CONCLUSION

MAJOR PROJECT 1
BLOCKCHAIN AND KRYPTOCURRENCY (EXPLAINED)

AMAN SAXENA
B.COM HONS. B.M.I
500070661
 MAJOR PROJECT 1

About this Course

The sudden rise in the value of Bitcoin and other cryptocurrencies, and its
subsequent decline, focused the world’s attention on cryptocurrencies as a
means of payment. Blockchain technology powers Bitcoin and has been hyped
as the next new, transformative technology.

In this course, we first discuss the technical underpinnings of blockchain and

review key concepts such as decentralization and consensus algorithms. We
then examine blockchain as an asset and review the dynamics of the
cryptocurrency markets. Finally, we examine blockchain as a business solution,
with a focus on understanding business cases in which blockchain does and
does not make sense.

What we will learn?

 Explain how blockchain works.
 Articulate the key technical aspects, such as decentralization and
consensus algorithms.
 Describe the strengths and weaknesses of cryptocurrency as an asset and
a payment mechanism.
 Evaluate trade-offs of blockchain as a business solution.

Skills to be gained-
 Cryptocurrency
 Decentralization algorithms
 Consensus algorithms
 Blockchain
 Blockchain as a business solution

Instructors- Robert Dittmar & Andrew Wu.

Learnings from Week 1
As we have discussed, we have defined FinTech very broadly as technological
innovations that improve how money and capital are transferred, raised, and
invested. Therefore, our courses will be structured as deep dives into each of
these three segments, and analyse both the technology and the business side
of innovations in these segments. Feel free to take these courses in any order
that works best for you. Our first two courses look at FinTech innovations in
the capital transfer sector. They're about the digital challengers to financial
institutions that promised to make paying for things and getting paid faster,
cheaper, and more secure. In the first course, which we'll call PayTech, we'll
examine the payment innovations that do not rely on decentralized
technologies such as blockchain. We'll first look at the technical aspects of the
blockchain, which powers the thousands of cryptocurrencies like Bitcoin. As
usual, we'll identify the specific advantages of blockchain's decentralized
record-keeping technology and connect them to current inefficiencies in the
transaction system. On the business side, we'll first look at the angle of
blockchain as a tradable asset. That is, the market dynamics of
cryptocurrencies, how they're priced, and their role vis-a-vis fiat currencies
such as a dollar. We'll then look at the angle of blockchain as a business and
show you some real experiences and lessons from growing a new business idea
based on the blockchain into a profitable company.
The next course in our series, which we call CreditTech, looks at how FinTech is
helping both individuals and businesses raise capital more broadly and more
efficiently. The fourth course of the series is called InvestTech, and not
surprisingly, it deals with how FinTech is fundamentally changing the way that
we invest money. On the technology side, we'll deep dive in the application
machine learning and artificial intelligence and see how they could help us
better select stocks for more targeted portfolios and manage our long-term
investments. We'll also look at how big data, particularly new unstructured
data from mobile sources and social media, could help better understand the
consumers and better plan their wealth. On the business side, we'll examine
the business models of the new robot-advisors, which combined online
platforms with machine learning to deliver customized financial advice at a low
cost. Hopefully by now, you'll notice a common theme from these descriptions,
that is the intricate link between the technology and the finance.
The truth is even if the buzzword Fintech is new, technology and finance is
not. In that age, the development of money in the form of gold nuggets and
coins which served as a common medium of exchange was an excellent
technical innovation. Similarly, checks, which ushered in the trend for cashless
transactions three centuries ago was also the Fintech breakthrough in the age
of paper money. The main difference is who's leading the charge, historically, it
has been the financial institutions. The banks, the investment managers, the
hedge funds, they are the trailblazers in most technological innovations for
money to checks to ATM and online trading. This time however is by and large
the tech companies leading the charge. For the first time, we're seeing tech
companies like Google, Amazon and Facebook, which we wouldn't think of as
financial institutions begin to take on court finance functions like the
payment, lending and investment. This is partly because of the Big Data boom
and the tech companies' unparalleled access to consumer data and partly
because tech companies are not subject to as strict regulations as financial
institutions. This has led to a situation where our traditional financial
institutions are in danger of being technologically leapfrogged on many fronts
by tech companies that have never done finance before. To illustrate this
situation, I'd like you to think about a traditional financial institution like a full-
service bank. Because of this, it might also have a trading department to
provide brokerage and settlement services for traders. And finally, there are
dedicated private banking and wealth management services available if you're
very wealthy and are willing to pay a premium fee. This pretty much sums up
what a full-service financial institution does on a daily basis. They all involve
capital and money and the core functions of finance is simply moving them
around, raising them and investing them. Now, I'm going to decompose these
functions and show you that today, the traditional financial institution is being
threatened on all of these fronts, not as a whole but piece by piece by different
types of tech companies. On the investment front, human advisors are feeling
the heat from robot-advisors like Wealthfront and Betterment which use
artificial intelligence and machine learning to deliver customized investment
advice at a low cost. Today's Fintech is defined by this piecemeal type of
innovation and disruption. And consequently, we're going to define today's
Fintech market broadly, as technological innovations that improve how money
and capital are transferred, raised and invested. A lot of people tend to equate
the latest Fintech boom with the boom in crypto currencies like
Bitcoin. Sure, they're an important part of the innovation and many of the
decentralized technology have very good business applications. Some of which
we'll carefully analyse as part of this series. However, blockchain and crypto
are far from being the only part of Fintech. Innovations in payment, lending
and investment that do not use decentralized technologies from mobile
wallets to supply chain finance to robot-advisors have received significantly
more venture funding because they use more proven technologies. At the
same time, they hold just as much if not more potential to significantly
transform our financial lives in the near future. Therefore, we designed this
series to give you the broadest exposure to Fintech and after taking the
series, you'll be well equipped to discuss and analyse all aspects of the Fintech
market. During this course, we will be working through content related to a
teaching case. A teaching case is simply a detailed, fictional story used to help
you make connections to the content, practice what you’ve learned, and think
critically. While moving through the course, you will be assuming the role of
one or more characters in the case to help you consider what YOU might do if
you were put in the same situation. The course is divided into weekly content
and small portions of the story will be revealed as you move through the
course. Each lesson within the week will have a brief review of the case prior to
the presentation of the video lectures and activities. In addition to some more
traditional quizzes at the end of each week, you will have the opportunity to
respond to discussion prompts or complete a peer assignment related to the
case.

