.
When we talk about blockchain we are simply referring to a new way of storing and transmitting information without the possibility of a specific entity that can control the network, but through an open, anonymous, encrypted, and distributed registry among the members.
These decentralized database implementations give users greater control of their information, allowing the transmission of titles, data, and securities through the Internet in a confident, anonymous, secure way and without the need to know the other party.
2. ABOUT BLOCKCHAIN 2.0 AND DIGITAL ASSETS
Blockchain 2.0 refers to the ecosystem of decentralized applications and Smart Contracts created from the development of Ethereum.
Although both are cryptocurrencies, the platform created by the Russian Vitalik Buterin is not exactly a direct competition from Bitcoin since its purpose is fundamentally different from the so-called “Internet gold”.
Protocols such as Ethereum, EOSIO, or Tron allow programmers to develop and execute Dapps and Smart Contracts, creating new models that allow the transmission of data and values in the form of digital assets.
This set of Digital Assets (cryptocurrencies, stablecoins, and tokens) make up the ecosystem of cryptocurrencies.
Cryptocurrencies such as Bitcoin, Monero, or Verge are born as means of P2P, anonymous and decentralized electronic payments between the members that eliminate traditional intermediaries with the ultimate goal of replacing the currencies issued by central banks.
One of the problems that cryptocurrencies have always faced is the volatility of their price. Some ADs can vary by 5%, 10% or up to 20% in a single day. This can discourage many people who could see their investment reduced considerably in one day but could attract others who would seek to benefit from the increase in the valuation of their cryptocurrencies.
To solve the problem of volatility in the price of cryptocurrencies, stablecoins are developed.
Stablecoins are cryptocurrencies backed 1: 1 by a FIAT currency (currency issued by a central bank of a State), usually the US dollar. Some of the most important stablecoins are Tether, DAI, and PAX.
Tether ($USDT) is a controversial dollar-backed stablecoin. It is the third-largest cryptocurrency by market capitalization and number one in daily volume traded. It is used mainly to invest in the cryptocurrency markets (exchanges), being commercialized and exchanged by other ADs.
Tokens are digital assets created on Blockchains like Ethereum or EOSIO. Although they can be used as means of payment, they are born with a different purpose than cryptocurrencies, and their usefulness or valuation will depend on the platform developed.
Tokens like $MANA are used to buy parcels and digital items in video games; $REP is used to create predictive markets on the Augur platform; $NEXO as collateral for a loan and interest protocol; and so on.
3. A NEW ECOSYSTEM OF DAPPS
One of the objectives of cryptocurrencies is the redistribution of wealth, which is achieved by facilitating access to reward systems and incentive payments for the use of different protocols.
A clear example of an incentive for the use and redistribution of benefits is the Brave Browser browser (developed by the creator of the JavaScript programming language).
This web browser running on the Basic Attention Token ($BAT) protocol pays users their $BAT token every time an advertisement appears.
The idea behind Brave is that advertisers should pay users for the attention it takes to view an ad or ad content.
Another cryptocurrency based on a similar idea is StormX, which credits its $STMX token to users who complete micro-tasks such as installing other applications or viewing certain content. These new programs are intended to reward users for the time they spend using their products.
One of the most interesting and promising applications of a blockchain is related to decentralized cloud storage and in this category we have Storj.
Storj is a decentralized cloud storage platform (a kind of Dropbox on a blockchain) that promises to be more secure and less vulnerable to computer breaches and attacks.
Traditional cloud storage applications such as Google Drive or Dropbox are constant targets of hacker attacks and sensitive data breaches.
Storj ensures greater security in the treatment and management of files stored in the traditional way in the cloud. Other startups that are working on developing decentralized cloud storage protocols are Siacoin and Filecoin.
Another section that points to an interesting implementation of cryptocurrencies is the video game and e-Sports sector.
Enjin ($ENJ) is the leading platform in the area of blockchain for video games. This protocol allows developers to create games based on a blockchain with high definition graphics, integrating functionalities that improve monetization and facilitate greater scalability and integration of digital products.
Blockchain-based virtual reality video games are becoming increasingly popular and Decentraland stands out among them. It is the first VR video game that is completely owned by the players; in which users create, browse, and trade items using their $MANA token.
Through the video game, players can generate and exchange $MANA and use it to acquire "parcels", collectibles, digital works of art, or virtual objects that can be acquired inside and outside the program.
In the betting section, Augur ($REP) is the dominant blockchain platform in the prediction market, making it possible to create betting markets not only for sports but also for all kinds of political, economic, and social events.
Augur allows users to create a bet on any event. Most of the betting and prediction markets in Augur deal with relatively normal topics like what the outcome of a basketball game would be or the price of a barrel of oil by the end of the year. But some of the bets have truly dark connotations, coming to assess the probability of public figures being assassinated or the possibility of a terrorist attack occurring in a certain city.
For artists and content creators, Ascribe is a startup that allows authors to claim intellectual property over their works, allowing the creation and tracking of limited edition digital artworks integrated into a blockchain, making it impossible for them to be duplicated or falsified.
Stay tuned for the second part! To be continued...
This article was originally written in Spanish by Ivar Cifré Molina, a lawyer who specializess in New Technologies, E-Commerce, Data Protection, and Blockchain. He is the Founder of JURISPIXEL, a legal consultancy for technology startups and entrepreneurs located in Madrid, Spain. He writes articles on tech law for the Spanish legal magazine A Definitivas. Also, he is the creator and developer of a security app for Android called lockIO.
Follow on Twitter or Instagram @ivarcifre
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