Blockchain / Cryptocurrency

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What is Blockchain?

In its most technical term, blockchain is an open, decentralized, distributed ledger, or database, that is shared among nodes of a computer, known as a peer-to-peer network. Essentially, it acts as a database that stores information electronically in digital format. Although numerous applications of blockchains have been explored and implemented, they are best known for their role in the cryptocurrency systems for maintaining a secure and decentralized record of transactions. The central idea behind the blockchain technology is that it warrants the fidelity and security of a record of data and develops trust within the network without a centralized authority figures that exist in traditional record keeping systems. Therefore, simply put, a blockchain is a distributed, secure database. [1]

With respect to the structure of data, blockchain differs from a typical database. A blockchain consist of blocks that collects information together in groups, where each block has a certain storage capacity. Once a block’s capacity reaches the maximum sets of information, it is closed and linked to the previous block, resulting in a chain of data known as blockchain. Accordingly, information following the added block is accumulated into a new block that will be added to the end of the chain once it is filled. As a result, blockchains creates an irreversible timeline of data that are permanently recorded and viewable by all node participants within the decentralized network, making the blockchain immutable to alterations and modifications. [1]

Moreover, compared to a traditional, centralized database, blockchain technology optimizes two factors from its decentralized structure:


In a blockchain network, all transactions can be transparently viewed and monitored by each computing nodes, or participants, due to its decentralized nature. The chain is constantly updated as fresh blocks are confirmed and added, providing all network participants with the ability to track every transaction as each has its own copy of the chain. In addition, blockchains strengthens the level of transparency within the network by encrypting stored records, allowing the users to remain anonymous.[1]

Consider the 2008 financial crisis for example. Although many analysts see the crisis as the result of issues involving short-term liquidity, the deeper cause was more accurately described as the society's high level of trust, and lack of transparency of, centralized, financial institutions. As a result, the public was unaware that bankers were manipulating the record of how much money was owned and owed, allowing them to resell assets with little or no value over many years. In relation, since blockchain technology eliminates the need for a central authority, it can help prevent manipulation of data by safeguarding transparency via storing information in a way that cannot be altered without the participants noticing the changes made. [2]

The transparency of blockchain offers all network participants with an opportunity to access and view the history of all transactions, and thus, it solidifies its self-governing structure by ensuring that users are held accountable for their actions, reducing the risk for corruption, fraud, and manipulation. [3]


Blockchain technology achieves decentralized security and trust through always storing new blocks linearly and chronologically, meaning that new blocks are always added to the end of the blockchain. By doing so, it optimizes the network’s security as it is difficult for a participant to alter the data within the block unless the majority of the network reaches a consensus to implement such changes. In fact, a hacker would need to simultaneously control and alter 51% of the computing power within the network to alter a blockchain or steal cryptocurrency. This would require a significant amount of resources and money as the hacker would need to alter all of the blocks in the chain to ensure that they remain linked together. Moreover, even if the hacker were to manipulate data within the blocks, it would be impossible to do this unnoticed as network nodes would immediately recognize such drastic alterations to the blockchain due to the network's transparent nature. [1]

Blockchain Architecture

Three Components of a Block
A blockchain is composed of series of blocks, where each block contains three components. The first component is the data. Although the data stored inside a block depends on the type of blockchain, it usually includes information about the sender, receiver, and the transactions, such as the number of currency, or assets, to be transferred. The second and third components are the hash of the block and the hash of the previous block, respectively. A hash refers to a mathematical function that meets the encrypted demands needed to solve for a blockchain computation. These mathematical functions cannot be reverse-engineered, meaning that the input required to solve the mathematical problem cannot be obtained through decompilation of the output. However, to keep things simple, a hash can be perceived as a fingerprint that is unique to each block since it identifies all of the block's content. As a result, once a block is published, any changes that occur within the block will cause the hash to change. In relation, it is important that the block also contains the hash of the previous block as it solidifies the chain between each block, preventing any modifications to the blockchain. [4] [5]

For instance, suppose there were two blocks in a blockchain: Block 1, the Genesis block, or the first block in the chain, and Block 2, the following block. If a hacker was to change the data of the Genesis block, its hash would also change. This would break the chain as the hash of the previous block in Block 2 no longer matches the hash of the Genesis block. As a result, since blockchain is a decentralized database, the node participants would recognize the inconsistency and veto such a change. [5]

Overall, the data, hash, and hash of the previous block forms the architecture of blockchain technology as these components reinforce the relationship, or the chain, between each block. [5]

Distributed Ledger

In the definition of blockchain, the term distributed ledger was used. Although there is a public perception that blockchain technology and distributed ledger technology are the same, there is a subtle difference between these terminologies. Inherently, a distributed ledger refers to a database that is consensually shared and synchronized across multiple sites, accessible by multiple people. It allows transactions to have public witnesses as each network participant can access, and own a copy of, the records shared across that network. Thus, since blockchain technology works to create a permanent and secure database, distributed ledger technology allows the blockchain to store a record, or transaction, that involves value or that needs to be secure and trusted.[6]

As mentioned previously, the primary purpose of blockchain technology is to allow digital information to be recorded and distributed amongst the peer-to-peer network, but not edited. This makes a blockchain the foundation for immutable ledgers, or records of transactions that cannot be altered or manipulated. In relation, these notions make blockchains a form of a distributed ledger technology (DLT). However, it is important to acknowledge that blockchain is just one type of distributed ledger, meaning that all blockchains are distributed ledgers, but not all distributed ledgers are blockchains. Although blockchain is a sequence of blocks, distributed ledgers do not require such a chain as it does not necessarily need to structure data in forms of blocks.[6] [7]

History of the Blockchain

Despite the fact that the concept of blockchain first emerged 30 years ago, it has the potential to grow to become the standard of the worldwide record-keeping systems: [8]

In 1991, the concept of blockchain first emerged as a cryptographically secured chain of blocks developed by Stuart Haber and Scott Stornetta. [8]

In 1998, based on the ideas proposed by Haber and Stornetta, computer scientist, Nick Szabo, worked on Bit Gold, a decentralized currency that would reside within a blockchain network. [8]

In 2000, Stefan Konst published a unified theory of encryption protection chains and his take for the implementation. [8]

In 2008, an unknown person, or group, under the pseudonym of Satoshi Nakamoto released a white paper establishing the model for the blockchain technology, where it was widely viewed as the holy grail of blockchain technology due to its content on what blockchain could potentially accomplish. [8]

In 2009, Nakamoto implemented the first blockchain as a shared ledger as part of a proposal for Bitcoin. [8]

In 2014, blockchain became separated from currency and financial transactions as other applications of the technology were explored, leading to the birth of blockchain 2.0 and 3.0, and the development of blockchain 4.0. [8]

Components of Blockchain

Although blockchain has numerous applications, all blockchain ecosystems must contain the following five components for it to become a decentralized, secure database:

