Blockchain: Going Down the Rabbit Hole
Blockchain technology and its related cryptocurrencies have exploded over the last few months. The technology went from geek fandom to a ‘mania’ as the market cap of various tokens skyrocket. We at Metrics have kept our eye on the tech, and pride ourselves in being leaders in the space where blockchain meets business.
Our partners, Regan McGrath and Kyle Mackenzie, have been featured speakers at CPA conferences, and have written on the subject for CPABC. They have recently spoke at a special presentation to capital market regulators to share their vision for how blockchain can transform the way we do business.
The following is a collection of resources that will help you get acquainted. We’re obsessed about this new tech, so settle in and join us down the rabbit hole.
Breaking down blockchain
Let’s get technical. Blockchains are complex data structures that go far beyond the databases we know today. Get started with these important questions:
What are hashes?
Why are blockchains so useful?
What makes blockchains so secure?
Everything you wanted to know about blockchains, but were too afraid to ask is our suggested reading that has a great balance of rich technical information, but is explained in an accessible way. No data sciences degree necessary. After reading, just promise us you won’t call it “the blockchain” anymore.
Ethereum – The Internet 3.0
You may have heard this tech referred to in this singular form. “The blockchain” is not akin to “the internet”. Ethereum is one of many public blockchains, but it is the only one being touted as the “Internet 3.0”. Ethereum is built to be a base layer on which decentralized applications, or dApps, hope to offer a different online experience.
The internet is a wonderful place, but with great power, comes great responsibility. Ethereum is looking at what a decentralized web can offer the world. See what the founders of Ethereum are up to at the Ethereum Foundation.
We love this gentle introduction to Ethereum for those eager to jump in. And here is a list of the most promising decentralized apps, and their stages of development.
Ether (ETH) is the token used as ‘gas’ to power smart contracts on the Ethereum blockchain. Smart contracts offer logic-based, computer-coded contracts that are run and executed by the network to facilitate complex, trustless transactions. Love a good infographic? Here is a great one to get to know smart contracts.
Want to see live data of blocks being created?
Check out Etherscan or EtherChain.
These are both Ethereum block explorers. They will allow you to see the current price, the difficulty of mining, the time it takes for each block to be mined, and the transactions within each block. You can also see the total hashing power, (the computer power being used to mine the blocks).
Taking some time to poke around in here really helps to make the information ‘connect’; how a blockchain operates and what makes it an important leap in technology. Us FinTech geeks are still amazed every time we watch hundreds of thousands of dollars worth of ETH shoot around in the world in minutes, costing users mere pennies, all in real time!
Along the left side, you’ll see the blocks with their information, including how many transactions were included in each, the time it took to mine them, how much the miners earned for each block, and the wallet address of the sender, receiver and miner of the transaction
How does mining work?
For a look at where it all started, here is a great video on bitcoin mining. We recommend you give it a watch before we dive into how Ethereum will differ.
Mining on Ethereum’s blockchain is generally a similar process to bitcoin mining, with both currently using the proof-of-work (PoW) algorithm to verify blocks. This protocol takes massive amount of computing power to solve the complex math problems that help provide security. Arguably, there are flaws to this system, not only for its thirsty electricity requirements, but also its vulnerability to a 51% attack.
The thought behind these algorithms and consensus protocols are based in game theory and have given birth to a whole new field of cryptoeconomics. As we rocket towards new ways of exchanging value online, age-old problems need to be addressed in a new way. How do we incentivize everyone to play nice in a blockchain system?
Ethereum is working on it. Over the next year or so, they will be moving to what is called “Proof-of-stake” mining. Rather than the energy-heavy process of PoW, users in the system (nodes) will pledge ETH as a kind of security deposit, preventing malicious actors in the system. If someone were to act poorly in the system, their ETH would be ‘slashed’, or disappear into the ether, (sorry, we had to), providing economic incentive to act with good intentions.
Rather than the rewards offered in PoW mining, those who stake ETH will earn interest, creating an ‘interest’ing new side to the cryptocurrency market.
Beyond Bitcoin and Ethereum
CoinMarketCap will show you the market capitalizations of the different cryptocurrencies. You can click into each and learn more information, see statistics, and look at trade volumes. This list generally contains all the available cryptocurrencies. Some of them are their own blockchain, but most are ERC-20 tokens, meaning they are built on the ethereum blockchain. These ERC-20 tokens will be the currency native to dApps that will run on Ethereum.
We really love infographics, so here is another great one that explains the biggest cryptocurrencies, how they are used, and what makes them different.
Exchanges: How to participate
This is the most simple exchange where most enthusiasts get started. You can create an account without completing a lot of KYC verification. Then, you’ll have a $200 weekly limit to purchase cryptocurrencies with a credit card. The prices are often much higher than other places due to the higher fees paid for its ease of use.
This is another simple exchange. You can send an E-transfer and the funds will be in your account within an hour. They are canadian, and all transactions are done in CAD.
Wallets are where you can store your cryptocurrencies outside of exchanges. Bitcoin and Ethereum require different wallets. Here are a couple of our recommendations:
Click for a list of different wallets for bitcoin.
Stay up to date with our favourite sources:
These are Canadian organizations that are pushing the advancement and adoption of blockchain tech:
Use by Bank of Canada – This a paper on Project Jasper – A study done by the bank of Canada on the use of blockchain.
Some of our favourite projects
Etherparty – Based in Vancouver, these guys are creating “smart contracts for the everyman”.
Request Network – Think of this like the PayPal of blockchain.
Civic – Identity verification on the blockchain.
Sia – Decentralized cloud storage – Like amazon web services, but decentralized, allowing you to rent out your computer hard drive space and earn money.
Chainlink – An oracle system for payments. This will connect existing payment networks like SWIFT to the blockchain.
Get in touch!
Hopefully this primes you with a little more information regarding blockchains and smart contracts, helps you keep current with the news, and understanding why this is such a revolution. Feel free to contact us through our website, or message Kyle Mackenzie, on Linkedin if you have any other questions.