Why the public cryptocurrencies matter! – Borko Tesic
Why are the public cryptocurrencies the best innovation since world wide web?
In this piece I would like outline why we firmly believe at blockk.io that a recent innovation in digital bearing assets ‘DBA’ or otherwise known as cryptocurrencies or blockchain cryptographic properties ‘BCP’ (ref: Swiss Federal Council and Swiss Financial Market Supervisory Authority) are the most important technological innovation since the internet. The first part of this article will briefly touch upon a great revolutionary (anonymous name) Satoshi Nakamoto and the symbolic meaning of Bitcoin whitepaper, then we will turn our focus on Initial Coin Offerings that engulfed much of the market place during 2017–2018 ICO palooza; and lastly we will cover general topics describing blockchain technology along with distributed ledger (#DLT) technology which paved a way for unceremonious digital infrastructure that transformed the very way we communicate, transact & interact with businesses and other prescient government to peer (G2P) programmes which have not yet come to light.
Please note this is an introductory piece and much more of qualitative and quantitative content will be published from our team at blockk.io as we’re continuously seeking other valuable contributors to join our squad. With this article — ‘Why public cryptocurrencies matter!’ we hope to clarify some common monomers about crypto-currencies / crypto-systems / crypto-networks because they often evoke an emotional response with people; merely due to the fact that taxonomies of these nascent digital bearing assets dwell on the 3 most prominent asset classifications of financial instruments: formation of #1 digital monies, #2 digital commodities and #3 token securities. Because any new groundbreaking technology will pain strikingly influence views of different people and challenge their ideological beliefs, understanding typology of cryptocurrencies from this article is beyond necessary and we hope you’ll appreciate the following discussion as much as we’ve enjoyed writing it.
What is quite important to emphasize here is that almost all public cryptocurrencies are in fact some kind of hybrid financial instruments and contain various characteristics underlying computer science and other cryptographic method techniques. What we are trying to explain is that all cryptocurrencies are demonstratively a blend of digital monies + smart programming and reflect a new type of asset class seen previously only with conventional commodities. As we veer toward global adoption of these digital bearing assets with infinite token divisibility, it is only natural to speculate on these crypto assets as the network effect takes hold — so they will exhibit somewhat a securities like characteristics only seen previously in public equities and other securitized assets.
Lastly we will explore the blockchain technical terms like ‘medium of exchange’, ‘unit of account’ and ‘store of value’ and will hopefully help users gain a better understanding of these topics going forward.
The conditional terms underlying a blockchain technology should merit carefully consideration as this ingenious new product / service offering in a form of ‘token payloads’ ( crypto mining) have never previously been known to mankind. I would like to point out that this article is not meant to provide a comprehensive review of computer science nor delve deeper into cryptographic techniques, but render a professional and unqualified opinion explaining dynamic nature of these P2P blockchain network protocols.
Satoshi Nakamoto name is synonymous with bitcoin and the creation of the first digital cryptocurrency known today as Bitcoin Core under the symbol $BTC. For the time being we will skip over a topic called #Forkonomy (ref: Parallel Industries), which basically is defined as ‘deliantiation / fragmentation in software code comprising various digital stakeholders and other distributed communities attached to a system of computer nodes’. The reason we mention forkonomy in the beginning is that there are currently number of different bitcoin-type (small letter “b” noun is used here to define bitcoin technology) cryptocurrencies such as Bitcoin Core ($BTC), Bitcoin Cash ($BCH), Bitcoin Satoshi Vision ($BSV), Bitcoin Gold ($BTG), Monero ($XMR), ZCash ($ZEC) among others that are all effectively all exhibiting similar performance characteristics of Bitcoin — $BTC. Warning: and I cannot say this LOUDLY enough, you’ll quickly encounter various crypto communities on social media supported by a legion of loyal followers that’ll all unscrupulously claim to have their own coin as only true versions of bitcoin, however we must say these coins are nonetheless just a version of the bitcoin blockchain system anchored in Satoshi’s genesis block.