Peer-to-Peer Network

Peer-to-Peer Network (P2P) is a network of computers, also known as nodes, that are equally privileged, meaning that it's open to anyone and everyone. The central concept of this type of network is the removal of intermediaries, creating a distributed network where peers, or users, can exchange data without the presence of a central figure. In a P2P network, all the computing nodes are connected, where each node can maintain a complete copy of the ledger and compare it to other devices in the network to ensure the data within the block is accurate. It is the main component of blockchain as it provides a decentralized network that allows computing nodes to remotely communicate and share in a secure method. [9]


Cryptography is a secure communications technique that allows only the sender and intended recipient of a message to view its contents. In a blockchain network, it is the art of secure communication in a hostile environment where transactions and records are kept. The need for cryptography arises from the first component, the peer-to-peer network, as anyone can participate in this network, including bad actors. It ensures that transactions and data within a block are processed unaltered. At its core, cryptography ensures the security of participants and transactions and allows users to verify transactions and prove its authenticity. Overall, it acts as a safeguard against numerous security threats arising from the lack of central authorities’ influence throughout the network. [10]

Consensus Algorithms

A consensus algorithm is a set of rules, through which all the peers of the blockchain network reach a common agreement about the present state of the distributed ledger. In simpler terms, it is a system used to achieve agreement, trust, and security across a decentralized P2P network. These algorithms promote reliability of the blockchain network by establishing trust between unknown peers and ensuring that every new block that is added to the chain is the one and only version of the truth, meaning that it has not been modified or altered. If these mechanisms were not implemented, it would be extremely difficult to reach a consensus amongst blockchain networks consisting of millions of users, and therefore, it’s integrated into the blockchain network to regulate activities or transactions within the blockchain. Although there is an abundance of consensus algorithms available, the four widely adopted methods are as followed: [11]

Proof of Work

The proof of work (PoW) algorithm requires node participants of a network to expend effort solving an arbitrary mathematical puzzle to prevent bad actors from manipulating data and gaming the system. Here, the purpose is to make sure that participating nodes provide evidence that they have expended computational power. By doing so, it makes it resource-intensive for a user to overtake the network as significant computing power is required to solve such puzzles. The mathematical puzzle, or the work, is generating a hash that matches the designated target hash for the current block. The crypto miner who does this the fastest wins the right to add that block to the blockchain network and receive rewards accordingly. However, PoW is very harmful to the environment as the computing power required to solve these puzzles translates into a high amount of electricity and power needed. In fact, a study conducted by the University of Cambridge revealed that Bitcoin miners use about 119.87 terawatt-hours per year, which is more than countries such as the United Arab Emirates and the Netherlands consume annually. As a result, PoW algorithms are considered to be unsustainable as the computing power required to mine a Bitcoin, or other cryptocurrencies leave a significant carbon footprint. [12] [13] [14]

Proof of Stake

The proof of stake (PoS) algorithm states that node participants can mine or validate block transactions according to how many coins they hold. As mentioned previously, PoW algorithms requires significant computing power that is harmful to the environment. As a result PoS was developed as an alternative algorithm seeking to address these environmental sustainability concerns. Due to these concerns, Ethereum is planning on shifting from PoW algorithms to PoS algorithms. Fundamentally, PoS algorithms limit node participants to mine a percentage of transactions that is reflective of their ownership stake, or the amount of assets they hold. In simple context, a node who owns 3% of the coins available within the blockchain network can theoretically only mine 3% of the blocks. Additionally, PoS algorithms prevents bad actors from attempting to overtake and obtain 51% of the blockchain network's stake. Although it is very difficult to accomplish, a bad actor who overtakes 51% stake in the coins would be disincentivized to attack the network as they hold majority of the share. In other words, if bad actors were to attack the network, it would decrease the value of the cryptocurrency and their stake, and thus, they would be more encouraged to maintain the security of the network. [14]

Proof of Authority

The proof of authority (PoA) algorithm leverages the value of identities, which means that node participants are not staking coins, as in the case of PoS, but their own reputation instead. It ensures the security of blockchain networks by selecting nodes with good reputations that are arbitrarily chosen as trustworthy parties. Simply put, the PoA algorithm relies on a group of known and reputable validators to produce blocks, which is less resource-intensive compared to PoW algorithms. However, since pre-approved participants, who act as moderators of the system, validate blocks and transactions , it does require participants to preserve the integrity of their nodes. Overall, PoA algorithms can be viewed as a mechanism that motivates participants to act ethically due to the fact that their identity and reputation is at stake. [15]

Proof of Elapsed Time

The proof of elapsed time (PoET) generates a random wait time for each node in the blockchain network, where the node with the shortest wait time will win the bid to create and add a new block to the blockchain. It is based on the foundation of a fair lottery system, as PoET algorithms spreads the chances of winning fairly across all participants within the blockchain network. Consequently, PoET relies on a randomised timer system for network participants, where each node in the network waits for a randomly chosen time period. The node who is given the finished time wins the bid and gets to mine and validate the new block. This way, it significantly reduces the amount of resources used as only the chosen participant will output computational power. In summary, PoET prevents high energy consumption, while keeping the process more efficient via a fair system. [16]

Incentive Mechanism

An incentive mechanism provides certain incentives, or rewards, to encourage nodes to participate in the security of the blockchain. In other words, it provides blockchain network users with an award for activities within the blockchain network, such as successfully publishing a block. The incentive mechanism moderates node activities within the blockchain network by influencing the behaviour of system participants via changing the relative costs and benefits of their choices. Accordingly, based on the quality of the user's work, the blockchain usually rewards the participants in the form of a virtual currency. Overall, the incentive mechanism functions on psychological behaviour as the rewards provided for a job well done ensures that it is in the participant’s best interest to follow the rules and act as a trustworthy participant. [17] [18]

Market Adoption

Market Adoption refers to obtaining critical mass in the number of users within the blockchain network. Accordingly, for a blockchain to become truly decentralized and immutable, the network must have a significant number of participants. If there are few users in a system, coins have little to no value, hindering the effectiveness of the incentive mechanism, and as a result, it would be extremely difficult to moderate activities within the blockchain network. However, although the decentralized nature of the blockchain network heavily relies on market adoption, it is an intangible component of the blockchain ecosystem. Therefore, it is difficult to determine what factors trigger mass-scale market adoption. [17]

Transactions within Blockchains

There are two main steps a transaction must go through before it is added to the blockchain network:


First, a transaction is requested and authenticated through the use of cryptographic keys, which are a string of data, similar to a password, that identifies a node participant and provides access to their account on the system. Moreover, each node has their own private key, which is used for authentication and encryption, and a public key, which is used for identification of the node participant. By using them both, the network creates a secure digital identity to authenticate the node in order to process the transaction they want to perform. [19]


After the transaction is authenticated, a block representing that particular transaction is created and distributed to every node participant in the P2P network. In relation, as represented by the component of the blockchain ecosystem, these nodes authorize the transactions through a consensus algorithms in order to receive a reward via an incentive mechanism. Once the block has been authorized by node participants, the block is added to the end of the existing blockchain, where it gets updated across the network. As soon as the blockchain is updated with the new added block, the transaction is considered to be complete. [19]

Types of Blockchains

There are four types of blockchain structures, where each differ in terms of user permissions:

Public Blockchains

Public blockchains are permissionless in nature, meaning that they are completely decentralized, allowing anyone to join the network. It provides all node participants of the blockchain to have equal opportunities to access the network, and create and validate new blocks. Here, there is no single authority figure that controls the state of the blockchain network, and thus, there are no restrictions on new node participants. Subsequently, this enables the data to be accessible by everyone, where an incentive mechanism is used to ensure that participants behave fairly. As a result, the main application for public blockchains is the issuance of cryptocurrency, such as Bitcoin and Ethereum, as there would be no incentive for the node participants to behave in a trustworthy fashion without a valuable digital currency. For instance, consider Bitcoin. The more valuable a Bitcoin becomes, the stronger the incentive mechanism becomes, resulting in more participants who behave ethically. This makes the public blockchain, such as the Bitcoin blockchain and other cryptocurrency blockchains, more secure as it becomes harder to manipulate and alter transactions. [20] [21]

Private Blockchains

Private blockchains are permissioned and controlled by a single organization that establishes rules with respect to who can see and write to the chain. Unlike public blockchains, there is an established hierarchy of control, meaning that private blockchains are not fully decentralized. However, it still holds the principle of decentralization as node participants still keep a copy of the blockchain, allowing them to monitor, recognize, and validate any modifications to the existing blocks. To clarify, private blockchains are only partially decentralized because public access to these blockchains is restricted. For users to gain access to the network, they must receive an invitation that is approved by the network founder or a set of rules established by the single, central authority. In addition, these central authorities do not grant each node with equal opportunities to perform functions. Overall, private blockchains are mostly used in enterprise environments where an organization wants to reap the benefits provided by a decentralized database, without exposing its network to the public. [20] [21] [22]

Consortium Blockchains

Consortium blockchains are permissioned blockchains governed by a group of organizations. In contrast to private blockchains, the network is maintained and overseen by a small number of equally powerful parties, or validators. As a result, consortium blockchains has a higher degree of decentralization than private blockchains, leading to an enhanced network security. One can think of this type of blockchain as a platform where multiple organizations share information in a collaborative environment. This means that organizations cannot manipulate, change, or cheat the blockchain network as every other organization on the platform will keep it in check. Moreover, each organization can contribute to the network and get credits and features equally, providing a system where all parties act in the best interest of the blockchain network. [20] [21] [23]

Hybrid Blockchains

Hybrid blockchains attempts to incorporate the benefits of both private and public blockchain solutions. Essentially, similar to a private blockchain, it is controlled by a single organization; however, it has a level of peer-to-peer oversight performed by the public blockchain, which is required for certain transaction validations. In other words, hybrid blockchains are permissioned and not open to everyone, but integrates decentralized features, such as node integrity, data transparency, and network security. Overall, hybrid blockchains combine the best of public and private blockchains by allowing node participants to leverage decentralization and control sensitive data, which optimizes performance of transactions within the blockchain network. [20] [24]

Evolution of Blockchains

The evolution of blockchain falls under four stages:

Blockchain 1.0

Blockchain 1.0 is the first evolutionary phase of the blockchain technology and it was derived from the concept of distributed ledger technology (DLT). The foundation behind blockchain 1.0 was to develop a comprehensive new method to deal with finances. Through the use of a decentralized, distributed, and irrefutable digital record of financial transaction, it aimed to shift the global financial systems towards a more transparent system that was accessible by the public. In relation, blockchain 1.0 emerged with the introduction of Bitcoin as a blockchain-based digital money solution, and as a result, Bitcoin paved the way for cryptocurrency as it proved that the blockchain technology could be used to keep track of financial transaction records in a transparent and secure method. As the benefits of a decentralized network in financial transactions was gaining global recognition, developers began experimenting the possibilities that blockchains could bring to the world of finance. Therefore, Bitcoin and its underlying DLT inspired the gradual creation of numerous other cryptocurrencies. Overall, blockchain 1.0 was a revolutionary approach that portrayed the potential of what personal and enterprise finance could become. [25]

However, blockchain 1.0 had its downfalls. First, it heavily utilized the PoW algorithms that required high energy consumptions. However, despite the high amounts of energy used, a research illustrated that cryptocurrencies using blockchain 1.0, such as Bitcoin, had a relatively slow throughput, or transaction speed. In addition, these blockchains were vulnerable to selfish mining, a practice where miners colluded their computing capabilities to earn more revenue. This hindered the scalability of blockchain 1.0 as the network was overpowered by select number of users who were gradually shifting the blockchain 1.0 network towards a centralized system as they held the majority of the network's computing power. As a result, to mitigate these issues, blockchain 2.0 was introduced. [26]

Blockchain 2.0

Developers were prompted to extend the concept of blockchain beyond currency in order to derive away from the wasteful mining and poor scalability elements of blockchain 1.0. Accordingly, through improving on the concepts of blockchain 1.0, blockchain 2.0 was developed, centered around the rise of Ethereum, a blockchain platform that had its own cryptocurrency, known as Ether. Essentially, blockchain 2.0 is based on the newly developed ideology of smart contracts. To keep things simple, smart contracts are computer programs, or pre-written logic, that exist within a blockchain. Its purpose is to act as self-governing programs that execute transactions when predetermined conditions are met. One of the main benefits smart contracts provide is that it reduces the cost of execution and verifying transactions as no node participant can tamper with it, resulting in a blockchain network that prevents fraud. Therefore, it enables transactions and agreements to be anonymously executed among two or more parties that do not trust each other. [27] [26]

Furthermore, blockchain 2.0 expands on blockchain 1.0 by discovering new applications for blockchain technology and moving away from financial transactions. In fact, many everyday services that are currently done offline can now safely be moved to the Internet as online services, due to the introduction of smart contracts. However, as the technology is currently within the early stages of blockchain 2.0, its applications in non-financial sectors are still being researched and discovered. Consider the following applications of Etherium, a blockchain 2.0 platform, outside of finances: [26]

Electronic Voting

Electronic voting is a trending topic that is making its way towards online services. The main requirements for electronic voting it that the system must be secure, avoid duplicate votes, and be fully transparent. Accordingly smart contracts provides the ability to satisfy these set requirements. As a result, Ethereum blockchain have been researched to assist in constructing a more secure system for electronic votings. Here, voters would use Ethereum wallets to cast their votes, and once the election period ends, blockchain 2.0, or Ethereum, would be used to store the ballets and votes. The integration of Ethereum into the electronic voting system have been tested and proven to be a much more efficient, secure and transparent alternative to conduct electronic votings. [26]

Smart Homes

Smart home products, which provide fully automated functions that offers the highest comfort to the users, have recently become widely adopted. However, there is growing concern that these products, such as Google Home, have been violating the privacy of residents as it has been proven that it eavesdrops in on consumers to obtain sensitive data. Therefore, to alleviate these privacy issues arising from smart home products, Ethereum based smart home schemes have been developed and researched to access policies and data flow to eliminate these devices from stealing sensitive information. [26]

