CHAPTER II: How Blockchain and Cryptocurrencies Work
Together
R1: Macatiag, Amber-Rae Z.
A. WHAT IS BLOCKCHAIN?
Blockchain is the foundational technology that facilitates the
existence and operation of cryptocurrencies. The transactions
are recorded and verified, allowing anyone to access and
verify the entire transaction history.
Introduction to Blockchain
o Initially introduced in November 2008 and
was implemented in January 2009.
o Satoshi Nakamoto developed the virtual
currency, bitcoin, and published the bitcoin white
paper.
o The true identity of Satoshi Nakamoto
remains unknown, it can be a person or a
group of people.
o Bitcoin and blockchain are not
synonymous.
o Bitcon is the first digital currency and
Blockchain is the technology that facilitates the
existence and functions of Bitcoin and other
cryptocurrencies. It provides infrastructure for
recording and storing the transactions.
Distribued Ledger
o A distributed ledger is a replicated,
decentralized, synchronized, and cryptographically
secured record of data and transactions shared
between contracting parties. (Treleaven et al.,
2017).
o Blockchain is usually grouped under
distributed ledger technologies. These include all
decentralized systems for recording transactions
and sharing data across multiple servers,
organizations, or countries. (Aste & Tasca, 2017;
Treleaven et al., 2017).
Blockchain Technology
o It is a chain of blocks interconnected with
complex computational crypto algorithms. The
underlying notion of this technology is storing
digital assets of any kind in blocks; blocks are
linked by a digital fingerprint called hash and
stored in limitless places on a distributed database
(Cirstea et al., 2018; Woodside et al., 2017).
o Blockchain can be thought of as a state
machine; it stores the status of things that have
happened, then updates that status while a
permanent record of past states remains. These
past states are almost impossible to be changed
(Adams et al., 2017).
o One of the key strengths of blockchain is
"hashing." Each block has information to be
stored, and every new block added in the chain is
encoded with a "hash" a code arithmetically
produced and generated from the block's date.
"Hashing" is not a new method; it is often used to
secure passwords.
o One of the fundamental strengths of
blockchain is hashing, it contains combination
of letters and numbers. The hash can be 32 or
64, Bitcoin uses 64 hexadecimal characters.
Figure1 Development of Blockchain
In Blockchain 1.0, it represents the creation and use of
cryptocurrencies like issuance, distribution, and transactions.
Blockchain 2.0 uses Turing program language that enables the
users to develop smart contracts, which are self-executing
agreements coded to run on the blockchain. Blockchain 3.0
Decentralized Applications or DApps, it is software
applications that aim to reduce reliance on centralized
authorities, enhance user privacy, and create more open and
transparent systems.
Overview of Blockchain-Based Design Features,
o Transaction Confirmation: the users are
required to confirm the transaction before it is
recorded.
o Settlement Verification: the blockchain
immediately verifies ownership of the assets being
exchanged.
o Permanent Timestamp: once blocks are
added to the blockchain and timestamped, it
becomes unchangeable providing a reliable and
transparent historical sequence.
o Smart Contract Automation: it will be
automatically executed and enforce terms when
specific conditions are met.
Overview of Blockchain Characteristics
o Distributed: users can access the entire
system and verify transactions without the need
for central authorities.
o Standardized Rules: it enforces consistent
rules for transaction processing, making the data
tampering extremely difficult.
o Privacy: Blockchain offers a level of privacy
as users utilize generated addresses, and not using
their own names.
 o Auditability: Transactions in a blockchain
are traceable and transparent, with records easily
verified through timestamps.
o Security: The interconnection of blocks
through hashes enhances security because
tampering with data in one block would affect
linked blocks, so we can ensure the protection of
users and transaction data within the blockchain.
