Cryptocurrency and Blockchain: ‘Tis The Future | by Ben Messika | The Block

Ben Messika

The world is changing incredibly fast, and we are not all aware of it. Blockchain technology and cryptocurrencies are an irreversible advancement that is disrupting established industries and the ways in which we interact financially. For that reason, I believe understanding and being aware of this blockchain wave is incredibly important.

Blockchain advancements will financially affect the majority of citizens in both underdeveloped and developed nations, and are already doing so. This paper examines exactly how blockchain tech and cryptocurrencies are being implemented into our economy and daily lives. Most importantly, I evaluate whether this change is positive or negative for both individuals in society or large institutions such as banks. After extensive immersion into this subject which includes tremendous amounts of research and actual ownership of cryptocurrencies, I became extra confident in the results I found. To gather accurate information, I utilized scholarly articles written by prestigious university departments, current events concerning the subject, and finally I conducted interviews and extensive discussions with cryptocurrency and blockchain pioneers. I found that Blockchain tech is being heavily implemented throughout the financial sector by banks. Meanwhile, advanced and more modern blockchains which utilize Smart Contracts disrupt countless different industries, but especially the music and energy sectors. In a way, Smart Contracts democratize business, as they give more power to individuals rather than big and rich companies. Blockchain and all its benefits will indeed change business and how we financially interact. However, this change will come about very slowly and cautiously. Bitcoin, the most renowned cryptocurrency, is already impacting the lives of many people due to its decentralized attributes. I do not believe bitcoin will replace dollars or euros anytime soon, but it is indeed an uncontrollable force which transforms assets and the idea of money in our modern era.

Guiding Question:

To what extent can cryptocurrency and blockchain technology make a positive contribution to society and our economy now and in the future?

By Ben Messika

Blockchain technologies and cryptocurrencies are the two keys to a more advanced, democratic and independent society. Blockchain technology has become a force that is giving rise to new, decentralized structures that will shape future societies, economies and each of us individually. Others view blockchain and cryptocurrency as a frightening phenomenon that endangers finance and our economy. This paper will provide an in-depth examination of the two sides of the coin and evaluate the significance of each perspective while giving an overview of the basics of blockchain and digital currencies.

An example of the first practical implementation of the blockchain technology is Bitcoin ($14,887 USD per BTC at the time of writing) — the mother of all cryptocurrencies — and the most successful “app” built on top of the blockchain to date. It is a fully decentralized currency, belongs to no single entity, and cannot be stopped by any government or power.

Figure 1

Blockchain technology plays a central role in this new asset class called cryptocurrencies: this is the new “magic internet money” that is minted purely by mathematics and cryptography. No government, organization or legal entity can control, distribute or limit Bitcoin and its spread. As a result, its popularity and valuation over the past eight years has become exponential (as seen in figure 1).

“The Truth About Blockchain” by Marco Lansiti and Karim R. Lakhani, published by the Harvard Business Review, provides an in depth analysis of blockchain technologies, their characteristics and what needs to happen before we see mass market adoption of the blockchain.

Lansiti and Lakhani point out that blockchain technologies should experience a mass market penetration curve similar to that of TCP/IP (the protocol commonly referred to as “Internet”). The blockchain technology is a “low-level” protocol; therefore, mass adoption and the potential for transformation of world economies is a long cycle.

Lansiti and Lakhani also propose that a technology’s timeline for mass adoption depends on two primary factors: novelty and complexity. Blockchain has both, but the authors have made it clear that mass market adoption won’t happen overnight.

The internet became popular in a similar fashion. It was first localized within private organizations and academic institutions, then it substituted legacy technologies quickly affecting jobs worldwide. It soon transformed telecommunications (Skype, VoIP) and commerce (eBay and Amazon), and finally transformed the economy altogether as “today more than half the world’s most valuable public companies have internet-driven, platform-based business models” (Isanti and Lakhanti).