Production and Supply Chains

Recently, a company, known as Verified Organic, initiated the first phase of a project that tracks production of organic hemp production using the Ethereum blockchain. The goal was to ensure quality, reduce fraud, and improve compliance in the organic agriculture supply chain. By doing so, managers were able use the Ethereum blockchain platform to register organic certificates and manage assets such as seeds, crops, fields, fertiliser, pesticide, and equipment. In relation, the Ethereum network enabled supply chains to operate with a high degree of transparency and accountability, while ensuring the authenticity of the production quality, as well as the sales record. [26] [28]

Blockchain 3.0

Blockchain 3.0 is a recent development of blockchain technology that allows blockchains to transact with other blockchains. Apart from smart contracts, it mainly involves Decentralized Apps (dApps), which are digital programs that run on a blockchain network of computers, instead of a single computer. However, Dapps use smart contracts to complete the transactions between unknown, anonymous parties without the need to rely on a central authority figure. As a result, blockchain 3.0 is beyond the scope of any systems containing a central authority. This generation is capable of promoting inter chain transactions. Although it is in its early stages, it promises to optimize scalability, interoperability, and privacy as it is designed based on the FFM (Fast, Feeless, and Minerless) concept. In other words, blockchain 3.0 eliminates the dependency on computing nodes, or miners, to verify and authenticate transactions, allowing for thousands of transactions per second, unlike blockchain 1.0 and 2.0. Moreover, blockchain 3.0 allowed the development of several platforms, where each has a unique advantage to encourage Blockchain usage in everyday life: [26]

One example of blockchain 3.0 is Cardano, an advanced blockchain platform, consisting of smart contracts and dApps, developed to pioneer new approaches for digital currencies. In fact, Cardano is leading the charge of blockchain 3.0, similar to how Etherium introduced the concept of blockchain 2.0. Cardano aims to achieve the scalability, interoperability, and sustainability needed for real-world applications. With respect to interoperability, Cardano allows for crossovers between its network and other cryptocurrencies and other blockchain networks. Based on its promises, Cardano suggests that the current state of cryptocurrency is transitioning toward an integrated crypto community. With traditional blockchains, developers are forced to operate within that blockchain network; however, Cardano could eventually break that barrier. [29]

Blockchain 4.0

Lastly, an upcoming evolution of the blockchain technology is blockchain 4.0 which guarantees to deliver blockchain technology as a business-usable environment to create and run applications. Simply put, it aims to convert the blockchain technology to become commercialized and mainstreamed. Blockchain 4.0 has the potential of incorporating advanced technologies, such as artificial intelligence (AI), with blockchains. However, its development and implementation has yet been initiated, and thus, its applications have only been conceptualized and are currently intangible. [26]

Benefits of Blockchain


The decentralization nature of blockchain creates a trustless environment. Each member in the network has a copy of the exact data ledger, which helps to reduce any member’s ability to take over the network. None of the members in the network has to even know each other. Every member has the same status and if a member’s ledger is corrupted or altered, it will be rejected by the majority of participants in the same network. Decentralization also means that the distribution of resources will be optimized, therefore promised services will be provided with better consistency and performance. [30]

Cost Reduction

With blockchain, firms can eliminate the need for manual intervention in sharing, aggregating data, and regular reporting. Moreover, it can reduce manual processing for audit documents. With less manual processes required, employees can now focus more on different value-added activities. For example, they can concentrate more on cost reductions strategies or increase the level of efficiency between departments. The transaction costs will also be significantly reduced. For example, the cryptocurrency payments are handled by the P2P network and require no centralized verification. This means that there is no middle man, therefore the merchant processing fees will be reduced. [31]


Blockchain is designed to be tamper-proof, immutable, and democratic. This can be achieved through three key characteristics:


Blockchain distributes the same information to every member in the same network. When there are changes being made in the network, the network will validate it then the miners will add that transaction into a block. Then this block will get added into the blockchain network. If one block got changed, all its subsequent blocks will need to be changed to. Otherwise, the nodes will spot the deceitful behavior and the changes would be discarded. There are more than thousands of nodes responsible for verifying the new blocks. Moreover, the information is stored across a network of computers rather than a centralized server, which makes it difficult for hackers to access the data. These factors contribute to the maximization of blockchain security. [32]


All data on the blockchain is cryptographically hashed (processed to hide its true identity). Hashing is similar to creating a unique password or ID. Every block has a unique hash derived from that block’s transactions and the hash of the previous block. If one block got changed, the entire history of that blockchain needs to be changed too. This means that fraudsters cannot make changes within the blockchain without invalidating the whole block.[32]


Another name for this process is called “proof-of-work”. This process starts by nodes validating that the block meets preset rules. Then the miners compete with each other to solve a cryptographic puzzle based on the data of that specific block. The solution is then judged by the whole network, and if 51% of the network nodes agree with that solution, the block is added to the blockchain. This process is carried out to ensure that each block has gone through a complex mathematical process before becoming a part of the blockchain.[32]


Blockchain eliminates the need for paper trails and ledger reconciliation. This means that the speed of transaction processes within a business or currency network will be improved. Moreover, blockchain facilitates faster transactions by removing the need for middlemen such as banks or other central authority. For example, in the case of real estate, the tenant-landlord agreements’ process would be automated using smart contracts and an unified system of ownership records.[33]

Drawbacks of Blockchain


This problem arises with the increasing number of nodes and transactions within the blockchain. The network is at risk of slowing down if the number of users joining the network keeps increasing. For example, the number of transactions which VISA can perform per second (1700) is vastly superior to that of Bitcoin (4.6).

Blockchain is a decentralized network, and all nodes are allowed to perform a specific action at the same time. This will cost a large amount of computational power and the network could potentially crash. The number of transactions within a blockchain network is limited within a given period of time, so when the demand exceeds this limit, it will lead to higher fees and longer waiting time for every transaction.

Experts have been able to develop two layers of solutions for this problem: The first layer includes two solutions. The first solution is expanding the amount of information each block can store. This means that each block limit is higher which leads to an increase in the number of transactions which can occur. The problem with this solution is that when the limit gets filled up, the block will need to be expanded again and again. This process continues until the amount of storage needed to hold the information spirals out of control. This leads to a huge delay in system processes. The second solution is shortening the amount of time needed to create a new block. It means that there are more blocks to contain information with the same or less amount of time. However, there needs to be a validation period of each new block. If too many blocks are being created within a short amount of time, there will not be enough time to identify possible problems which might have occured. One of the solutions in layer two is called State Channels. This focuses on grouping similar transactions together in order to reduce the overall number of transactions, which can reduce the strain on the blockchain. Layer two works better than layer one, however, it has not been able to solve the problem on a global scale yet.[34]

Energy Consumption

The blockchain decentralized structure drives a huge carbon emissions footprint. To be more specific, it’s proof-of-work concept is a lot more energy intensive than verifying transactions on a centralized network.