What is Cryptocurrency?
o Cryptocurrency is a digital currency secured
by cryptography and operates on decentralized
networks, allowing for secure peer-to-peer
transactions without central authority.
o It is not physically tangible and relies on
blockchain technology for transparency and
security.
o Cryptocurrency was created to solve a
particular problem; double spending is one of
those problems. Double spending means that the
same money could be spent twice because it can
be easily copied.
o With cryptocurrency, digital currency could
be used without going through a centralized
server. The system was based entirely on P2P
(person to person) networks which is used as an
assurance against double spending.
What Makes Cryptocurrency Different From Normal
Currency?
o Cryptocurrency lacks a physical form and
exclusively exists in digital format, functioning on
decentralized blockchain networks.
o This eliminates the need for a central
authority, such as a government or financial
institution, for regulation or control.
o Spending with cryptocurrencies is
somewhat like regular money.
Most Common Crypto
 BITCOIN (BTC)
 ETHEREUM (ETH)
 RIPPLE (XRP)
 MONERO (XMR)
 LITECOIN (LTC)
 GOLEM (GLM)
 FACTOM (FCT)
How Does Cryptocurrency Work?
o Step 1: The transaction is submitted online
– this happens when someone requests a
transaction.
o Step 2: The request is received by the P2P
network nodes.
o Step 3: The network then verifies the
identity of the requester and the details of the
transaction. –it validates the transaction by using
algorithms.
o Step 4: The miners verify, accept, or deny
the request.
o Step 5: If approved, it is logged into the
digital database (the Blockchain) –when verified
the transaction will create a new block of data for
the ledger.
o Step 6: The transaction is then added to a
list of stored lines of code. – the new block of data
will be added or linked to the existing blockchain,
when it has been added it will become permanent
and cannot be edited.
o Step 7: The transaction is then listed as
complete.
Crypto Exchanges
Different Types of Exchanges
o Brokers: act as intermediaries between
buyers and sellers. For example, Coinbase
provides user-friendly platform for buying, selling,
and managing various cryptocurrencies.
o Trading Platforms: allows users to place buy
or sell orders on an open market. An example is
Binance wherein it connects buyers and sellers in
an open market, and offers advanced trading
features and charts, to more experienced traders.
o Direct Trading System: enable users to
trade directly with each other in a peer-to-peer
fashion. Example is LocalBitcoins allowing users to
negotiate terms and conditions without an
intermediary, promoting a decentralized
approach.
Top 3 Crypto Exchanges and Platforms (2017)
1. Coinbase
2. Poloniex
3. Kraken
How to Store and Secure Crypto?
 o Online wallet: web-based wallet hosted on secure and transparent ledger for
a cloud server, accessible through a web browser. financial data.
It is accessible on different devices, but prone to o Consensus Mechanisms
hacking or phishing attacks.  In Traditional, Information Asymmetry and
o Mobile Wallet: installed on a mobile device High Transaction Costs.
for managing cryptocurrencies. More practical and  It refers to a situation where
convenient to use, it is faster to send different parties in a transaction have
cryptocurrencies and can produce QR code that different levels of information, and
can be scanned to complete transactions. Prone to because intermediaries are often
malware and web viruses, especially if we are not involved in the transaction process, it
careful about what links we click on our device. leads to additional fees.
o Desktop Wallet: software installed on a  In Blockchain, Decentralized Peer-to-Peer
computer, allowing users to store and manage Transactions and Reduced Financial Operation
their cryptocurrencies. Considered as the safest of Costs
all wallets, more secure than mobile wallet due to  It ensure that information is
more features in terms of security, but less agreed upon by all participants,
portable compared to mobile wallets. reducing information asymmetry.
o Hardware Wallet: physical device designed Additionally, blockchain's decentralized
specifically for storing private keys offline, nature and consensus mechanisms
disadvantage of this wallet is not user-friendly like allow for peer-to-peer transactions,
other wallets. You need to connect it via usb port reducing intermediary costs and
when making transactions, but it is considered to increasing efficiency.
