Blockchain is officially trending. Although many still do not understand what the word itself means, the changes the technology is bringing to many industries will soon spur the uninitiated to educate themselves with fervor. Those who are more in the know can say blockchain has something to do with bitcoin. Occasionally, one might encounter the rare person who can explain the nuances of blocks, mining and even how some startups are using blockchain to power their newest ventures. The past and inevitable future successes of some of these companies highlight exactly how important blockchain is for staying on the cutting edge.
Some of the unique projects built on this technology include voting systems that cannot be corrupted, countless cryptocurrencies (that now boast billions in market capitalization), secure communications networks and enforceable, digital smart contracts. Many who witnessed the rise of the internet draw similarities to the recent popularization of blockchain, not the least of which is the amount of money being made by those who adopt early.
Among the revolutionary businesses being built with the help of blockchain is LAToken. This cryptocompany provides people with a way to leverage their illiquid assets immediately, without resorting to traditional methods like a bank. Illiquid assets might be residential and commercial real estate properties, vehicles, valuable works of art and more. With LAToken, one can sell fractionalized stakes of their asset to investors, receiving cash in exchange. In turn, investors acquire LAT – a cryptocurrency tied to the asset’s relevant market. For example, as the residential real estate industry continues to climb, the relative price of LAT increases in value as well, and the property’s owner continues to occupy their home.
There are countless impressive ideas like LAT out there, and more arrive each day. The companies with an in-depth way to utilize blockchain have an enormous advantage, as do the investors who can spot a worthy opportunity. Billions have already been made, but blockchain is still in its infancy and the future is an open book for those willing to learn. As it is with any subject, one must begin with the basics.
What is blockchain?
Blockchain was first mentioned in Satoshi Nakamoto’s bitcoin whitepaper, published in 2008. Although no one has yet figured out the identity (or identities) behind this dubious code name, the world soon learned the technology described in the paper was anything but questionable. In fact, the first project to be built on blockchain was bitcoin, which is still wildly successful today. Essentially, blockchain is an incorruptible ledger that contains all the transactions its network has ever verified, including those of bitcoin.
This network is the source of blockchain’s strength. Instead of being hosted on a single server in a faraway corner of the world, the ledger is run on millions of computers at once, each referred to as a node. These nodes are always connected to the blockchain, and they all have the most updated version. To many, this resembles a Google spreadsheet stored in the cloud. And though millions are working on it at the same time, its values are identical everywhere it appears. These nodes are also the mechanism by which transactions are verified and relayed to the correct recipient, and participants that grease the wheels are rewarded for their efforts.
When one goes to trade bitcoin, for example, one of the nodes receives their trade request and verifies it. The node must expend some computational power for this to happen. Valid transactions are grouped among several others, and when enough are verified, they form a block, which gets permanently added to the chain. The blocks on the blockchain are publicly visible and cannot be altered. The algorithm behind blockchain requires 51% of the network’s computational power to make changes, a consensus that is theoretically impossible to achieve.
Accordingly, blockchain has two characteristics that illustrate its fail-proof nature: transparency and incorruptibility. Behind the network, modern cryptography practices discern the order of blockchain entries and their individual hash numbers (the ID one uses to look up a transaction on the chain). This so-far flawless way of conducting digital business is being taken advantage of all over the world, but cryptocurrencies are still king.
Bitcoin leads the pack
One question remains: why participate? The nodes that work so hard to run the blockchain, verify and process transactions use millions of megawatts of electricity, allotting much of their GPU and CPU power for this purpose. This is called mining. By doing so, however, they are compensated with the chain’s cryptocoin – bitcoin, in this case. While it gets harder to mine profitably, given the diminishing returns set by the algorithm, the potential future price of these coins keeps miners going. Litecoin, Auroracoin – they all work the same.
While many coins have similar functions, the value of each varies. Coins like bitcoin are valuable for the work it takes to mine them, the strength of the network and their scarcity: the algorithm dictates only 21 million will ever be mined. As the cryptocurrency industry progresses, however, speculators are putting more emphasis on the minute differences between coins. Investors see smaller or bigger blocks, system flexibility and other slight alterations between the way coins operate as a determinant of future success. This may be because the idea of a secure currency ecosystem is already old news.
Lately, companies are using the blockchain to create cryptocoins that derive value from other features. The ability for any business to easily launch their own coin has made initial coin offerings (ICO) the likely usurper of bitcoin’s throne, upping the ante for the entire industry.
Tech’s newest infatuation: the ICO
ICO means “initial coin offering.” Those familiar with IPO, or initial public offering, may have already guessed what ICO means. Basically, companies that need to raise funding can do so with their own cryptocurrency. People can buy these coins with the hope the company’s future performance will raise the price of their coin – an idea blockchain has already proven possible. LAToken is expected to be the next big thing in the cryptocurrency space, with investors and users alike already abuzz about its potential. Relevantly, demand also raises the price of these coins, so the best ideas have many willing investors and will get funded quickly. A recent example is Golem – a company that released a coin to the market to fund their idea of a blockchain-based internet. They raised $9 million in just half an hour – a milestone LAT is likely to eclipse given its support in the highly-informed crypto community.
Finding a niche on the chain
Creatives and programmers are still figuring out blockchain’s many purposes. Unique ideas, like those from Golem or LAToken, are leading the young industry, and there are more just waiting to happen. As blockchain disrupts markets far and wide, more will come to realize its power and hop on the wagon. Those who can get a seat at the front will be the industry’s future leaders, and savvy investors (even individuals) stand to gain immensely from choosing the best ventures to back. Caution is recommended, however, as the horizon has not yet come into focus.