The cryptocurrency’s technology becomes much harder as more people are competing to solve them for the prize. This resulted in a large number of specialized computers being used, which pours huge amounts of computational and electrical energy into the ecosystem. The Cambridge Centre of Alternative Finance surveyed the people who manage the Bitcoin network around the world on their energy use and found out that two-third of it is from fossil fuels.[35]


Decentralization of authority means that there is no one power to enforce law and order in the network. Blockchain is global and every user can be from a different country, this makes it very difficult to determine which laws should apply to transactions, smart contracts, and agreements since every country’s regulation might be different. In the case of smart contracts, it is not legally recognized as substantial agreements or proofs in most countries.[36]

Blockchain Applications


Securing patient data

Security is a major issue in the Healthcare industry. Between 2009 and 2017, more than 176 million patient records were exposed in data breaches. This includes banking and credit card information, identity information, and medical records.[37]

The decentralized nature of blockchain enables the network to keep an incorruptible, decentralized and transparent log of all patient data. Moreover, this nature of the technology allows patient and healthcare providers to share information quickly and safely. Blockchain can also conceal the identity of any individual with complex and secure codes that can protect the sensitivity of medical data.

Preventing Costly Mistakes and Streamlining Care

Miscommunication between medical professionals costs the healthcare industry around $11 billion a year. A big factor which contributed to this problem is the inefficient process of obtaining access to a patient’s medical records. The decentralized nature of blockchain can build one ecosystem of medical data that can be effectively and efficiently referenced by doctors, hospitals, pharmacists, and others who are involved in medical treatment. This leads to faster diagnoses and personalized care plans.[37]

Drug Traceability and Medical Supply Chain Management

Once a ledger for a drug is created, it marks the point of origin. This ledger will then continue to record data along the way, including where the drug has been and who has been handling it, until it reaches the consumer. This process guarantees full transparency in the shipping process of drugs. Moreover, it also enables medical firms to monitor its labour costs and waste emissions.[37]


Genomics is the study of human genes. The decentralized and secure nature of the blockchain can help it to store billions of generic data points. Moreover, it can be a marketplace where people sell their encrypted genetic information to create a wider database. This enables scientists to gain access to valuable data faster than before.[37]

Examples of Blockchain Applications in Healthcare Industry

Since the start of 2021, The South Warwickshire NHS Foundation Trust has been using Hedera Hashgraph to keep track of whether COVID-19 vaccines are being stored at the right temperature. The Hedera’s Hashgraph digital ledger does not use the same kind of blockchain as Bitcoin does. Instead it uses a mathematical system called directed acyclic graph. This system does not require the consensus process like in cryptocurrency networks. Which is why the cost per piece of information added to the ledger is low and the transaction process is quick.[38]

Another example is Intermountain Healthcare, a Utah-based, not-for-profit system of 22 hospitals. The medical group is using blockchain-based technology and artificial intelligence to identify waste in its large health care system, developing better outcomes for patients, and significant savings all around.[39]


Blockchain technology has the ability to disintermediating six key services that banks provide.


Sending and receiving payments using traditional banking methods is not very effective. For example, a transaction from the U.S to U.K required a fee for the middleman for wire transfer, and the transaction can take up to a week to be delivered. Cryptocurrencies are built on public blockchain that anyone can use to send and receive money. In this way, public blockchain cut down the need for trusted third party parties to verify transactions. This enables people around the world to access cheap, fast, and borderless payments. For example, Bitcoin transactions take 10 minutes on average to be settled, while traditional bank transfers take up to 3 days on average.[40]

In 2016, VISA introduced a blockchain platform that would deal with business-to-business payment services. By the end of 2019, they wanted to implement this technology to 90 markets.[41]

Bitpesa is an example of companies which are implementing blockchain to improve business-to-business payments. Bitpesa facilitates blockchain-based payments in countries like Nigeria and Uganda. The company has processed millions of dollars in transactions, reported growing 20% month-over-month.[42]

Clearance and Settlement System

Bank transfer has to go through several intermediaries, ranging from correspondent banks to custodial services, before it reaches the destination. It also requires a series of compliance for payment completion.

Blockchain works as a decentralized ledger of the transactions. Interbank blockchain technology can track all transactions securely. This means that instead of having to rely on intermediaries, transactions could be settled directly on a public blockchain. Moreover, blockchain allows for atomic transactions, the transactions that clear and settle as soon as payment is made. According to a report made by Accenture, the use of blockchain can reduce transaction settlement costs by $10 Billions annually.[40]

Ripple is an enterprise blockchain services provider who is best known for its associated cryptocurrency XRP. By integrating directly with a bank’s databases and ledger, Ripple’s product provides banks with a faster, two-ways communication protocol that permits real-time messaging and settlement.[42]


Financial markets keep track of who owns what through a complex chain of brokers, exchanges, central security depositories, clearing houses, and custodian banks. These different parties have been built around an outdated system of paper ownership which is not only slow but possibly prone to deception. Blockchain technology can create a decentralized database of unique, digital assets. With distributed ledger, it is possible to transfer the rights to an asset through cryptographic tokens (this process can be called assets off-chain). Tokenized securities have the potential to cut out middlemen and lower asset exchange fees.[40]

Polymath is a blockchain technology company whose goal is to migrate financial securities to the blockchain. The company is building a marketplace and platform that helps people issue security tokens and implement governance mechanisms to help these tokens meet regulations.[42]

Loans and Credits

Whenever a person applies for a loan, banks have to assess their risk level using credit score, debt-to-income ratio, and homeownership status. This centralized system can have some drawbacks such as credit score error or data breach. Blockchain technology allows for peer-to-peer loan, complex programmed loans, and a faster, more secure loan process in general. Using blockchain for lending purposes offers a cheaper and more efficient solution. With a cryptographically secure, decentralized ledger of transactions history banks can decide to approve loans based on a global credit score.[40]

Bloom Protocol is an example of companies which are focusing on bringing credit scoring onto the blockchain. Bloom is building a protocol for managing identity, risk, and credit scoring using blockchain technology.[42]

Trade Finance

Trade Finance is about the financial instruments and products that are used by companies to facilitate international trade and e-commerce. It functions as a third-party to eliminate fraud risk, extend credit, and make sure importers and exporters can take part in international transactions. These instruments frequently operate on outdated manual and written documentation. Blockchain technology with its transparency enables firms to securely prove country of origin, products, and other transaction details. It can provide better visibility into the shipments and a more efficient assurance of delivery.[40]

HSBC and Standard Chartered are two banks that have joined consortia dedicated to using blockchain technology to fix trade finance.[42]

Barclay, U.K’s second largest bank, is using blockchain to streamline fund transfers and KYC processes. Back in 2016, Barclay and innovative start-up company Wave were the first organizations who used blockchain technology to handle the documentation to approve the fund transactions.[43]

Customer KYC and Fraud Prevention

Customer KYC is a series of documents used by banks and lenders to verify their customers’ identity. These documents include photo ID verification, address proof verification, and biometric verification. The process is slow and can take up to 3 months to be completed. Moreover, it is very costly at the same time. An average of $500 million is spent annually by banks for completing the KYC. Blockchain technology can reduce human effort and cost involved with the KYC compliance. Customers' information can be stored on a blockchain and the decentralized nature of the platform allows all institutions to access the information and complete KYC compliance. Moreover, banks can ensure security of data using blockchain.[40]

Deutsche Bank, HSBC, and Mitsubishi UFJ Financial Group have developed a partnership with IBM to test a service to share KYC information via blockchain.[42]

Blockchain Future Implications

Democracy and Governance

Voting, crowdfunding, communal services, registrars, and more can be put on a Blockchain database for increased transparency. This has the potential to eliminate corruption in regulation. However, it has not been an application yet and there is still a long way until blockchain can be implemented on this specific segment.[44]

Retail Industry

The distributed ledger technology has the potential to improve supply chain goods tracking, and to prove the authenticity of goods by providing the ability to discern fake items from authentic ones by scanning a barcode. In the future, blockchain will be able to bring a lot of different applications to the retail industry.[44]


The secure nature of blockchain networks can detect and prevent fraud in the insurance industry. Moreover, it can improve insurance organizations in regard to property insurance claims.[44]


Entertainment industry is not a typical industry which can be disrupted by blockchain. However, this technology can have a significant impact on issues that are existing in the entertainment industry such as copyright infringement, piracy, and content consumption. Artists and writers can distribute their creative content on a global scale, while retaining full control over their own content using blockchain technology and cryptocurrencies.[44]


What is Cryptocurrency?