be the most secure way to store on long-term o Smart Contracts
basis.  In Traditional, there are Trust Costs and
o Paper Wallet: involves printing the public Long Cross-Border Clearing and Payment
and private keys on a physical document. It is Cycles
more difficult to trade or transfer, but it doesn't  Electronic payments are spreading
have a third-party server which is beneficial, so we in different counties, it emphasizes the
consider it one of the safest ways to store complexity involving multiple
cryptocurrency. intermediaries, but cross-border
transactions still face challenges like
B. APPLICATION OF BLOCKCHAINS fraud and lengthy settlement times,
I. FINANCIAL APPLICATIONS leading to trust costs.
o Generally, these are the trusted  In Blockchain, De-trusting Costs and
intermediaries that carry out financial activities Accelerating Cross-Border Settlement
between individuals and institutions.  It eliminates the need for third
o Blockchain can replace the services parties or intermediaries and addresses
provided by these trusted middlemen, trust issues through automatic
particularly, avoidance of the duplications of enforcement of mutual agreement
financial transactions and registration and terms, that enhances trust by avoiding
validation of financial activities (Al-Jaroodi & default and operational risks.
Mohamed, 2019).
R2: Rubi, Kyla Coleen L.
Three core technologies to be compared between II. PAYMENTS
traditional management and blockchain technology: o When Satoshi Nakamoto introduced the
o Timestamp Mechanism bitcoin, blockchain started as a peer-to-peer
 In Traditional, Data Can Be Tampered with, electronic cash system.
Accounting Information is Prone to Distortion.  transactions involve direct exchanges of
 The data can be manipulated, digital assets between individuals without
which compromises the accuracy and intermediaries or financial institutions.
reliability of the data.  blockchain uses a distributed ledger,
 In Blockchain Technology, Data Cannot Be transactions and data are recorded identically
Tampered with to Ensure the Authenticity of in multiple locations.
Financial Data.  all network participants with permissioned
 It is tampered resistant, if access see the same information at the same
someone tries to edit it is nearly time, providing full transparency.
impossible, so Blockchain can provide o The bitcoin payment system succeeded and
gained increasing interest as an effective method
 of making cross-border transfers and paying
remittances at a lower transaction cost than that
of the traditional financial system, with a much
faster settlement speed.
 De
spite the
setbacks and negative publicity due to the Silk
Road (an online black market where buyers
and sellers of illegal or unethical items could
transact anonymously) and Mt. Gox was a
cryptocurrency exchange that operated
between 2010 and 2014. In 2014, Mt. Gox was
hacked and thousands of Bitcoins were stolen.
JPMorgan Chase & Co
o an American multinational investment bank
and financial services holding company
o launched the Interbank Information
Network (IIN), they declared that "the new
initiative will use blockchain technology to
minimize friction in the global payments process.
IIN will allow payments to reach beneficiaries
faster with fewer steps and better security”.
o launched its own crypto token — JPM Coin
— on a private version of the Ethereum blockchain
for its institutional client base.
o takes progressive steps in the business-to-
business (B2B) payment landscape by utilizing
blockchain technology for its B2B clients.
III. FINANCIAL CLEARANCE AND
SETTLEMENTS
o Financial Clearance - Clearing is the correct
and timely transfer of funds to the seller and
securities to the buyer. Clearing is necessary to
match all buy and sell orders to ensure smoother
and more efficient markets. The clearing process
protects the parties involved in a transaction by
recording the details and validating the availability
of funds.
 clearing house serves as a third-party
mediator between a buyer and seller engaged
in any financial transaction. generally, the
clearing house's main duty is to make sure the
transaction runs according to plan.
o The main difference between settlement
and clearing is that the latter occurs before the
settlement and includes the exchange, validation,
and reconciliation of transaction information
across the payment network.
 companies and institutions can use
blockchain to record, validate, and process
financial settlements without the need for a
clearinghouse.