Now going back to the original bitcoin whitepaper, we at blockk.io are defining bitcoin cryptocurrency as a permission-less, censorship resistant peer to peer (P2P) electronic cash system. In our humble opinion, Satoshi Nakamoto ultimately solved for 3 plaguing human phenomena #1 provided a technological solution altogether disparate from any legacy financial system (delivered a disinflationary economic model backed my mathematics of fixed coin issuance), #2 assembled cryptographically scripted computer code which installed a 3-entry accounting ledger with the P2P transactions decentralized across the participating nodes (public SCI records distributed at all times to the network) and #3 introduced a super innovative ‘coinbase payload mechanism’ meant to reward computer resources dedicated to supporting the public ledger! To quote a great Satoshi himself, he envisioned ‘this idea of a future with virtual peer to peer banking. A kind of decentralized and secure system with fixed total amount of money where each unit (say virtual coin) is divisible infinitely [1 bitcoin = 100,000,000 sub-units called Satoshi sub-units] to replace inflation. It would pose no problem for liquidity because the virtual currency can be divided anytime, however people might not spend their currency often as to would increase in value’, end quote.
Since the bitcoin inception with genesis block first mined in 2009, the cryptocurrency marketplace has grown tremendously both in scope (payment infrastructure) and scale (market capitalization) and has lent credence to a development of other smart cryptographic protocols such as Ethereum Foundation and Stellar.org. To use a cosmetology reference here, bitcoin is equivalent to ‘dark matter’ in space, which ultimately enveloped formation of first galaxies (other cryptocurrencies known as altcoins) by engaging a.) DevOps talent pool programming decentralized new protocols and b.) explosion of luminous stellar supernovas expelling pertinent solar masses of material (i.e. funding mechanism). Think that over again but I am right!
To further elaborate on the second point just mentioned, what we are referring to here: is that cryptocurrency funding mechanism have re-engineered both Venture Capital and Private Equity investment mandates and their coin distribution proceedings. In the past, only accredited investors and other prominent investment firms were allowed to participate (benefit) in fin-tech deals by staking their capital interest alongside the founding partners during seed financing. Prior to invention of cryptocurrencies and blockchain coin payloads, there weren’t any investment vehicles available for public consumption sadly enough — the retail investors were precluded entirely from participating. Consequently, with an advent of bitcoin, a suite of new opportunities became introduced through coin issuance which unequivocally granted participation rights to all stakeholders fairly and equialy. What is important to emphasize here again is that Satoshi successfully domiciled units of bitcoin into 100 million sub-units which were partially used as investment token amounts to fund new protocols. This process called ‘native token sales’ encouraged fast moving capital (called down) along with culmination of skilled developers & other professionals across the various fields to swiftly engage with a common goal (such as software engineering, infrastructure design analysis, marketing and sales, cryptoeconomists plus other legal professionals) to bolster a fast moving fin-tech research and development.
The culmination of these venture capital efforts has lead to creation of Ethereum Classic VC Fund in May of 2016 and a $200 USD million vehicle called ‘The Dao’ (ref: Wikipedia) with an intention of investing in participating projects using exclusively smart contracts. Although the mechanism ultimately failed & had reported vulnerabilities worth of $50 million of native cryptocurrency Ether $ETH compromised (stolen) & which was moved to another account without owners content. The bottom line is that the program demonstrated share power of the decentralized finance and its capabilities to syndicate large swaths of newly formed capital. It attempted to deploy investment capital in the new technologies without single human intervention which is quite an accomplishment — voila!
Since 2017, over 750 new digital protocols have raised money through a subscription method called the Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs) and Listen Exchange Offerings (LEOs). Although relative viability and success rates might have come into question for some of these projects, there is no doubt that most of the programming initiatives brought forward ingenious new ideas and unprecedented blockchain-based solutions in attempt address legacy problems plaguing the global commercial business for many many years. Nonetheless, the experimental treatment of these fintech protocols did in fact encourage regulatory arbitrage as few of the them clearly failed to deliver on promised business deliverables and were egregiously avoiding the US securities laws regarding token issuance compliance. During 2017–2018 ICO palooza, crypto projects clearly broke stakeholder guarantee rules and dismembered investor protection rights.
However since late 2018, we’ve since begin to exact more accountability from the cryptocurrency community with additional compliance standards and stakeholder rights validated right from the computer code including ‘corporates governance’ — case in point the Japan Financial Services Agency (FSA) permitting Tokyo Virtual Currency Exchange Association (Source: Retuers) to police and sanction exchanges for any possible violation. In a free and open market and a fast moving industry, self-regulation has become the best way to enact rules and compliance guidelines set to best safeguard customer assets, prevent money laundering practices and promote strong operational standards.