Cryptocurrency is a decentralized digital currency that runs on blockchain technology and can be used to purchase goods and services much like traditional fiat money. On top of that, cryptocurrency is also an investable asset that can be traded on cryptocurrency exchanges similar to the stock market. Unlike traditional stock market exchanges, cryptocurrency is traded 24 hours a day, 7 days a week. Many blockchain-related companies also use cryptocurrency to raise capital in the form of an Initial Coin Offering (ICO) which is comparable to an Initial Public Offering (IPO) on a traditional stock exchange.[45]

Though cryptocurrency serves many of the same purposes as fiat money, it is unique in a variety of ways:

No Central Authority

Cryptocurrency operates on the principle of decentralization which means that there is no central power that governs it, making everyone equal. This means that if you hold a cryptocurrency, no outside authority can seize your funds. Instead, it is managed by the blockchain network.[46]

Peer-to-Peer (P2P)

Cryptocurrency operates on a decentralized platform whereby two individuals interact directly with each other, without intermediation by a third party. Thus, when it comes to trading cryptocurrency, users can make trades or conduct transactions without needing a middleman such as a bank or a broker to pass the trades. Instead, the P2P network connects the buyer with the seller directly, enabling them to set their own terms, price, amount, and exchange rate.[47]

Borderless Transactions

Cryptocurrency can be sent or traded across the world in seconds without any need to convert into other currencies.[46]

Limited Supply

Unlike fiat money which is readily printable when the economy is not performing well. Most cryptocurrencies, especially bitcoin, have a strict supply. Instead of losing value over time like fiat money does due to inflation, many cryptocurrencies are deflationary due to a phenomenon called “halving” which maintains scarcity and value. For example, Bitcoin's program code is designed to have a strictly limited number of Bitcoins and the reward for mining Bitcoins is reduced by half every 210,000 blocks or roughly every 4 years. Thus, "halving" reduces the incentive to mine bitcoin, which in turn, reduces the rate at which new bitcoins are mined.[46] [47] [48]

History of Cryptocurrency

In 1983, the first proposal for an anonymous electronic payment system was outlined in a paper written by David Chaum, a cryptographer who is widely accepted as the creator of digital currency. Six years later, Chaum founded DigiCash, the first known electronic cash company.[49]

In 1998, Paypal was founded and the first concept of a decentralized digital currency operating in a manner similar to Bitcoin was proposed. However, it was never implemented due to the inability to ensure that transactions were secure and verifiable.[50]

In 2008, based on a whitepaper written by an anonymous programmer or group of programmers, Bitcoin software was implemented as an open-source code and released in January 2009.[51]

In 2010, the first-ever transaction for value occurred using Bitcoin as payment. Two pizzas were purchased for approximately 10,000 BTC.[52]

In 2011, alternative coins or “altcoins” such as Litecoin were created using Bitcoin’s open-source code to improve on aspects of speed and anonymity. During the same year, the first-ever cryptocurrency exchange called was created.[53] [54]

In 2012, became the first mainstream company to start accepting Bitcoin as a payment option but other firms such as Microsoft soon followed suit.[55]

In 2013, the first-ever Initial Coin Offering (ICO) was held by Mastercoin. During this same time, the price of one Bitcoin reached $1000.[56]

In 2014, MT Gox, the biggest cryptocurrency exchange in the world at that time was hacked resulting in the loss of six percent of the entire Bitcoin circulation being stolen. This event exposed the risk associated with cryptocurrency and sent Bitcoin into a bear market; Bitcoin fell all the way from $1000 to $200.[57]

In 2015 Ethereum was created by Vitalik Buterin, and was one of the first platforms that enabled the development of smart contracts on the blockchain. In the same year, Coinbase became the first regulated cryptocurrency exchange.[58] [59]

In 2017, cryptocurrency broke into the mainstream with bitcoin prices rising to $20,000. Other altcoins such as Ethereum and XRP rose by 9000% and 36,000% respectively.[60] [61] [62]

In 2020, the Covid-19 pandemic paired with the 2020 halving of Bitcoin fuels the start of the biggest cryptocurrency bull run in history.[63]

In 2021, El Salvadore became the first country to formally accept Bitcoin as legal tender. Soon after, the government of China declared all cryptocurrency transactions illegal.[64]

The Creator of Bitcoin

Dorian Nakamoto
Satoshi Nakamoto is the alias name used by the presumed person or persons who developed Bitcoin, authored the bitcoin white paper, and created and deployed bitcoin's original source code. In 2008, Nakamoto published the white paper on the cryptography mailing list at describing a digital cryptocurrency, the whitepaper was titled "Bitcoin: A Peer-to-Peer Electronic Cash System". In the whitepaper, Nakamoto condemns the current central banking system and blames it for the 2008 financial crisis. As a solution, Nakamoto proposes the use of a decentralized digital currency that he or she or they call Bitcoin. From 2008 to 2010, Nakamoto was very involved in the bitcoin community and collaborated with many developers to improve the bitcoin software. However, in 2010, Nakamoto gave control of the source code and network to other prominent members in the bitcoin community and stopped all involvement. During that time, it is estimated that Nakamoto mined over 1 million Bitcoin, which would make him, her or they one of the richest people in the world. While some people have accused a Japanes American Engineer named Dorian Nakamoto of being the creator of Bitcoin, he denies any involvement. Thus, to this day, we still do not know the true identity of Satoshi Nakamoto.[65] [51] [66]

The Dark Side of Bitcoin

Silk Road Website
While unique features of Bitcoin such as anonymity and decentralization were big selling points for its early adoption, those same features have been exploited and used for illegal applications. In 2013, an American blog website called Gawker published the first mainstream article about Bitcoin and its usage on black market websites such as Silk Road. On Silk Road, Bitcoin was used to purchase illegal contraband such as drugs, fake identities, weapons, and even murder for hires. In October of that year, Silk Road was shut down and the founder of the site, Ross Ulbricht, was sentenced to 6.5 years in federal prison. The following year, the number of well-known dark markets increased from 4 to 12. Since then, Bitcoin has been associated with illegal activities which has been a major barrier to its broader adoption.[67]

What is Bitcoin Mining?