Blockchain and cryptocurrencies today are expected to progress through the identical paths. According to Isanti and Lakhanti it is important to understand that it took thirty years for the Internet to reach its current level of adoption, and the blockchain today is roughly where the Internet was in 1990. Blockchain is in a very nascent stage. Allon Mason, Co-founder and CEO of Platin (, a much anticipated innovative new location-based blockchain protocol, depicts a clear model showing the current state of cryptocurrency adoption (Figure 2). Blockchain tech is young; it is now just starting to see early-phase implementations, and its growing pains are evident.

Blockchain technologies, and more specifically, cryptocurrencies, have proven to be disruptive technologies that are impacting industries, institutions and governments in ways few can predict and fewer can control. Due to the nascent nature of the blockchain technology it is expected that markets will require time to adapt, implement and properly regulate cryptocurrencies through access and education for people. Nonetheless, blockchain and cryptocurrencies are positively contributing to how people financially interact and to our economy in various ways to a large extent.

For cryptocurrencies to function as envisioned, they will need to earn trust by ensuring their protocols and the ecosystems on which they’re built. Secondly, they will have to emerge from their nascent, experimental phase as secure and incorruptible technologies.

The cryptocurrency craze reached its most recent peak in 2017. Together with their growth in popularity and interest, cryptocurrencies and blockchain technology are being applied to different industries, ranging from finance, to gaming, gambling, supply chain, manufacturing, trade, commerce and more. Cryptocurrencies, and bitcoin in particular, are starting to become attractive as a major source of long-term investments, as a solid store of value, thereby introducing a whole new asset class to investment markets. With this growth, however, come governmental reactions, some of which have outlawed Bitcoin in an aim to prevent fleeing of capital and the potential for losing grasp over government’s fiscal control. On the flip side, other countries are embracing it. Meanwhile, financial institutions have been the main actors in the adoption of blockchain tech and implementing it in the way to facilitate the movement of money and assets, nationally and internationally.

However, blockchain is still in its infancy, which means that many cryptocurrencies today do not necessarily share the same characteristics of traditional centralized financial services such as Visa, PayPal, ForEx, etc. (Gates 1120). Also, cryptocurrencies are entirely out of reach for about 60% of the world’s population as it requires access to a computer or smartphone (Strategy Analytics). This is especially troubling since part of the democratized vision and ethos of the cryptocurrency, according to Allon Mason, is to “bank the unbanked” in developing and low GDP nations.

While investing in cryptocurrencies has been lucrative for many investors, the distinction between investing in them as a long term “store of value”, and utilizing them as a digital currency, or “means of exchange”, two primary characteristics of “money,” must be better understood. This includes the potential of cryptocurrencies to replace traditional fiat currencies, a trend that has been witnessed by the “bitcoinization” of several countries after their recent bouts of hyperinflation and the collapse of their financial and monetary systems.

In his book “Blockchain: the Ultimate Guide”, Gates uses a library as a metaphor to explain the blockchain concept. In a traditional library, reader A borrows a book from the library. Reader B cannot take that book until it is returned by user A. The Library can notify Reader B when the book is returned, but the Library cannot reveal any identifiable information of Reader A. The library is the main repository (or database) of all books, and it controls the record of who has which book and keeps a ledger of which books were checked out and when they were returned.

In a decentralized, peer-to-peer system, the library isn’t a central repository, but a distributed one, where each user has a full copy of the entire library itself. This allows users to read each other’s books freely by borrowing and lending from one another. In this kind of peer-to-peer library, people can join and transact freely without the oversight of any central authority. Each time a book is borrowed from the shared library, an update regarding that transaction is added to a block of similar transactions and once the block is “full” (each block can store a certain number of transactions), the block is cryptographically signed and propagated to all nodes until everyone is updated and has a current and identical version of the library’s inventory (Gates 238). Multiple blocks (signed every ten minutes) create a chain of blocks, or the blockchain. This, in essence, is the main principle behind the blockchain and its freely-accessible and transparent ledger.

“In the library example, anybody could go to the most recent block on the chain. They could see all the books that have been borrowed and by whom. They could then see the transactions in the previous block, to see who had the books before them, all the way back to the start to see the original owner (the genesis node).” (Gates 240)

Clearly, blockchains do not contain books, but digital assets — cryptocurrencies. Blockchain transactions are immutable. Meaning, transactions are impossible to alter once they are signed in a block and all of the nodes (computers) connected to the blockchain continuously approve these transactions, preventing fraudulent activity (Gates 246).