BLOCKCHAIN Terms to Know
The public cryptocurrencies space is probably a most difficult topic to comprehend from a main-stay media due to the fact that crypto encompass most eclectic concepts from the queuing theory to cryptographic techniques such as elliptic curve digital signatures, block explorers, computed hashes, merkel trees, inventory vectors among other fun topics!
In the next section, we would like to briefly reference the supplementary work by Dr. Wassim Alsindi of Parallel Industries and Cryptoeconomic Systems Journal at MIT — Digital Currency Initiative. If you carefully follow many of the cryptocurrency factions on Twitter, you will quickly discover that they all seemingly have the very best coin on the planet. I am hoping that via the following section we can help clarify some confusion surrounding what is defined as bitcoin. A range of definitions of public cryptocurrencies is important to understand since if they are properly used crypto coins / tokens could help you gain financial independence and even position you better to grow you investment portfolio & capture potential new growth opportunities!
We have derived much of our logic from the workpaper ‘TokenSpace: A Conceptual Framework for Cryptographic Asset Taxonomies’ and although the intent of this article is not to paraphrase Dr. Alsindi remarkable work, we are going to reference few relevant terms and definitions. First and foremost, Bitcoin has most fundamentally introduced a new medium of exchange to the market place = ‘MOE’. Prior to Bitcoin, the world has most rudely depended on financial institutions and credit agencies to transact and transfer monetary units of money. The Chartered Financial Analyst Institute defines money as ‘inter-temporal rate of substitution’, this definition quite happily goes along with what Satoshi Nakamoto envisioned as ‘UXTO’ an unspent transaction output in Bitcoin. Furthermore the Nakamoto cryptocurrency consensus has empowered millions of users around the world with an internet connection to gain immediate financial access and further participate in other new and exciting tech startups with their digitex holding. Also, the crypto payment infrastructure quickly became ingratiated in the world commerce as the e-wallet users can now spend their bitcoin easily & transfer UTXO values anywhere in the world and unencumbered (ex. with a third party app such as the Badger Bitcoin Wallet) — revolutionary! This new method of exchange proclaimed Bitcoin as true winners as it quickly surpassed conventional payment system of monies (not to be confused with sovereign currencies) with accessibility and added security unlike seen before. Since 2016, aggregated Bitcoin-type blockchains have gained global popularity among different types of users with over 30 million unique wallet addresses currently registered (Source: Bitcoin.com), it irrevocably become the most important digital transformation of wealth & creation since Italian mathematician Luka Pacioli invented modern accounting system of debits and credits back in 1494!
As previously mentioned the Elliptic Curve / ECDSA is used to sign digital signatures on most public blockchains while Public Keys or Units of Account, another definition to remember = ‘UOA’ (a 32 byte big-endian integer representing some the coordinates of a point on the curve while using encoding method to approve transactions) are systemically transcribed across the network to verify client possession of UXTO, again deployed without a single human intervention. The bitcoin client signatures are the first method of its kind to standardize an e-wallet transaction functionality ultimately enabling users to buy / sell assets freely and securely across the network backed by cryptographic technology!
In this last segment we are going to briefly discuss a topological assignment of asset taxonomies. Throughout human history, we have effectively classified all financial instruments into 3 main classifications — monies, commodities and securities. Although the digital asset infrastructure has introduced new pathways how best to secure asset value, outside of the conventional commodities such as ‘precious metals’ (gold, silver etc.) ‘utility metals’ or ‘energy resources’ (WTI, BRENT, LNG) or even more subjective commodity assets like the fine art or even diamonds, the digital assets such as bitcoin are new commodities and have been declared such by the US Commodities Futures and Trading Commission (Ref: CFTC gov/bitcoin). It can be argued that various digital infrastructure pathways are the purest form of asset commodities of any kind and most resemble the store of value “SOV” properties due to the inherent qualities such as fungibility interchangability and scalability of blockchain / Dots crypto networks. The argument can be made mainly from a fact that the decentralized nature and system wide requirements of POW POW DPoS blockchain operating nodes are entirely standardized across the network and used discreetly by everyone. We can provide a quantitative evidence to back our conclusions on SOV of asset commodities, however monetary policy considerations and metadata implications of different asset classes would be reserved for another time.
We are not going to feel dejected and apathetic here and will merely end this article with a profound statement — the public cryptocurrencies matter!