Lec2: Types of Blockchain Applications

Types of Blockchain Applications

Cryptocurrency

Problems of Trusted Third Party

- Financial Institute highly relies on trusted third parties

• A third party became a single point of failure
• Delay leaves customers at risk, temporarily unsure about the state
• Attacks on concentrated data
• Third Parties' monopolies

Blockchain can reduce the risk of the trusted third-party authority in a situation where multiple entities

AltCoin (= Alternative cryptocurrency)

• any cryptocurrency alternative to Bitcoin
• Bitcoin market is extremely competitive and difficult & expensive for beginners to get into.
• Bitcoin has some problems and challenges: too slow, consume a lot of energy, not very sustainable.. etc.

LiteCoin

• fork of the Bitcoin Core client, having a dicreased block generation time(2.5 min), an increased maximum number of coins, a different hahsing algorithm(Scrypt)
• faster than Bitcoin
• FPGA and ASIC devices made for mining Litecoin are more complicated and more expensive than they are for Bitcoin.

Dash (previously, DarkCoin)

• has additional functions unlike LiteCoin
• Anonymous transaction
  • Dash hides the transaction records by mixing coins using a master node
• Instant transaction
  • reduces the block generation time to 1 sec and allows real-time transaction

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Assset Centric Technology

Asset Centric Technology

• focus on the exchange of digital representations of existing asssets in combination with a shared ledger but not on a public ledger (some data are hidden)
• participants in the network commit to 'publishing' digital assets on the network and some of these participants are responsible for convrting these assets at the same time.

Ripple

• designed for bank settlement and networking - intrabank transactions

Stellar

• forked from Ripple and became totaly independent now

Stable Coin

• cryptocurrencies that attempt to peg their value to some external reference(U.S. dollar, price of gold..)
• purse price stability by maintaining reserve assets or through algorithmic formulas

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Asset Registration Technology (e.g. NFT)

Asset Registry

• use public ledgers to register assets other than the 'coins' (== uploading assets to the blockchain system)
• the ownership of asset is publicly registered without the need for a central authority.
• the owner of private key is the owner of that asset

Colored Coins

• a class of methods for representing and managing real world assets on top of the Bitcoin Blockchain
• Bitcoin's scripting language can store small amounts of metadata which can be used to represent asset manipulation instructions.
• immutability, non-counterfeitability, ease of transfer, robustness and transparency(decentralization)
• Open Asset: Colored Coins implementation. Metadata is linked from the Blockchain and stored on the Web

Meta Coin (also called Embedded consensus system)

• Similar to Colored Coins, but it uses address for registhry although Colored Coins uses UTXO(unspent transaction output). -> reduce the burden on the network and bloating of the blockchain & UTXO
• e.c. Omni(= Mastercoin), CounterParty, Meta Coins
• built using Bitcoin's blockchain = on-chain / built with their own blockchain = off-chain

Blockchain Bloat

• Assset registries include additional data in the blockchain -> affects the underlying network performance in negative way and require addition procesing power
• It causes concers with regard to the scalability of applications.

Limitations of Colored Coins

• Dynamics btw Bitcoin and Colored Coins: if asset values in Bitcoin become more expensive than Bitcoin, the processing power to protect Bitcoin may not enough to protect the value of the assets.
• Validators: because Colored Coins is a public coin, all transactions can be accessed by public which is not suitable for legal asset
• Cost to Storage: blockchain bloat cause inefficient in the system
• Scalability Problem: not scalable enough for high frequent transactions

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Application Stack

Application Stack

• Bitcoin allows a script language but it has limit
• Application stacks such as Ethereum, Nxt, EOS for non-currency applications of blockchain technologies
• Platform for the development and execution of complete applications: decentralized version of Cloud Services

Smart Contract

• computer protocol intended to digitally facilitate, verfiy, or enforce the negotiation or performance of a contract
• Contract can be any program
• Self-enforcing language: enforces an execution when the execution conditions are met.

Ethereum

• Turing Complete Language for a script languages
  • Vyper (similar to Python)
  • Solidity (similar to C++)
• provides a lot of degree of implementation freedom -> however, more uncertainty from a security perspective