There are various cryptocurrency flavors on the market, each trying to introduce an innovation that could disrupt an established industry, not excluding Bitcoin itself. Usually, these new cryptocurrencies are based on the Bitcoin core code, the Ethereum blockchain, or are were created from scratch.

In Bitcoin and Ethereum, new BTCs or ETHs are minted through a process called mining. This process is usually a costly process that requires solving complex cryptographic equations that dictate the creation, or minting, of new currency. Today anyone can mine. All you need is technical know-how, strong processing power, and lots of electricity. Some cryptocurrencies have a limit to how many coins can be mined. Bitcoin, for example, is capped to 21 million coins. Ether, on the other hand, has no hard cap (coinmarketcap).

Cryptocurrencies and Blockchain are revolutionary for many reasons, but there are few specific characteristics that should first be understood. Decentralization refers to the idea that the ecosystem of a specific currency is not controlled or manipulated by a single entity or power. This is perhaps the most important trait of the decentralized blockchain.

The security, ease of use, and accessible nature of blockchain technology are all quite mind-blowing. The benefits of decentralization of money have immense potential to constructively impact society and economies. When using a blockchain, organizations and businesses do not need to depend on any central authority like a bank. Having a single database that everyone can access makes monetary transactions very easy. For example, transferring money from one bank to another would be easier on a single database rather than multiple databases. Additionally, centralized databases are vulnerable to hacking, data loss, and corruption. The blockchain, on the other hand, does not have a central database; the data is copied to every computer that is connected to the network running a full node. To manipulate a blockchain, one has to control 51% of the computing power connected to the blockchain, which is too costly to be pragmatic (Gates 583). Transparency is also an important aspect of blockchain-powered cryptocurrency. All transactions recorded on a blockchain cannot be deleted or replaced, and all computers connected to the network have access to them.

Another important advantage of blockchain usage is the lack of intermediaries, or third parties, that traditionally facilitate transactions. This factor has many social implications. Today, we depend on and trust and well-regulated financial institutions to facilitate financial transactions with others. Blockchains remove banks from the equation and make peer-to-peer money transfers possible within minutes. The best example for this is Bitcoin. Today, people can pay for countless different products and services using Bitcoin as a unit-of-exchange. Accepting cryptocurrencies as a unit-of-exchange has major benefits. For example, people who cannot trust banks due to poor regulation and troubled governments could turn to decentralized cryptocurrencies, as can be witnessed in Venezuela and Zimbabwe. The fact that there is still trust and security when using a blockchain and when there is no third-party involved has significant value. However, Gates outlines the benefits of blockchain with a very simple statement: “It is the increase in trust between entities in a transaction that is an important [in]tangible benefit of these changes [transparency and decentralization]” (Gates, 627).

With increased speed and no third-party intermediary, the cost of transactions is much less than, for example, paying for a Coca-Cola bottle with a credit card. In this example, the seller would pay the transaction fee. An implementation of cryptocurrency into running a business can reduce costs significantly.

These descriptions are a general outline of simple yet key transformations which blockchain can bring about. For many of these characteristics, like the reduction of costs and time for the transfers of funds between banks, there are already projects running and making this happen. The peer-to-peer aspect of cryptocurrencies has obviously been utilized for a long while now with Bitcoin. Buying coffee, paying for dinner, and transferring coins from one wallet to another are actions that have and are being conducted every second. On November 23rd, 2017, the Bitcoin blockchain had approved nearly 300,000 transactions ( This number demonstrates the fact that some people use Bitcoin as a unit-of-exchange — making the peer-to-peer aspect of cryptocurrencies a reality.

