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Blockchain - trust is good, mass is better

Trust is good, anonymity is better - Blockchain changing the way we act.

Despite technologically enhancing the way in which payment transactions are executed, or how contract development is implemented, Blockchain and Bitcoins are still being negatively perceived by the public. The lack of publicity is due to both the complicated technology behind it and the difficulty in explaining it. Here’s an attempted explanation:

Blockchain is the technology behind Bitcoins. Bitcoins is a means of payment that exists exclusively on the Internet and was developed in 2008. Unlike conventional money, Bitcoins are not printed or embossed, but are caused by the fact that Internet users make computing time available on their computers.

The computing time of tens of thousands of "miners", as these Internet volunteers are allegedly called, is required to make Bitcoins forgery-proof and to log transactions using Bitcoins. The miners receive Bitcoins for their computing time. The sum of Bitcoins is capped to 21 million, so that no inflation occurs. Since the value of Bitcoins has increased against the dollar and euro for years, the sum of 21 million is sufficient for all transactions. A single Bitcoin can be split into 100 million units.

Trust through the masses

It is difficult to imagine but all transactions worldwide between two trading subjects are logged in the so-called Blockchain. The block chain - ie a chain of blocks, in which the transactions are logged, is available on all computers of the miners involved. If  A buys a house from B and pays for it by Bitcoin, this transaction is appended to the Blockchain as an additional chain term. The information about the transaction is then available on all participating computers. Only if the majority of the network growth calculators confirm the integrity of the Blockchain, will Bitcoins flow from A to B. The Blockchain also records whether A has sufficient Bitcoins for a purchase.

The integrity of the Blockchain can be checked by means of checksums or by hash value. Hash values are used to clearly represent large amounts of data in a relatively small progression - similar to how a person can be identified by a fingerprint. Even the smallest changes to the original text or a number completely change the hash value.

Example:

Original

"Anna buys a house from Brigitte for 100 Bitcoins. Brigitte's grandmother is given a lifelong right to live there."

Checksum 86ddb9d97cc52e143ec130f14cf42c1c

Fake

"Anna buys a house from Brigitte for 100 Bitcoins. Brigitte's grandmother does not get a lifelong right to live there."

Checksum 7cc5371f77584faee04971d6a1d12356

(http://www.md5generator.de )

Therefore, if someone attempts to insert a wrong Block or chain of blocks into the Blockchain, the fake is detected because the checksum of the smuggling Block is recognized by the majority as false. The transaction is cancelled and not successful. Likewise, this prevents the same Bitcoin from being issued multiple times. Attempts are documented on the Blockchain website (https://blockchain.info/de/double-spends). Production and possession of Bitcoins are documented in the Blockchain.

Anonymity with effort

The transactions and trading persons can be tracked with some effort. Researchers at the TU Darmstadt have succeeded in identifying the IP address behind two seemingly independent Bitcoin addresses (sic!) (https://www.privacy-handbuch.de/handbuch_26_bitcoin2.htm). Due to these attack areas - money laundering or bribery through Bitcoin would be easy to find - news services are also very interested in the Bitcoin payment service. If both the benefactor and beneficiary use anonymous services on the Internet to manage their Bitcoin wallet ("eWallet"), transactions can be made traceability free.

Different area of application - Smart Contracts

Countries which are struggling with corruption and ambiguous property ownership such as Georgia and Honduras, have in part, (Honduras) or only recently, (Georgia) given their citizens the opportunity, to register their property in the forgery-proof block chain. (http://www.forbes.com/sites/laurashin/2016/04/21/republic-of-georgia-to-pilot-land-titling-on-blockchain-with-economist-hernando-de-soto-bitfury/#715578496550).

This gives Blockchain further potential: it can thoroughly document ownership conditions and irradicate the possibility of manipulation as a distributed storage system. Contracts through Blockchain, e.g. The sale of a car, can be additionally secured in the future through a code, for the release of the ignition is only transferred to the buyer as soon as the Bitcoin payment has been received (see http://www.it-finanzmagazin.de/blockchain-bitcoins-wie-smart-contracts-banken-ueberfluessig-machen-werden-9078/). In the case of instalments, access to the car could be blocked if the instalment payment declines.

Verifying a transaction can take anytime from 10 minutes to several hours. One can gladly accept this time when considering the duration it takes to reverse a contract process. Online shop operators will value this.

Since the Blockchain can not be manipulated, it is also important to note the use of Bitcoins as an "intelligent currency". For example, health insurance may benefit from Bitcoin being used for medical treatment or medication payments, safely transferring payments to doctors without undue payment on patient accounts.

As shown in the example of land registration, Blockchain could also be used to make counterfeit-proof elections at home from the computer or from the smartphone.

Banks and other brokers

Banks or credit institutions no longer play a role in penetrating the Blockchain market; transactions are still largely free of charge. However, it is already possible to get a faster transaction for a fee. Nevertheless, the charges are much lower than for the financial institutions. It will also be tight for endorsers and lawyers with standardized legal areas. For example, Copyrights to music, pictures or text are kept in the Blockchain and the authors are paid automatically.

Who accepts Bitcoins?

At the beginning of March 2015, the number of German companies accepting Bitcoins at 6.284 (https://en.wikipedia.org/wiki/Bitcoin) was across all industries. In the US, the figure was 100,000 in January 2015. PayPal, Expedia and Dell are among the names of the 10 largest companies that accept Bitcoin. The restriction in other large companies is explained by two things: firstly, you do not want to bother customers who withdraw payments. However, this is irreversible when you pay within the Blockchain. On the other hand, retailers are not aware of their creditworthiness, an important parameter for online marketing, due to their largely anonymous Bitcoin payment method.

Blockchain is much more than a "buzzword". It is predicted that Blockchain will be applied to many areas of technology within the next 2 - 3 years and will permanently change business models.

JW