Examples of companies that are working with traditional
banks to improve transactions using blockchain:
1. Ripple
 is a company and a digital-payment
processing system, and it has a
cryptocurrency known as XRP.
 developing blockchain-based
solutions that banks can use for improved
clearance and settlement.
2. R3
 another big company working on
distributed ledger technology for banks.
 Ripple and R3 are working with
traditional banks to make the sector more
efficient. They seek to decentralize the
system, connecting financial institutions to
the same ledger to increase transaction
efficiency.
3. Chainalysis
 ensures customers complete secure and
compliant crypto transactions through its data
platform.
 company conducts in-depth analyses on
various transactions, tracking funds to their
sources and keeping each trader’s identity
transparent.
 customers can avoid suspicious
funds and meet the legal standards of
banks, law enforcement agencies and
other financial institutions.
R3: Galang, Jishi Khiel
IV. STOCK TRADING
Stock Trading- involves the acquisition and sale of shares of
publicly traded companies either on a stock exchange or
through over-the-counter markets. When you buy a stock,
you effectively gain ownership of a fractional portion of that
particular company.
Traditional stock trading is managed by centralized
authorities such as stock exchanges and clearinghouses.
These entities maintain records of trading transactions,
handle order matching, and settle trades between buyers and
sellers.
Kinds of Trading
o Day Trading- buying or selling of stocks
within the same trading day
o Swing Trading- holding the stock for a week
or a month before trading.
o Long Term Investing- holding the stock for
an extended period of time usually a year or a
decade before trading.
o Drawbacks of traditional trading: High fees
and delayed settlement
Some Blockchain-Based Solutions have been Developed to
address these issue:
 Reduce Transaction Cost
 Automation
 Enhance Security
  Increase Efficiency and Speed
 Greater Transparency and Instant
Traceability
Examples of Blockchain
o Polymath
 Polymath is a company and a software
platform founded by Trevor Koverko and Chris
Housser in 2017. Polymath is a token issuance
platform programmed to create and issue
security token.
 Security token is a digital representation of
ownership of or rights to an asset that has
been tokenized and stored on a blockchain.
o tZero
 tZero is a subsidiary of Overstock that
operates a blockchain-based trading platform
for digital securities. The platform aims to
provide a secure and efficient way to trade
various types of digital assets, including
cryptocurrencies and tokenized traditional
securities.
 In October 2018, tZero conducted a private
digital token offering, raising $134 million.
These tokens, issued by tZero, were made
available for trading on the platform starting in
January 2019. This offering represented a
significant step forward in the development of
blockchain-based financial markets, providing
investors with a regulated and transparent
platform for trading digital securities.
o Interstellar
 Interstellar is a blockchain technology
company that focuses on developing solutions
for the financial industry.
 Interstellar's mission is to accelerate the
adoption of blockchain technology in various
sectors, including finance, supply chain, and
digital assets.
TRADE FINANCE APPLICATIONS
o Trade finance represents the financial
instruments and products that are used by
companies to facilitate international trade and
commerce.
o Traditional trade finance is associated with
many issues such as loaded paper, increased
errors,and slow method of processing transactions
between counterparties.
o Blockchain has a lot to offer to the world of
trade finance, ranging from removing papers,
automating processes and payments, reducing
fraud, and cutting costs to tracking and tracing
shipments and allowing all participants to access
the same information.
Types or Agreement in Trade Finance
1. Open Account- refers to a payment
arrangement between a buyer and a seller
where goods are shipped and delivered before
payment is due.
2. Letter of Credit- is a financial instrument
issued by a bank or financial institution on
behalf of a buyer (importer) to guarantee that
the seller (exporter) will receive payment for
goods or services, provided certain conditions
are met.