The Harvard Business Review article, “The Truth About Blockchain,” provides a specific organizational process of implementation of new technologies in regards to their complexity and novelty. This organization works as follows: single use implementation (low complexity and novelty), localization (low complexity high novelty), substitution (high complexity low novelty), transformation (high complexity high novelty). Institutional adoption lies in the localization form of implementation. Investment, private, and state banks, and other large financial establishments like the NYSE and Nasdaq have all began implementing private blockchain ledgers to facilitate business operations in every respect (Gates). Meanwhile other peer-to-peer transfers of funds using Bitcoin falls in the single use implementation. Substitution of financial standards today — currencies and banks — with more advanced financial services based on blockchains would evidently fall into the substitution forms of implementation. But finally and perhaps most importantly, Smart Contracts, which will be described more deeply later in this section, are the the most transformative aspect of blockchain today.

There is a lot of evidence showing how blockchain is being implemented among the most powerful financial institutions in the world. Major banks have been adopting blockchain technology to store and record data safely and to try and find ways to facilitate business actions. According to the World Economic Forum, by 2018 four out of five banks will be using blockchain technology. This process has already begun with the initiative of JPMorgan Chase, Microsoft, and UBS and other giant financial institutions. These three industry titans created the Enterprise Ethereum Alliance, which is looking into creating private Ethereum-based blockchains. The hope is that one-day large corporations will utilize the public Ethereum blockchain instead of using their private ones (Hackett). BNP Paribas, CitiBank, Societe Generale, and UBS have all began their journey into the blockchain world as well. Some even created their own coins for experimental purposes, but all established research grounds on how to implement blockchain and possibly cryptocurrencies into their own systems (Sundararajan). BNP Paribas’ ALM Treasury IT strategy and architecture, Xavier Toudoire, gives an insightful thought of the impact that localization of blockchain in banking could have on business.

Although it is still too early to determine how the technology will evolve and whether it is suitable for large-scale deployment, our pilot has demonstrated the clear strengths of private blockchain and its potential as one of the most effective ways to improve the existing internal processes between different businesses on an international level. (Sundararajan)

The tech company R3 has begun working with twenty-five different banks such as Wells Fargo and JPMorgan in an aim to create a distributed ledger to facilitate transactions among these banks. This project is called the R3 Consortium. Today, eleven out of these 25 banks have entered the R3 consortium distributed ledger (Gates 873).

Now, the question remains, how exactly is the implementation of blockchain in banking and financial institutions positively contributing to the world economy? The answer to this depends on how one defines positive contribution. If positive contribution stands for better and more efficient data keeping within banks, and faster transactions between banks, then this is definitely a very positive contribution. However, this keeps the banks in power; thus, not transforming the status quo of trust because people remain dependent on banks to store their money in a safe place. Nonetheless, we have already made clear that Bitcoin or blockchain will not replace banks overnight. Therefore, having blockchain facilitating banking is a positive step toward the improvement of asset management and any other banking actions which keep people’s money safe.

Norway’s largest bank, Skandiabanken, has begun implementing its plans to let customers view their Bitcoin balance in their bank accounts (Peres). This example demonstrates the fact that banks are trying to adapt to the inevitable change currently being influenced by the blockchain. This action by a bank, however, is very different to those described earlier. Skandiabanken acknowledged the fact that more and more people buy and keep bitcoin as a store-of-value, and therefore surfs the wave rather than paddling against it. This makes the life much easier for a Norwegian Bitcoin owner who uses Skandiabanken as his main bank, thus manifesting a very rare intermingling between decentralized currencies and established banks, which I believe is very positive.

Ripple is the best example of an industry’s real use of blockchain technology. Ripple is a blockchain technology company who is working closely with banks from all over the world for the sole purpose of facilitating transactions using the RippleNet distributed ledger (the Ripple blockchain). Ripple has over 100 customer banks who are using the blockchain for facilitating and recording transactions (Browne).