Bitcoin mining refers to the process in which bitcoins are released into circulation. The bitcoins can be released by solving very complex mathematical and computational problems. After the bitcoins are released, new blocks are added to the blockchain. Bitcoin mining does not only refer to the release of the bitcoins into the system, it also refers to adding and verifying all bitcoin transactions across the network. The maximum number of bitcoins is capped at 21 million; therefore, after all these bitcoins are mined, no more bitcoins can be released into the system. It is expected that all the 21 million bitcoins will be mined until the year 2140. Thus, the network would be quite similar to a closed economy after 2140 and the major source of income would be from transaction fees. [68]

How Can You Mine Bitcoins?

Miners spend a lot of time and resources to be able to mine bitcoins. Miners try to minimize fraud in the transactions across the network by verifying all the transactions; therefore, the more the number of miners in the network, the less frauds happen in the network. Miners get paid twice; once for mining the bitcoins and another time for verifying transactions. However, it might not be 100% profitable since the miners might not be able to cover their initial investment costs. Anyone can mine bitcoins; however, their success depends on the level of their expertise and investment into the job both timewise and financially.

To start, the miner needs bitcoin mining hardware. These devices highly consume electricity and are designed differently and compatible with bitcoin mining softwares. Secondly, the miner needs to do research on which bitcoin mining software is better and buy software to start the bitcoin mining process. Thirdly, the miner needs to choose a mining pool, ask for permission to join the pool, and pay the owner of the pool any fees associated with the process. Lastly, the miner can start mining bitcoins.

The bitcoin mining process is very complex; also, there are various fees associated with the process. It costs a miner anywhere between $500-$15000 for the hardware required for bitcoin mining to start the mining process. Furthermore, there are other costs associated with the required software, the mining pool fees, and other costs highly vary based on the level of activity and electricity consumption. The miners might have to pay taxes on the mined bitcoins, however, that varies among different jurisdictions. Finally, after the bitcoins are mined, the miner needs to pay a fee to the brokerage that facilitates the transaction between the miner and the user. [69]

Popularity of Cryptocurrency Over the Years


As mentioned earlier, bitcoin was invented after the 2008 financial crisis. Bitcoins and other forms of cryptocurrency have become more popular since then. Cryptocurrency is not controlled by governments, banks, or any form of a central authority; therefore, it is a lot more protected against inflation and deflation compared to fiat money. [70]

High Potential for Profit

Another reason for cryptocurrency’s popularity is a high potential for profit. The price of cryptocurrency specially bitcoin has fluctuated significantly over the years with a high increasing trend. Thus, this gives people the opportunity to invest in bitcoins and sell them when prices go up and earn huge amounts of profit. It is important to note that celebrities and famous people have a lot of influence on the demand of cryptocurrency. Social media has made it very easy for people to post their opinions on a daily basis and affect many people’s life decisions. [70]

Becoming Increasingly Easier to Use

Furthermore, it is becoming increasingly easier to exchange goods and services with cryptos as many companies are starting to accept them as a method of payment. A 2020 survey indicates that 36% of the small and medium sized businesses in the US are accepting bitcoins as a payment method. The biggest companies accepting bitcoins include Microsoft, AT&T, and Wikipedia. [71] It is expected that bitcoins and other forms of cryptocurrency would be a lot more extensively used in the future because of their increasing popularity and adoption by so many businesses. [70]


Security is another reason cryptocurrency is becoming more popular. More traditional methods of payment such as debit and credit cards can be easily hacked or their numbers can be stolen. However, blockchain provides a very secure platform for cryptocurrency transactions, which make these transactions a lot safer and more secure than most payment methods. [70]

Why is Bitcoin so Volatile?

There are many reasons behind the volatility of bitcoin. Firstly, as mentioned earlier, bitcoin supplies are limited and not controlled by central banks or governments. Therefore, with an increase in demand for bitcoins, the maximum number of bitcoins does not change. Therefore, the demand for bitcoins is inelastic and this makes bitcoin scarce in nature and very valuable. Secondly, bitcoin was only first introduced back in 2008 and it is relatively new in the market. According to Mike Bucella, a General Partner and Blocktower Capital, "because bitcoin is still a nascent asset class, it remains in the price discovery phase. It’s the most volatile of any asset’s life cycle...Bitcoin has clearly established itself as a new form of value, but the terminal value is still undefined". [72] This is one of the main reasons people invest in bitcoins; because the value is not established yet, the price fluctuates a lot. However, because people see a lot of potential for growth in bitcoins, the price is fluctuating, but it has had an increasing trend since its introduction in 2008. Thus, there has been a lot of potential for profit in bitcoin investment in the past few years.

Use Cases Behind Cryptocurrencies

There are many different real-life applications of cryptocurrency and the blockchain technology behind them. Below we list 5 different cryptocurrencies and how they are being used today to solve real-world problems:

Ethereum / ETH

Ethereum, which was created in 2105 by Vitalik Buterin, is a decentralized, open-source blockchain with smart contract functionality. The platform comes complete with its own programming language that runs on a blockchain, enabling developers to build and run permanent and immutable decentralized applications (dApps) onto it. This means that other blockchain-related companies related to decentralized finance (De-Fi), Non-fungible tokens, gaming, and other technologies can provide their own services and business operations using the Ethereum network. In addition, many other cryptocurrencies have been issued on the Ethereum blockchain as ERC-20 tokens and have used it for ICOs.[67]

ETH is the cryptocurrency behind Ethereum and is used to pay miners through Proof of Work. It is also a tradable asset that has faster processing times and lower transaction fees than Bitcoin.

Ripple / XRP

Ripple Labs is a US-based technology firm that offers global decentralized finance (De-Fi) applications using blockchain technology.

The current payment system to move funds across borders is very intensive and requires a lot of unnecessary steps that involves multiple intermediates such as correspondent banks, a payment system, and a messaging protocol called SWIFT. This current process can take up 3-5 business days and oftentimes can result in delays due to miscommunication and wrong information. Furthermore, the current messaging protocol, SWIFT, which allows financial institutions to securely send and receive information such as money transfer instructions is inefficient. It was founded in 1973, is extremely outdated, and requires a lot of manual processes which results in slow processing times.[73]

In response to this, Ripple Labs created the Ripple Payment Protocol with blockchain technology. They launched a native crypto current known as XRP and a payment protocol called RippleNet. Ripple allows users to easily move money to all corners of the world with instant transfers and provides the benefits of a decentralized infrastructure that allows users to spend payments within 3 seconds. Furthermore, Ripple’s modern messaging infrastructure allows financial institutions to communicate directly with each other and cut out unnecessary intermediaries.[73]

Currently, RippleNet is the world's leading blockchain-backed payment network with hundreds of financial institutions across the world who are already using it. For example, Ripple has partnered with Santander, a Spanish multinational financial services company that is currently the 4th largest bank in Europe with approximately $1.4 trillion USD in total assets under management. Using the partnership with Ripple, Santander launched OnePayFX which is a mobile application that allows individual customers to make blockchain-based international transfers. The purpose of this partnership is to allow Santander to provide its customers with low-cost and instantaneous same-day transfers. Within 8 months of launch, One PayFx recorded a transaction volume of $450 million and it is expected to continue to rise.[74]

Vechain / VET

VeChain is a blockchain-based platform, founded by Sunny Lu, that records the truth of what happens at every stage of the supply chain. Lu is the former CIO of Louis Vuitton China and originally started VeChain in 2015 to combat the sales of counterfeit fashion items. VeChain combines physical tracking with blockchain records to keep tabs on real-world products from production to delivery, helping to prevent fraud and increase transparency. It does this by giving each product a unique identity, then sensors are used to track what happens at each stage of the supply chain.[75]

VET, the cryptocurrency of VeChain, is known as a utility token which are tokens that give you access to a product or service produced by a company. Thus, companies who use VeChain tracking services pay for those services using VET.

