Blockchain Technology and Cryptocurrencies
Completion requirements
Cryptocurrencies and blockchain technology are some of the means of how technology is entering the financial world. As technology advances, so does the financial products and the provision of these products and services. After watching this video and going through the attached slides, you will learn more about how technology is shaping the world of finance. Is the emergence of multiple non-central bank-backed cryptocurrencies threatening traditional central bank-backed currencies?
Shaping the Financial World
Challenges & Assessing Viability of Use Cases
Blockchain Technology Challenges
- Scalability, Performance & Efficiency
- Privacy
- Security
- Interoperability
- Governance
- Public PolicyFrameworks
- CommercialUseCases
Framework for Comparing Costs & Trade-offs
(Coase)
Vitalik Buterin Trilemma
Assessing Use Cases – First Considerations
Which side of a divide the project is on?
Is the project one that services the new crypto asset class?
Is the project one uses blockchain technology and crypto currencies?
Projects servicing the cryptocurrency space:
| Custody solution – Coinbase , Fidelity |
Exchange operation – Binance, Coinbase |
|---|---|
| Software provider – Blockstream |
Wallet provider – Circle |
| Hardware company –BitMain | Asset manager – BitcoinSuisse, Galaxy |
| Miningpool operator – BTC, F2Pool, Poolin | News service – CoinDesk |
Assessing Use Cases – Strategic Considerations
- What value creation proposition is there?
- Decentralized vs. Centralized Computing?
- Native Token filling what Gaps in Fiat Currency system?
- What are competitors (Traditional& Blockchain) doing?
- Why use append only ledgers, multiple party consensus and native token?
- What verification or networking costs can actually be reduced?
Assessing Use Cases – Tactical Considerations
- Which data needs recording on append-only ledgers?
- Which multiple stakeholders need 'write' access to the shared ledger?
- What are the trade offs of performance, privacy, security, governance & regulation?
- How can broad adoption and user interface be realized?
- If permission less, what are the token incentive systems?
Assessing Use Cases – Deeper dive
- Why use multiple party shared ledger?
- Why choose a distributed ledger solution over a centralized one?
- Why not rely on a third-party authority or host?
- Is the value proposition well distributed amongst all parties?
- What is the adoption model?
- What specific verification or networking costs can be reduced?
- Authentication? Traceability? Trust?
- Are the transaction processes & data standardized?
- How much data needs to be stored?
Incumbents' Choices of Databases
| Traditional Databases |
Private Blockchain | Public Blockchain |
|---|---|---|
|
Trusted Party Hosts Data
Trusted Party can Create, Read, Update, & Delete (CRUD) Client Server Architecture
|
Known Participants Private Write Capability Append Only Timestamped Log Publicly Verifiable No Native Currency Needed  |
Unknown Participants No Central Intermediaries Public Write Capability Peer to Peer Transactions Native Tokens & Incentives  |