The most recent and important news concerning Ripple and banks is Ripple’s partnership with Santander and AMEX. This “project will initially allow customers in the U.S. to connect instant, traceable cross-border non-card payments to U.K. Santander bank accounts” (Browne). This is the essence of blockchain innovation — facilitating safe and quick transactions of assets on a global scale. What is unique about Ripple is that its blockchain does exactly that yet cooperates with established finance giants. Banks speeding up their payments with Ripple’s own cryptocurrency is a goal predicted by Ripple officials, but this will also take time. For a clear explanation of the new partnership in regards to the Ripple currency, Marcus Treacher, global head of strategic accounts at Ripple, is for the rescue,

“The technology we have developed, it separated a connection from the cryptocurrency or the token. So what that means is that a bank or non-bank like AMEX can use Ripple to connect and just exchange value from one fiat currency to another directly, without the need for any intermediate blockchain currency.” (Browne)

It is clear that banks are being pressured to innovate and bring up to speed their legacy financial settlement technologies. The motivations behind this are mostly fiduciary, aiming to decrease the costs and improve transaction times of international transactions. However, these system upgrades may have little effect on society and the public as a whole other than speeding up the process of sending money from one place to another. Therefore, while the changes implemented within a bank’s IT department are constructive for the bank and its bottom line, it is not necessarily disruptive or contributes to the way people independently manage and control their finances or the way by which society interacts with these institutions. It would have been disruptive if the people were able to entirely eliminate the banks and their infrastructure and act as their own bank using Bitcoin or any other decentralized currency.

In addition to vast institutional adoption of blockchain technologies around the globe, blockchain has played a vital role in the production of decentralized applications which currently disrupt a vast number of established industries. Firstly, the most fascinating and practical application of blockchain is the use of blockchain and cryptocurrency to make green energy an easily tradable entity. In other words, blockchain technology or distributed ledgers are being utilized to facilitate the immediate transactions of energy between two parties; for example, two neighbors.

LO3 is a tech company aiming to facilitate the trade of energy. Recently, it has created the Brooklyn Microgrid, a startup that facilitates the immediate trade of energy between neighbors through the Ethereum blockchain (Manning). This startup is of incredible importance and potential. This is because making energy a peer-to-peer tradable product could reduce the monopolistic state of the current energy market. Additionally, the microgrid system that is managed by Transactive Grid (the platform which uses the Ethereum blockchain) utilizes solar panels only; this could therefore make green energy much more accessible and reliable. This application of blockchain is a very positive societal advancement. Not only does this blockchain innovation diminish a lot of the power of large energy companies, it encourages and supports green energy to a large extent.

Another established industry which is currently being disrupted by blockchain is the music industry. The best example for this is a startup called Ujo Music. Simon de la Rouviere created Ujo music in an aim to help independent artists rise in the industry. Ujo Music created a platform to help artists automatically license their music on the Ethereum blockchain. Artists can license and then sell their music through the blockchain, receiving all the profits (in ETH) thus doing away with the many middlemen that exist in the music industry (TechFinancials) who impede entry into the music business. Therefore, Ujo, using blockchain, essentially democratizes the music industry. Rouviere sees Ujo as being very influential in less developed countries as its main goal is to help independent and struggling artists more easily enter the music business (TechFinancials).

Ultimately, both LO3 and Ujo Music end up giving a lot of power to the ordinary citizen or musician and limiting the influence of big corporations. As stated above, this could be interpreted as a form of democratization, which is clearly a result of a technological innovation — the blockchain. As a result, blockchain technology unlocks not only a change within business and trade, but within society through the expansion of the freedom and independence of people. These applications are two of many that clearly represent a positive impact of blockchain on our economy.

All in all, the examples of blockchain applications above are two out of countless other applications that aim and facilitate the exchange of value in a fair and efficient manner. In doing so, these DAPPS (decentralizes apps) disrupt the established order that exists in most industries today. If and when DAPPS gain sufficient momentum, we may see the power of large corporate entities and middlemen decrease over time. In the music industry, for example, we may witness a decrease in the influence of record labels due to innovations like that of Ujo, which is a significant and extremely important positive contribution of blockchain on the economy and society.

However, there is one attribute that the majority of these DAPPS share, which is the use of Smart Contracts to run their applications. As previously discussed, several stages are required before a technology reaches mass-market adoption. The last stage is “transformation”: when the technology becomes sufficiently advanced to completely change the lives and businesses of the workforce and ordinary people, on both the micro and macro levels; the internet, for one, has done exactly that. As for blockchain, its transformative characteristics are its ability to facilitate smart contracts that are executed without any central authority or middleman.

