Why is there so much buzz about blockchain and bitcoin? Blockchain is the world’s biggest bitcoin wallet and search engine. They have experienced over 2 years of phenomenal growth. Blockchain has expanded from 100,000 accounts to over 3,500,000 users during their growth. Through the blockchain technology, there has been an evolution from a small bitcoin mining network to a powerful validation engine. The entire fintech world is being shaken by the potential of bitcoin 2.0 fueled by blockchain applications. If the bitcoin system continues to mainstream growth, it could have a powerful disruptive effect in determining how fintech markets operate in the future.
1. What is bitcoin?
According to Coindesk, bitcoin is a form of cryptocurrency that processes transactions using e-money via a digital network. Bitcoin differs from traditional currency. Paper money is based on commodities like silver or gold. When governments declare the paper or coinage as legal tender, it is called fiat money. On the other hand, bitcoin is based on mathematics, not silver or gold. Bitcoin is not legal tender. Like all e-currency it is not printed on paper. It is literally "mined" through a worldwide digital network.
2. Who created bitcoin?
The bitcoin program was envisioned and developed, in 2008 by a programmer who worked under the name Satoshi Nakamoto. The original bitcoin software surfaced in 2009. Nakamoto was a mysterious figure who may represent a group of people. It has also been speculated that Nakamoto is a man named Nick Szabo, who had written proposals for a "bit gold" protocol, as early as, 1996. Whoever Satoshi Nakamoto is, his blockchain wallets ledger reveals that, as of the summer of 2015, his holdings of one million bitcoins have a US dollar value of $250 million.
3. What is blockchain technology?
The premise of bitcoin was to implement an electronic payment system based on mathematical proof. The idea was to produce a currency through blockchain code that is decentralized, transacted electronically and has very low or non-existent transaction fees. The developers were successful on all counts. A blockchain is really two types of records: transactions and blocks. Transactions are comprised of the real-time data that is stored within the blockchain. The blocks are the sequenced records of specific transactions which are journaled into the vast block chain database. A transaction is created by any participant who uses the system. Whenever a cryptocurrency is sent a transaction is created and recorded. Blocks are built by users known as "miners." The bitcoin network isn’t controlled by one central issuing authority. Every computer that mines bitcoin and processes transactions makes up a part of the network.
4. How does bitcoin "mining" work?
Bitcoin miners use special software and/or equipment to create the blockchain blocks. When a user sends bitcoins over the network the data is decentralized. All transactions during a given period are called a block. Bitcoin miners confirm transactions. Then the miner collects and records them in the general ledger. The general ledger contains a huge volume of blocks, which make up the 'blockchain'. The miners who create these blocks have an incentive. In a cryptocurrency system (bitcoin is only an example) miners collect either a pre-defined per-block award, and/or fees offered within the transactions. Miners get paid to successfully confirm transactions.
5. Are there limits to bitcoins?
The blockchain directed bitcoin protocol is limited to 21 million bitcoins. No more will ever be created. These digital coins can be reduced into smaller parts. The smallest (one hundred millionth of a bitcoin) is known as a ‘Satoshi’.
6. How are bitcoin accounts anonymous and transparent?
Although users may have multiple bitcoin addresses the anonymity is preserved since actual names and physical addresses aren't linked to the network. Each bitcoin transaction is stored forever in the comprehensive general ledger. Blockchain is completely transparent. It is developed using open source software. This allows an operating environment where everyone has access to the sum total of all details. If you have a bitcoin address (your email) anyone can tell how many bitcoins you have. They may not know exactly who you are since your email is used as an account identifier.
7. What are some examples of blockchain APIs?
In September 2015, Chain.com, a San Francisco based company, founded in 2014, raised $30M in equity funding. Investment was through a network of companies including Capital One, Visa, Nasdaq, and Citi. They use their blockchain technology platform to operate transactions. Chain's platform also includes developer tools designed to allow companies to prototype in sandboxed environments. Chain.com has the same innovative engineering team that developed the unique software infrastructure at Salesforce.com and Microsoft. APIs such as FileCoin digitally distribute resources (energy, bandwidth, storage) to connected services/devices. Oculus Rift developers are able to bridge the gap between real economies and the virtual world. Codius came on the scene in 2014, and is currently in beta phase. Taking advantage of open source software Codius is a smart contract app. More centralized than bitcoin apps, this platform automates and hosts providers and sets up smart contracts e-currency supplier and the client.
8. How can bitcoin and blockchain-based companies leverage Yodlee® API?
Bitcoin companies like Coinbase have used Yodlee Interactive Instant Account Verification API to quickly verify the ownership and balances of accounts in less than a minute. Yodlee verifies more than 35,000 accounts each day, enabling fast digital transactions and a seamless user experience. Voatz, a startup from Ynext Incubator, combines both blockchain technology and Yodlee’s financial data APIs to provide a secure, convenient way to hold elections. Soon you’ll be able to use Voatz to record your choice in the presidential elections, simply by using your iPhone to take a selfie with your government ID. Voatz will then call on the Yodlee API to double confirm your identity using your financial data. When you confirm your vote, it is published to the distributed blockchain, providing you and the government with an irrefutable record of your vote. What are your thoughts on bitcoin and blockchain technologies? Are you building an innovative financial app? Check out these resources for developers.