Learnings from Week 2

In recent years, there is a lot of buzz on Blockchain. Many have described this
as a most disruptive technology of the decade. Especially, the financial
markets could be the most affected ones.
The technology is being adapted into many verticals like Healthcare,
Medicines, Insurance, Smart Properties, Automobiles, and even Governments.
However, so-far the most successful implementation of Blockchain is the
Bitcoin - A Peer-to-Peer Electronic Cash System, which incidentally is also the
first implementation of blockchain technology. Thus, to understand
blockchain technology, it is best to understand how Bitcoin System is designed
and implemented. The blockchain architecture is not so trivial and many have
written good articles, tutorials including several videos. These range audience
from Novice to Professionals. In this tutorial, I will focus on the conceptual
understanding of blockchain architecture, keeping both Novice and
Professionals on mind.
Technology Fundamentals of Blockchain
A Blockchain comprises of two different components, as follows:
1. Transaction:
A transaction, in a Blockchain, represents the action triggered by the
participant.
2. Block:
A block, in a Blockchain, is a collection of data recording the transaction and
other associated details such as the correct sequence, timestamp of creation,
etc.
The Blockchain can either be public or private, depending on the scope of its
use. A public Blockchain enables all the users with read and write permissions
such as in Bitcoin, access to it. However, there are some public Blockchains
that limit the access to only either to read or to write. On the contrary, a
private Blockchain limits the access to selected trusted participants only, with
the aim to keep the users’ details concealed. This is particularly pertinent
amongst governmental institutions and allied sister concerns or their subsidies
thereof. One of the major benefits of the Blockchain is that it and its
implementation technology is public. Each participating entities possesses an
updated complete record of the transactions and the associated blocks. Thus
the data remains unaltered, as any changes will be publicly verifiable.
However, the data in the blocks are encrypted by a private key and hence
cannot be interpreted by everyone.
Another major advantage of the Blockchain technology is that it is
decentralized. It is decentralized in the sense that:
• There is no single device that stores the data (transactions and associated
blocks), rather they are distributed among the participants throughout the
network supporting the Blockchain.
• The transactions are not subject to approval of any single authority or have
to abide by a set of specific rules, thus involving substantial trust as to reach a
consensus.
• The overall security of a Blockchain eco-system is another advantage. The
system only allows new blocks to be appended. Since the previous blocks are
public and distributed, they cannot be altered or revised.
For a new transaction to be added to the existing chain, it has to be validated
by all the participants of the relevant Blockchain eco-system. For such a
validation and verification process, the participants must apply a specific
algorithm. The relevant Blockchain eco-system defines what is perceived as
“valid”, which may vary from one eco-system to another. A number of
transactions, thus approved by the validation and verification process, are
bundled together in a block. The newly prepared block is then communicated
to all other participating nodes to be appended to the existing chain of blocks.
Each succeeding block comprises a hash, a unique digital fingerprint, of the
preceding one. Figure 1 demonstrates how Blockchain transactions takes
place, using a step-by-step example. Bob is going to transfer some money to
Alice. Once the monetary transaction is initiated and hence triggered by Bob, it
is represented as a “transaction” and broadcast to all the involved parties in
the networks. The transaction now has to get “approval” as being indeed
“valid” by the Blockchain eco-system. Transaction(s) once approved as valid
along with the hash of the succeeding block are then fed into a new “block”
and communicated to all the participating nodes to be subsequently appended
to the existing chain of blocks in the Blockchain digital ledger.

