Distributed Ledger / Blockchain / Cryptocurrency
Hyperinflation
A very rapid rise in the price level; an extremely high rate of inflation.
Distributed Ledger Technology (DLT)
An umbrella term for a shared, and synchronized database. A digital system to record transactions of assets, anything of value, without a centralized authority.
What are tokens?
Another key difference of DLT and blockchain technology. In a distributed ledger technology, it's not necessary to have this, or any kind of currency on the network.The only time you may find the need to use is when you want to block spamming, and there is a need for anti-spamming detection.
What is a blockchain?
Another type of a distributed ledger. Developers can use multiple methods to achieve a consensus that includes Proof of Stake (PoS) and Proof of Work (PoW).
What cryptocurrency made blockchain a popular term?
Bitcoin
What are some aspects of blockchain that are unique and may not necessarily exist in other distributed ledgers?
Block Structure, Sequence, Proof of Work or Power Hungry Consensus algorithms, Real-Life Implementations, and Tokens
How do blockchains differ from Distributed Ledgers (DLT)?
Blockchain only allows adding operation. ie. you can add new data, but you cannot alter or delete existing data.
How can Blockchain transform the finance and banking sector?
Blockchain will do to banks what the internet did to media by reducing potential costs and labor savings. Hundreds and thousands of funds are being regularly transferred from one region of the world to another within each day.
What are some of the challenges in adopting Blockchain?
Interoperability, Privacy, Encryption, Security, Scalability, Energy Consumption, Legal Regulations
Are DLT's a new concept?
No, although they have become popular only recently
Cryptocurrency
Peer to peer electronic cash system that uses the Blockchain to verify and transfer funds between entities
What other applications are currently using distributed ledgers?
Some include IBM Fabric, R3 Conda, and Digital Asset Holdings.
Why are cryptocurrencies like Bitcoin valuable?
Since there is no central bank or government to change Bitcoin's monetary policy, the digital currency serves as an escape in times of rapid inflation. People need the ability to convert their wealth to a more stable store of value, or risk losing huge amounts of value just by letting their fiat currency sit.
What are some issues with the current banking system?
Slow, Centralized, Transaction fees, Security, Lack of transparency
How much is the blockchain market expected to increase?
The blockchain market is expected to increase from half a billion in 2018 to 2.3 billion in 2021. Some predictions even estimate a 16 billion market value in 2024.
Why Blockchain for banking?
The current day banking systems are highly reliable on paper and outworn process. This technology is an upgraded system embedded with reliable and trustable technology that could withstand frauds, scalability and security issues. Banks cannot be termed as independently operating self-sufficient entities as any transactions made through them still involve intermediaries. Banks would be able to make transfers real quick without even having to take the burden of risks, as the system would be self-sufficient to resolve it all on its own. Small transfers are made feasible and fast along with the aid of lower fee and scalability of transactions.
Why are distributed ledgers (DLT) more reliable than human resources or traditional databases?
They do everything faster and in a more reliable fashion. The data cannot be compromised as no single location or entity is controlling it.
Internet of Value
the idea that each person, using blockchain technology, will own their data and can choose which organizations get access to it (and who has to pay for it).
What is Representative money?
a variation of money, and refers to money that represents a commodity.
Proof of Stake (PoS)
concept stating a person can mine or validate block transactions according to how many coins he or she holds. This means that the more Bitcoin or altcoin owned by a miner, the more mining power he or she has. The first cryptocurrency to adopt this method was Peercoin
Trade Finance
considered one of the most useful applications of blockchain technology in the banking sector. All the involved parties such as a complex transaction can be on-boarded on a blockchain network and the information can be shared by exporters, importers, and banks on one common distributed ledger.
Know Your Customer (KYC)
customer due diligence regulations performed in order to reduce money laundering as well as terrorist activities
Decentralized
distributed across several computers or nodes
What is Fiat money?
money issued by a government to be legal tender, and is not backed by gold or other physical commodities. The value is based on the strength and credit of the issuing body, and almost every country today issues its currency. ie. every bank transaction or credit card purchase today
What are some of the eventual savings from greater efficiency and transparency from using blockchains in the Luxury market?
removing the need for paper invoices, for example, as well as reducing the information silos that have traditionally existed among each point of the supply chain, like the mine, the refiner, the manufacturer and the retailer — are another major boon for the luxury markets.