V. ACCOUNTING APPLICATIONS
o Blockchain is a promising technology for the
accounting profession. A self-auditing and
immutable record can mean massive changes for
not just how much time and effort is required to
verify the financials of a company, but significant
reductions in the difficulty and complexity of
audits.
o Instead of keeping separate records based
on transaction receipts, companies can enter their
transactions directly into a shared ledger, which
creates an interlocking system of enduring
accounting records. As these entries are
distributed and cryptographically sealed, it
becomes almost impossible to be falsified or
destroyed to conceal an activity
o The big four accounting firms (Deloitte,
Pricewaterhouse Coopers (PwC), Ernst & young
(EY), and KPMG) and many financial institutions
have already recognized the importance of
blockchain and thus have launched several
projects.
R4: Antonio, Aliah Maycie T.
VI. SUPPLY CHAIN MANAGEMENT
APPLICATIONS
Supply Chain Management- refers to controlling the entire
production flow, from acquiring raw materials to delivering
the final product/service at the destination.
Benefits of Blockchain on Supply Chain Management
o holds complete provenance details,
o enhances transparency and accountability
in supply chain systems (all suppliers can track
shipments, deliveries, and progress),
o increases trust between suppliers in the
chain,
o eliminates middleman auditors (can carry
out their own checks and balances at any time),
o effectively and securely helpful to logistics
management (smart contracts),
o ensures the genuineness and quality of
products (result in reduction in processing times,
management costs, and human errors),
o enables better quality, outcomes, and
performance of effective supply chain
management (SCM) processes (improves in
 facilitating planning, scheduling, coordinating,
monitoring, and validating these activities).
International Business Machine (IBM)- a supply chain
consulting services that presently has a fleet of 1,000 trucks
that make over 25,000 deliveries each week on a project
combining blockchain technology with innovative internet of
things (IoT) solutions.
IBM Food Trust- blockchain-based food-traceability platform
since 2018; modular solution built on blockchain, benefiting
all network participants with a safer, smarter, and more
sustainable food. Nestle, McCormick, and Dole use this IBM
food trust in their businesses.
Examples:
o Maersk- a Danish shipping company, is
using blockchain to track all its shipments across
the world.
o Provenance- which piloted a traceability
project in Indonesia's fishing industry through
mobile phones, blockchain, and smart tagging.
VII. HEALTHCARE APPLICATIONS
Electronic Medical Record (EMR)- where patient data and
records are digitized and stored; exposed to patient-privacy
violations, outdated data, and incomplete data.
Benefits of Blockchain on Healthcare
o common database of health data and
information (doctors, hospitals, patients, and all
other stakeholders can access; doctors can spend
less time in doing administrative tasks, providing
more time for patient care, and more research can
be shared for new treatments),
o holds the complete medical history for each
patient, with multiple granularities of control,
o tamper-resistant means of storing medical
history,
o increased efficiency in providing insurance
quotes (minimizing claim and billing fraud),
o precise drug recommendations and drug
development (more accessible and ready for
research).
Zhang et al. (2018) identified seven potential blockchain use
cases in healthcare:
1. prescription tracking to detect opioid
overdose and over-prescription,
2. data sharing to incorporate telemedicine
with traditional care,
3. sharing cancer data with providers using
patient-authorized access,
4. cancer registry sharing to aggregate
observations in cancer cases,
5. patient digital identity management for
better patient record matching,
6. personal health records for accessing and
controlling complete health history,
7. and health insurance claim adjudication
automation to surface error and fraud.
Angeles (2018) discussed in detail three promising
healthcare use cases:
1. healthcare data exchange and
interoperability,
2. drug supply chain integrity and remote
auditing,
3. clinical trials and population health
research.
Examples:
o Patientory- a software and service
company, offers a blockchain-based application
that securely stores and manages health
information in real time, giving patients control of
their own health data.
o MedRec- a decentralized record
management system to handle electronic medical
records using blockchain technology.
o AmerisourceBergen- a drug wholesaler,
that uses blockchain technology for improved
drug supply chain integrity and remote auditing.
o Merck & Co- a drug developer, that uses
blockchain technology for improved drug supply
chain integrity and remote auditing.
o MedShare- a blockchain-based system that
highlights the issue of medical data sharing in
cloud repositories among big service providers
(smart contracts).