Smart contracts are computer codes that facilitate, execute, and enforce the negotiation or performance of an agreement using blockchain technology (BlockchainTechnologies). The terms of the smart contracts are written in code as sets of instructions for the execution of the contract. With smart contracts in a blockchain, two anonymous parties can transact without a middleman. Today, ordinary contracts used in daily affairs and business may require vast amounts of printed material, time, money, and most importantly, the costly involvement of third parties (sometimes an arbiter, mediator or court of law) to enforce a contract. And if something goes wrong, for example, the contract is breached, an intermediary is needed to settle the affair (BlockchainTechnologies). On the other hand, a smart contract has three parts: coding, distributed ledgers, and execution. First, a contract is coded, meaning coders write down the terms of the contract in computer language, then this code is sent to the blockchain or distributed ledger, and finally it is executed when utilized. By sending the code or contract to every computer connected to the distributed ledger, the manipulation or noncompliance by a single party in a smart contract is not possible since the terms for the execution of the contract are immutable. Isanti and Ikhante ask in their paper, “if contracts are automated, then what will happen to traditional firm structures, processes, and intermediaries like lawyers and accountants? And what about managers?” (Isanti and Ikhante). Indeed, their roles would definitely be impacted in one way or another. Nonetheless, for smart contracts to grow in popularity, use and implementation, “A tremendous degree of coordination and clarity on how smart contracts are designed, verified, implemented, and enforced will be required. [Isanti and Ikhante] believe the institutions responsible for those daunting tasks will take a long time to evolve. And the technology challenges — especially security — are daunting” (Isanti and Ikhante). The transformative phase of blockchain is certain but distant. For businesses that handle millions of dollars to fully depend on smart contracts it will take a decade or even more. However, these are already taking shape and are contributing positively to society. For example, Ujo and TransactiveGrid are essentially smart contract platforms which facilitate the exchange of music or energy.

Cryptocurrencies and blockchain technologies have become extremely popular and very influential in just under a decade since the beginning of Bitcoin. In every nation, however, it is the government that possesses the power to either suppress or expand a particular phenomenon or movement. When it comes to cryptocurrencies, governments in different nations are responding differently. The clash between governments and crowdfunding, investments in, and the use of cryptocurrencies as units-of-exchange is one of the many hurdles blockchain innovations will have to experience along the path of implementation. On the other hand, the support shown by other governments is slowly aiding the exposure and expansion of cryptocurrencies and blockchain.

2017 was a very important year for Cryptocurrencies and blockchain. In the realm of government policy and approach towards it, 2017 was especially significant. Firstly, China played an important part in the clash between cryptocurrencies and government. China has pressed its brakes hard on Bitcoin all throughout September of 2017. It shutdown ICO’s (initial coin offerings) and cryptocurrency exchanges all over China. The fundraising done in the past few months in China for ICO’s has reached an all-time high. However with these extreme crowdfundings came great risk and very low security. China, therefore, sparked a regulatory campaign against high-risk crowdfundings. Regulating ICO’s and digital coins, in general, is a question most governments are currently debating. Mainly, should it be recognized as a security like any stock or similar asset? In many ways, government themselves do not know how cryptocurrencies work and how to handle them. Zennon Kapron is a director of the Shanghai-based financial technology consultancy named Kapronasia and provides insight to why this measure was taken by the Chinese government (Ruwitch and Kelly).