Currently, VeChain has partnered with some of the largest corporations in the world. For instance, Walmart China used VeChain technology to launch a food traceability platform on which consumers can track the entire product lifecycle of the goods they purchase to increase transparency.[76]

BYD, China’s largest manufacturer of electric vehicles has also teamed up with VeChain to create a Carbon Credit App in response to the Government of China’s goals to lower carbon emissions through the creation of a carbon market. Essentially, the app tracks users’ driving habits; those who use clean and renewable resources will earn carbon credits and those who emit will have to spend more in carbon credits. The credits that users earn can then be used to purchase products and receive discounts.[76]

Filecoin / FIL

Filecoin is a decentralized peer-to-peer storage provider that allows users to rent out spare storage space on their computers to others in the network who wish to store their files. A good comparison would be the business model of AirBNB where both buyers and sellers interact directly, creating a free market for renting houses, or in FileCoin’s case, file storage.

The Filecoin network is powered by a cryptocurrency called FIL. It is a utility token that is used to pay for data storage, data retrieval and any other transactions that may occur within the network.

The decentralized nature of Filecoin allows users to protect their data and information without having to trust one single company. Instead, they can separate and store files on different computers around the world. Also, Filecoin is censorship-resistant, so a central authority, government, or government agency cannot intervene in your storage, transmission, or retrieval of your files.

There is also high competition between storage providers to offer the lowest price for storage, which means that as Filecoin network usage expands, the open storage market will become "hyper-competitive" and therefore cheaper than centralized data storage such as Amazon Web Services (AWS), Dropbox and iCloud.[77]

Tether / USDT

Tether or USDT is a centralized cryptocurrency that is built on top of the Ethereum blockchain and whose tokens in circulation are backed by U.S. dollars. Furthermore, USDT belongs to a class of cryptocurrencies called stable coins which aim to keep cryptocurrency valuations stable, as opposed to large price fluctuations that occur in other popular coins such as Bitcoin and ETH. Currently, Tether is designed to always be equal to $1 USD.[78] [79]

The creation of Tether and other stable coins has revolutionized the way that people can invest in cryptocurrencies because it allows them to store value in their trading accounts without worrying about market volatility. However, USDT is not only a mode of storing value but it can also be used as a medium of exchange for goods, services and other cryptocurrencies. Many retailers that accept cryptocurrency as a form of payment prefer the use of stable coins such as USDT because there is no price fluctuation. Thus, USDT combines the unrestricted nature of cryptocurrency with the stability of the US Dollar.[78]

However, in 2021, Tether settled an $18.5 million dollar lawsuit with the New York Attorney General, Letitia James for allegedly lying about having USDT backed by an equivalent amount of U.S. cash. In fact, Tether published a report showing that only 2.9% of Tether was backed by cash, with over 65% backed by commercial paper. Since then, Tether has committed to increased levels of transparency by publishing quarterly disclosures of reserves.[79]

El Salvador’s Bitcoin Experiment

El Salvador and Bitcoin

In September 2021, the government of El Salvador accepted bitcoin as a legal tender. Since then, there has been a lot controversy around this matter and whether El Salvador has made a good decision. Now any kinds of payments including paying off debts can be done by bitcoins as long as the company has the technology to accept bitcoins. Interestingly, if creditors do not accept bitcoins as payment, then the debt can be cancelled. This has created many concerns for many businesses and the people of El Salvador. It is important to note that El Salvador does not have its own currency and relies on US dollar; therefore, Bitcoin is being used alongside US dollar in the country since September 2021. [64]

Definition of Money - Is Bitcoin Money?

For any item to be considered as money, it must have three characteristics and functions: Firstly, it must be a unit of account. Secondly, it must be a medium of exchange. Thirdly, it must be able to store value

Is Bitcoin money?

Firstly, It is traded in international markets; thus, it is a common measure of value. Secondly, it is accepted in El Salvador as a method of payment; therefore, it’s a medium of exchange. However, it is not predictable and cannot store value the way fiat money does because it is extremely volatile and does not have a stable price. [64]

Therefore, Bitcoin does not possess all the characteristics of money, and many can argue that no one can accept Bitcoins as money until its price stabilizes.

Concerns About Bitcoin in El Salvador

The majority of El Salvador's population disagree with bitcoins being used alongside US dollar as a legal tender. Some of these concerns arise from the fact the USA is the biggest trading partner of El Salvador; therefore, US dollar still needs to be used for trades and exchanges with the US. Also, many people have expressed their concerns with the privacy and security of digital wallets for bitcoins. Many of these digital wallets are new and their privacy has not been proven yet. Furthermore, as mentioned earlier, Bitcoin is extremely volatile and the price is not stable. Therefore, many people have concerns around losing money if the value of Bitcoin drops. It is going to take a while for people to get used to using bitcoins like a normal currency provided that El Salvador continues using bitcoins as a legal tender. [80]

Future Outlook - Cryptocurrency

Increasing Popularity

Cryptocurrency has become very popular in the past few years and the demand is expected to further increase. According to Rogoff (2019), "Market capitalisation of cryptocurrencies could explode over the next five years, rising to $5-10 [trillion]". [81] Therefore, the evidence suggests that despite of the volatility of cryptocurrencies,, most of them including bitcoin have had an increasing trend since their appearance and they are expected to become even more popular in the future.

Increasing Scrutiny

Cryptocurrencies make illegal activities easier a lot easier since there is no central authority such as governments to central banks to control the transactions. Therefore, this issue is has become more concerning recently and governmental organizations are trying to find ways to deal with these issues, such as money laundering and tax evasion. Governmental agencies such as the SEC have massive concerns about this and are constantly trying to find legal ways to deal with the issues and maximize safety of these transactions. In May 2013, the DHS froze an account of Mt. Gox, the largest bitcoin exchange, alleging that it broke anti-money laundering laws, by using cryptocurrencies to hide the transactions. [82]

The Characters Cryptos Need to be Widely Accepted by People

The system that supports cryptocurrency transactions needs to be mathematically complicated enough to prevent fraud and hacks; However, it also needs to be easy enough for people to understand and work with. Since the transactions and decentralized and there is no governments or banks controlling the transactions, another way must be found to maximize customer protection. Also, the platform should not facilitate tax evasion, money laundering, and other criminal activities.


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Aidan Bain Richard Kwon Ramos Vu Heliya Zarei
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
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