Interoperability
the ability to exchange and use computer information within and across networks
What is Commodity money?
the earliest form of money, and is money that has actual intrinsic value. The most popular is gold, and for a huge part of human history it was physically used in exchange.
What are the implications of cryptocurrency on fiat currency?
the strength of any fiat currency stems from the strength of the government or bank that issues it. While the intention of fiat currency is to be stable, in times of recession and rapid inflation shows this is not always the case.
What is the first step in creating a block?
A cryptographic puzzle must be solved, thus creating the block
What are smart contracts?
A type of self-executing agreement where the terms between buyer and seller are directly written into the code itself, these mechanisms unalterable, almost impossible to hack, and helps guarantee that both sides to an agreement aren't ripped off. They also allow for more complex transactions to be carried out between two anonymous parties without the need for a central authority, enforcement system, or legal guidance.
How to consider the relationship between DLT and Blockchains?
All Blockchain Uses DLT, but not all DLT is Blockchain. Consider DLT as the parent technology. However, over time, blockchains became more popular than the whole concept of distributed ledger technology. ie. Jordan sneakers having their own identity within the Nike brand
What makes Blockchains the most transparent technology?
As you cannot alter or remove even a single block of data, every transaction exists in history. For the financial industries, such features as decentralization and immutability make it one of the most transparent technologies, and has become the technology behind cryptocurrencies.
How are blockchains and Distributed Ledgers similar?
Blockchains are also decentralized, and does not require a central authority to manage the operations
What are the three main types of money?
Commodity, Representative, and Fiat.
How do Blockchains work?
Data is organized in blocks with each block holding multiple transactions. Data is stored in chronological order (time stamped), with each change a new record must be added to the chain. Once a block is added to the chain the data can't be changed. Every change of ownership is represented in the Blockchain ledger.
What industries find the distributed ledger technology attractive?
Financial industries, or any other industry looking for more transparent technology, and those that want to move away from central authority.
What industries benefit from smart contracts?
Financial services and insurance, Mortgage transactions, Supply chain transparency, Medical research, Digital identity and records management, and Building a digital future on the blockchain
What was the Gold Standard?
For a brief part of the 1900s, the United States operated on this. Under it, each dollar could be exchanged for a set amount of gold. It was slowly phased out, until President Nixon completely abolished the conversion of gold for a fixed value in 1971
How can blockchain change the current face of the banking industry?
Fraud Reduction, Know Your Customer (KYC), Smart Assets, Smart Contracts, Trade Finance
What is money?
Generally described as a medium of exchange to purchase goods and services or to transfer value.
Which enterprises have taken a liking to the nature of the blockchain and slowly starting to integrate it into their systems?
Giants such as IBM, Amzon, Oracle, Alibaba and many more offering good Blockchain As A Service solutions.
What characteristics make blockchain a reliable promising and in-demand solution for the banking and finance industry?
It is safe, secure, decentralized, transparent as well as relatively cheaper. It provides a very high level of safety and security when it comes to exchanging data, information, and money. It also allows users to take advantage of the transparent network infrastructure along with low operational costs with the aid of decentralization.
Examples of Some Banks Using Blockchain
JP Morgan Chase, Bank of America, Goldman Sachs
How does cryptocurrency differ from fiat currency?
The main difference is that unlike a fiat currency that is issued by a central bank or government, this is not issued or controlled by a central body. Governments and banks can decide to print new fiat money when times call for it. The Bitcoin network has a finite amount of coins to be issued over time, and this policy will never change
Proof of Work (PoW)
The second step in creating a block; when the computer that solves the puzzle shares the solution to all the other computers on the network
What is the final step in creating a block?
The verification of Proof of Work (PoW), and if correct, block is added to chain