Regulators globally are struggling to understand what ICOs are, what the risks are, and how to ring-fence and regulate them. China, in many ways, is no different than the U.S. or Singapore in saying, ok, we need to push back on these for now until we figure out how to deal with them…I think it will be slightly a temporary measure. (Kapron)

The current situation in China does not look good for the cryptocurrency market. Cryptocurrency exchanges were officially outlawed in November 1st, 2017. Thus, making the exchange of digital currencies in China illegal (Reiff). But this did not stop Chinese investors; most of their exchanges and assets are now stored offshore, predominantly in Singapore. Nonetheless, the Chinese central bank had a trial run of “transacting digital currencies among banks,” as do many other central banks around the world (Chen). Estonia, Japan, Sweden, and many more have all created their own digital currencies. However, these currencies have very little to do with ETH or BTC. That is because if created and utilized, they are simply government backed currencies — centralized and controlled by a single entity or body. However, it is indeed interesting seeing governments attempting to digitize currencies in order to ease and hasten the transfers of funds. In relation to bitcoin, the city of Hirosaki, Japan, is officially accepting Bitcoin donations with the goal of attracting international tourists and financing local projects and the preservation of important public parks. (Higgins). In 2017, Japan’s government officially recognized Bitcoin as a method of payment (Coleman).

There is a clear juxtaposition between Japan and China. Governments simply creating digital assets or currencies will not better the lives of the individual in society, but it will reduce costs for and facilitate exchanges among governments which will contribute positively to their economies. Governments that support decentralized cryptocurrencies such as Bitcoin like Japan essentially approve an individual’s break with banks when his Bitcoins are legally recognized as units of exchange, and this is revolutionary.

Dubai has just delved into the world of cryptocurrencies by creating its own currency called emCash. Soon, Dubai citizens will be able to pay for different services in all around Dubai. This bold step into creating a whole new economic “ecosystem” has great importance (Das). This change or innovation has the goal to facilitate and thus attract even more business into Dubai. According to Dubai Economy deputy director general Ali Ibrahim, “a digital currency has varied advantages — faster processing, improved delivery time, less complexity and cost…” This can greatly motivate other nations and governments to advance along with the shift of innovation and implementation of blockchain into their economies. And yet this is another example how blockchain positively impacts economies around the world. Though I would like to highlight that Dubai’s project does not necessarily aid the process of decentralization of money. Rather, it reshapes the status quo, which keeps the nation’s centralized economic institutions in power. Nevertheless, this is a positive step towards the implementation of blockchain and cryptocurrency to improve an economy in many different aspects.

The role of governments in spreading the use of cryptocurrencies cannot be underestimated. Though China is dual-natured when it comes to digital assets, other governments like Sweden, Estonia, and Japan see the benefits of digitizing money and even decentralizing it. As more and more governments support this new trend, tech innovations like that of Ripple with cross-border payments recorded on a blockchain will be much more common and accepted. Thus, governmental responses play a vital role in society’s technological advancements and general improvement of the economy.

Though blockchain and cryptocurrencies have been flourishing in many ways, every new trend has growing pains. The internet did not become the seamless and ubiquitous platform when it was first created. Similarly, blockchain technology and cryptocurrencies may have to fail to eventually become the game-changers they are destined to be. At the end of the day, blockchain is created by humans and the innovations that surround cryptocurrencies and blockchain are also created by humans. Today, it is an obvious fact that credit cards get hacked and one’s money in a bank is never one hundred percent secured. The 2008 financial crisis collapsed the world economy, while large sums of money that belonged to ordinary citizens were lost forever. It took many years for countries like the US to completely recover. Today, faults in the financial systems are abundant. Blockchain today is in its very and nascent stage and experiences growing pains. These growing pains include faults in the ecosystem, disagreements among cryptocurrency developers, and issues concerning fundraisings via initial coin offerings.

