Much gets lost in the current “bubblicious” and exhilarating world of cryptocurrencies. In some cases, the “get-rich-quick” stories are reminiscent of the California gold rush. Although these are exciting times, an investor in blockchain technologies, whether a miner or crypto-trader; must ask themselves two critical questions:
1. What problem does the blockchain solve (value proposition) and its impact on global markets?
2. Where are there opportunities of inefficiencies in the current system that blockchain technology can replace?
In other words understanding what differentiates one blockchain platform from another is extremely critical, especially from an investor’s point of view. Much of the conversation these days about blockchain and cryptocurrencies are often misguided and centered around misinformation. However in this post, let’s begin to explore some of the value proposition of the blockchain and understand what drives the levers of value in this new paradigm by answering the two questions above.
Question # 1: What problem does the blockchain solve (value proposition) and the impact on global markets?
As I wrote in the previous post, blockchain technology is positioned to disrupt and up-end today’s current e-commerce business model at its foundation. First of all, blockchain technology is a displacement of the current business paradigm of trusted-third party models (TTP). Blockchain is a technology that enables distributed "proof-based” business model.
In trusted-third party models; an entity facilitates interactions between two parties in a fiduciary capacity. Trust-based business models work but are costly and vulnerable to the inherent risk of trust. To the contrary, a proof-based model enables the power of “distribution” in that it enables the network of constituents itself to secure and verify a system’s state efficiently and cheaper.
This point is extremely important, because trusted-third party schemes is how our existing internet architecture are designed. Displacement technologies such as blockchain networks will have a huge impact on the way we do business. The paradigm-shift from consolidated trusted-third party systems to a distributed proof-based system will have an enormous impact on the following areas:
• Cyber-security & data privacy
• Banking & investment
• New & unique business models
At the core, blockchain technology attacks the very foundations of “trust-based” systems and aims to replace with a distributed “proof-based” systems. The platform to achieve real-world use case of a proof-based business model and achieves positive mass network effect will usher in new types of companies solving new types of problems based on a total difference of mechanism of reaching consensus- establishing value.
Question # 2: Where are there opportunities of inefficiencies in the current system that blockchain technology can replace?
Having a fundamental understanding of the true value proposition of blockchain technology coupled with the technical understanding of how each protocol works; opens the door for a more interesting conversation on areas were the the existing system is most vulnerable. In the case of Bitcoin, the network’s purpose is to be an electronic payment system based on cryptographic proof instead of trust. This is a different value proposition then the Ethereum network which purpose is to be a distributed protocol that offers a platform which promises to support more general applications beyond electronic payment applications and protocols such as Bitcoin, Dash and Litecoin.
Understanding these core but critical differences is the first step in differentiating between platforms for new entrants and a reminder for more seasoned crypto participants in evaluating blockchain platforms. In conclusion, it is important to understand the “real” core problem the blockchain network is proposing to solve. And is the technical challenges and value proposition feasible or even necessary in comparison to its rival networks?
Please leave your comments and share your thoughts and let's all grow together.
Blockchain is poised to change IT in much the same way open-source software did a quarter of a century ago. And in the same way that Linux took more than a decade to become a cornerstone in modern application development, Blockchain will take years to become a lower cost, more efficient way to share information between open and private networks
Agree. Maybe this time around though- the adoption will accelerate much quicker because the amount of investors on wall st licking their chops :)
The blockchain will for sure disrupt certain businesses. That's way there is so much FUD going around. It shows, that some companies are fearing that there reason for existence is vaporizing!
But we must not confuse cyrpto with blockchain. A blockchain can run without crypto, but it is much harder for crypto to keep on going without a blockchain. I do expect that there will be blockchain coming, private blockchains, which will run without crypto! If there is enough advantage to keep the blockchain running, then there is no need for cyrpto!
Also the blockchain technology is not the solution for all problem, the old systems are facing now!
@fullcoverbetting I think a lot of FUD is self imposed- I guess the "fear" is understandable with new technology. However a lot of "uncertainty" has to do with the large number of blockchain platforms and their purpose. And the "doubt" comes from a lot of scams and misinformation.
I still have the feeling that at the moment the biggest enemy of th cryptomarket, is the crypto market itself. Like you wrote due to all the scams and misinformation.
That’s why some kind of regulation would be good! It will increase the faith of the people in crypto market, driving much needed new fiat money to it! The difficulty is that we won’t like the government to so this and the crypto market has no tools to do this!
good post my friend...gonne share this one
Coins mentioned in post:
Excellent article. I subscribed to your blog.
I will be grateful if you subscribe to my blog @dreladred
Good luck to you!
All this is a little too confusing for me.
Can one not make money in crytocurrency without mastering all such things?
Blockbasis has been and will continue to be advocates of blockchain. It is indeed a revolutionary technology that has benefitted many. It is also being adopted by many financial institutions and companies. The popularity and its adoption has increased the possibility of it being part of our daily lives.
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Nice profile thank you very much for your crypto know how. I follow you.