Learnings from Week 3

Ethereum Pros:

Pulls Blockchain: Ethereum don't supervise lacking a blockchain substructure.

As a result, it is the faultless lesson of a plan supplementing the benefits of the
blockchain.

Practicality: ERC-20 tokens have elevated an evaluated $5.5 billion during the
2017 plus 6.5 one thousand million at 2018. This is par amounted over
cryptanalysis creation.

Enormous Locale: Speculator of consensus assets concludes that Ethereum

possess 30 times fresh creator than the later blockchain populace. Additional
evaluation assesses 250,000 Ethereum creators on the cryptanalysis
atmosphere.

Cons:

Slow Bargaining Momentum: Ethereum's page proof of employment gears for

collateral deals has build the system leaden and crack to overcrowding. The
crew is celebrated for enchanting a validity on safety, constancy, and damage.

For more scrambler drawback: Ethereum has procured the best puller flaw. It
is currently the throwback web which is the average owner. As a result, the
sum of state-of-the-art commencements are acknowledging from the keeper
and are deft ample to secure faster occurrence and enactment.
Blockchain Pros:

Lofty Streak Documents: Blockchain application gives a better plane of

document rank. The scattered accounts arrangement where it lots document.
This scattered account record presents assent performance that approves you
to seep out any severe document with salutary document. No one can solely
compute a speck of sort of data on the accounts or notwithstanding steer the
extant ones.

Soundness and Comfort: Blockchain presents strength at top. Presume as the

cyberspace where there's curvy lust. The by and all arrangement produce it so
constant. For that reason, as no one can vary the lumps, thus becomes a
compact batten down tenet. Structured to deflect rasp tackles adeptly.

Cons:

Out of work Portrayal: The calculation necessity of this application is at a

larger amount recurrent than centralised data processor. Each stretch the
account becomes corrected, the sum of the lumps calls for to correct their
form of the account carefully.

Compound Theme Proof Procedure: For each deal on the arrangement, call for
seclude-local cryptological allograph corroboration. Employs ECDSA (Elliptic
Curve Digital Signature Algorithm) to make certain that deal occurred among
accurate lumps. Each knot calls for to corroborate the verity of the consumer,
can be problematic and compound procedure.

Learnings from Week 4

Based on the recent history, it seems to be a very good idea of investing

cryptocurrencies. Though cryptocurrency is risky – just like any other
investment with a potentially high return. However, there are clear benefits.
Blockchain:

The underlying technology, Blockchain, is going from strength to strength and

is actually far more exciting than the daily fluctuations of a specific coin.
Technological Innovation: The underlying technology of Blockchain is not only
the backbone of the cryptocurrency world, it is doing so much more behind the
scenes in technology perspective.

Crypto Regulations: Introduction of better cryptocurrency regulations which

are now beginning to taking place. Hence the reduction in uncertainty as a
result of such regulations has been significant in boosting trading activity and
subsequently, coin prices.

Investing become slowly simpler: Times have changed and there is now much
more information out there to enable investors to quickly navigate the world
of cryptocurrency without many of the previous barriers to entry.

New Way of Investing: Today’s investors who are looking for those big returns
must, therefore, expand their horizons by investing in cryptocurrencies such as
Bitcoin, Ethereum and Litecoin.

Crypto’s promising future:

Keep focused on the long-term viability.

1. Crypto exchanges perform he function of an exchange as well as that of a

custodian. These exchanges are unregulated. They can run into liquidity
problems in case of a run on the exchange situation and are vulnerable to price
manipulation. Fewer market makers lead to high bid-ask spreads and low
liquidity.

2. Blockchain networks have many points of attacks and the exchanges

themselves lack the security infrastructure that is present in traditional
financial institutions

3. Crypto blockchains are not as decentralised as they are believed to be.

Concentration of mining nodes in China makes the network vulnerable to
regulatory changes in China which can affect operations and value of crypto
currencies.
 CONCLUSION

The application of the Blockchain concept and technology has

grown beyond its use for Bitcoin generation and transactions.
The properties of its security, privacy, traceability, inherent
data provenance and time-stamping has seen its adoption
beyond its initial application areas. The Blockchain itself and
its variants are now used to secure any type of transactions,
whether it be human-to-human communications or machine-
to-machine. Its adoption appears to be secure especially with
the global emergence of the Internet-of-Things. Its
decentralized application across the already established global
Internet is also very appealing in terms of ensuring data
redundancy and hence survivability. The Blockchain has been
especially identified to be suitable in developing nations
where ensuring trust is of a major concern. Thus, the
invention of the Blockchain can be seen to be a vital and
much needed additional component of the Internet that was
lacking in security and trust before. BC technology still has
not reached its maturity with a prediction of five years as
novel applications continue to be implemented globally.