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Blockchain 1.0 - Distributed ledger

Blockchain 1.0 the first wave of blockchains and distributed apps. This wave was mostly crypto currency applications adding differentiating features to Bitcoins model. Predominantly 2009-2014.

This series of articles sees to explore the evolution of Blockchain technology. How are we seeing real world adoption for each progression and what can we speculate might come about? The articles are intended for people with some knowledge of blockchains. Thus, features and terms won’t necessarily be described. This article is my views. I have done light research but mostly it’s coloured by my experience in my crypto journey.

The Blockchain 1.0 is a distributed ledger transactions. Some ledgers use value bearing high liquidity assets called crypto currencies. Others, utility tokens where the value bearing part is either removed or downplayed. The very first application of blockchain was crypto currency. The Internet of Value enabled through the visionary whitepaper outlining blockchain as a technology and proposing the first application, Bitcoin a peer-to-peer electronic cash system.

An Alt-coin is a crypto currency that is not bitcoin. Many projects were launched using this new technological breakthrough. Some specialized the technology, adapting it to a need. Others tried taking on Bitcoin’s market position with improvements to the value proposition like better anonymity, faster transactions or value adding data layers.

Bitcoin is not a static project. Bitcoin is continuously improved through ‘Bitcoin Improvement proposals’ (BIP). These proposals add functionality that enable other applications. Examples of those are coloured coins - attributing representation to a set of coins, conditional trading, bigger block-sizes and more. Not all proposals are accepted.  Because of this Bitcoin has several layers running on-top of it. Some with their own alt-coin synergistically helping provide the service.

Real world adoption of Blockchain 1.0 include:

  • Banking intermediate layer through the Ripple and Stellar project. These are consortium type projects that uses a type of mining algorithms that by design are closed off to the public. They are entrustable rather than trustless intermediates.
  • Through the Bitcoin ATM 3rd party ecosystem, a global network of brokers, local buyers and sellers Bitcoin offers a real alternative to international money transfer brokers like Western Union. However, in some regions the benefit is eaten up by the spread between bid and offer in the market.
  • Anonymous transactions using, TOR-network, coin-mixing, ring signatures and zero-knowledge proof algorithms. Blockchain technology is born out of the cryptographer community and is at its core an arms race against centralized authorities putting first anarcho, cyberpunk, individualism and libertarian creeds like individuals right to privacy, right to private property and right to freedom of speech above convenience when enforcing the will of the ruling class. These cryptocurrencies can also be used for payment layer in criminal transactions but the debate about the utility of the technology should be seen in a civil rights context. DNS projects like Namecoin, one of the first alt-coins can also be placed in this category.
  • Timestamping and registration on the blockchain, immutable proofing events. Blockchain’s can as above mentioned be anonymous, but most are not. They are very transparent. The transparency of blockchains can be used to make entries that are trustlessly immutable. An attribute that does very well with certifications after audit. First generation proof of existence.

Crypto Currencies should be assessed by the following metrics:

1. Generally Accepted - Many people must accept the money as a settlement of debt or as a discharge of obligation.
2. Durable - Its quality/value does not deteriorate over time, which is why we do not tend to use food products as money.
3. Divisible - If you divide the money in half, each half should be worth 50% of the whole. This is why we tend not to use diamonds or artwork as money.
4. Stable/Consistent - The value does not fluctuate substantially with time.
5. Transportable - It is easy to move from one place to another.
6. Scarce - It is difficult to acquire.
7. Easily recognizable - It needs to be obvious what it is, mostly for the purposes of #1.
8. Difficult to Counterfeit - This mostly has to do with #6.
 
In addition to these, there are a variety of disputed desirable characteristics of a good currency:

1. Elasticity - It must be able to expand or contract as needed in the economy. Providing price stability.
2. Economical - The cost to produce it must be less than its value.
3. Inherently Valuable - The money should have a use besides its use as money that gives it intrinsic value.
4. Long history of acceptance - A long history of acceptance benefits #1 and #7.
5. Supervised - The currency is tracked by a central authority to avoid economic catastrophes.