Initial coin offerings are the process by which a new digital coin or token is first released to the market. To create and offer a coin a lot of capital is needed, and thus crowdfunding is a very common practice, which was actually banned both in China and South Korea just recently (Noonan). Initial coin offerings have raised 3.5 billion dollars so far (Noonan). But there are few attributes about them which make some of them a dangerous and risky affairs. Firstly, many are decentralized and thus unregulated in any way. This means that there is basically no one to blame if one loses all his investments in an ICO due to a failed project. ICO funding occurs when investors who find a project worth it will pour money into it and once the coin is released to the public, the investors will automatically receive the number of coins relative to their initial investments. Currently, an example of uncertainty exists within the project named Tezos. Tezos is a project which raised $232 million to offer its cryptocurrency called Tezzie. This amount translated into 66,000 bitcoins and 361,000 ethers. However, since the date of funding, the value of each coin surged, making this stash of funds worth significantly more than when just collected (close to $1 billion at the time of writing). The issue with Tezos is that the two founders, Arthur and Kathleen Breitman, want to oust a third member named Johann Gevers. So who owns this money which they all raised? This crisis alarmed investors who are trying to retrieve their funds, namely, Californian investors which filed a lawsuit against Tezos is in the works. The issue extends further. Not only are the funds not defined as belonging to any person, funds cannot be moved around without the signatures of all three members. As described above, Tezos executives do not seem like they would agree on any decision concerning what to do with the funds any time soon. This is one example out of many which concerns the disorganized and risky nature of ICO fundings. Thus, Tezos is an added wave of pain to the growing bones of the cryptocurrency “ecosystem.”

The most important example of growing pains in the blockchain ecosystem is the Parity failure. Parity Technologies was created by Gavin Wood, Ethereum co-founder. Parity is well immersed in the Ethereum blockchain and it specializes in the handling of multi-signature digital wallets which are compatible with all of the different tokens on the Ethereum blockchain. Multi-signature wallets require signatures of multiple individuals in order to complete a transfer of funds in that specific wallet. According to Parity Technologies there was a “vulnerability” in some of the wallets that allowed users to change the computer code of the wallet and thus change the owners of the wallet. They also stated that the hackers/users froze the wallets (Browne). According to a French hacker Matt Suiche, the frozen funds amount to about $280 million (Browne). The parity issue is of great importance and represents the growing pains of blockchain innovation and cryptocurrency management. Again, a lot of time is needed to study and better secure this “ecosystem” to eventually trust it fully. But I would like to again remind the reader, even though we use the internet and online payments on a daily basis, it does not mean these methods do not fail us sometimes. Growing pains such as unorganized and uncontrolled ICO’s and failures in the blockchain “ecosystems” keep blockchain and cryptocurrency from being flawlessly beneficial to society and the economy.

After close analysis and examination of the blockchain and cryptocurrency phenomenon, I can confidently state that when used wisely and precisely, blockchain as a whole already positively contributes to society and our economy. Again, it is important to understand that what is seen as positive in the eyes of banks and large financial institutions is very different to what ordinary users of cryptocurrency see as positive contributions of blockchain tech. Banks will do all they can to remain in power and control the financial world. As the blockchain wave takes with it many supporters very quickly, banks around the world feel the need to innovate their IT departments and intend to reduce costs and make financial interactions between banks and customers easier and faster. This does positively contribute to the economy, but it strengthens the status quo and keeps the banks in power. This does not really help ordinary citizens. But that is why decentralized currencies are revolutionary. They enable a whole new world of financial independence for a very large number of the world population who depend on banks or do not have access to banks. The benefits of decentralization are abundant and are already being utilized. Nonetheless, society is very far from a decentralized financial system of economy. For now, it is very positive and promising to see large financial institutions cooperate with blockchain companies such as Ripple to improve the methods of transactions and financial interactions. For that reason, the adoption and implementation of blockchain in the financial world is a definitely positive for our economy.

Governments, which very closely regulate banks and financial institutions, have the power to control the extent to which blockchain and cryptocurrencies influence their economies. Some governments created their own centralized cryptocurrencies and blockchains in an aim to reduce costs and become more efficient on the long-run, but this does not affect the individual in society significantly. Other governments like Japan, on the other hand, showed support towards decentralized currencies with are meant to “bank the unbanked,” and this has a lot more significance to the individual in society and threatens the status and power of banks around the world. Apart from all of this, Smart Contracts, which run decentralized applications, democratize industries like the music and energy sectors. Undoubtedly, smart contracts give more power to the individual and strip a lot of the monopolistic influence of large corporations. We are a long way from the exploitation of blockchain’s full potential, and cryptocurrencies are just beginning their journey into changing economics and finance. Needless to say, this is already happening and what the future holds is unknown but very exciting.

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Understanding the economics of high fees

Speculation: How will PoS affect ETH price action?