Healthcare Data Gateway (HGD)- Yue et al. (2016); a
blockchain-based app architecture that empowers patients to
own, control, and easily and securely share their data without
fearing a privacy violation.
 Indicator Centric Schema (ICS)- organize all
different kinds of patient data.
 Secure Multi-Party Computing (MPC)- can
be a solution that makes it possible for an
untrusted third party to conduct computations
with patient data without privacy violations.
R5: Iglesias, Erica G.
VIII. LEGAL-RELATED APPLICATIONS
Two Broad Blockchain Uses
o Records
o Conducting Transactions
Global Legal Blockchain Consortium - A group of companies
with joined resources will work together to "drive the
adoption and standardization of blockchain in the legal
industry, with the larger goal of improving the security and
interoperability of the global legal technology ecosystem”.
Founders include Baker Hostetler, Orrick, IBM Watson Legal,
and a newly established company, Integra Ledger.

Benefits
 Reduced costs and time in identity
verification
 Reduction in human trafficking
 Transparency
IX. ENERGY-RELATED APPLICATIONS
o Blockchain-based smart contracts enable
the application of power-exchange restrictions
and regulations, payments management, and
direct interaction between users, without a
centralized microgrid authority.
o Microgrid, the cluster of multiple
distributed generators (DGs) that supply electrical
energy to consumers without any
shortage.Blockchain can facilitate microgrid-
related transactions. Blockchain-based smart
contracts enable the application of power-
exchange restrictions and regulations, payments
management, and direct interaction between
users, without a centralized microgrid authority.
o Siemens, an automation company, and a
New York-based startup called LO3 Energy. They
are developing blockchain-based microgrids to
allow for local energy trading. LO3 Energy has
already piloted called TransActive Grid in Brooklyn
in New York.
o TransActive Grid. A microgrid and a peer-to-
peer trading platform piloted by LO3 Energy in
Brooklyn in New York wherein over 130 buildings
were participated, aiming to allow buildings to sell
their extra generated energy to other microgrid
participants.
Benefit
o Enable to manage, track and verify
thousands of energy transactions per second.
R6: Santiago, Allyssa Mae T.
X. ADVERTISING APPLICATIONS
o A notice or announcement in a public
medium promoting a product, service, or event or
publicizing a job vacancy.
o Advertising now has many challenges,
according to eMarketer in 2019, due to ad fraud
which is predicted to cost the industry as much as
$100bn globally by 2023.
o Without accurate measurements,
advertisers cannot create an ad that will reach the
right consumer just exactly where they need them
– which makes targeting difficult if you want any
hope of success whatsoever.
The ad buyer’s challenges:
1. Lack of trust
2. Rising customers’ expectations
3. Inability to mine current metrics
4. Fraud
5. complexity
6. Forge Connections
The publisher’s challenges:
1. Lack of trusted, transparent, metrics
2. Need to improve the customer experience
3. The expensive, manual, time consuming
effort
4. Risk of compromising
5. Credibility loss
The consumer’s challenges:
1. Lack of control over personal data
2. Lack of trust
3. Frustration
4. Lack of education
Blockchain can bring trust to digital ad buying in 3 ways:
1. Transparency -offers a single, streamlined
way for advertisers to keep track of their
spending
2. Security -is more than just an online
database. It's a revolutionary technology that
enables ad supply networks to exist in secure
ways, creating the right visibility and security for
counterparty transactions.
3. Traceability - blockchain is a disruptive
technology that can trace transactions without
depending on people auditing books or pointing
to various applications.
How can blockchain improve digital advertising?
o NOW, without a clear picture of where
budgets should be focused, brands spend money
on digital marketing that is not maximizing ROI.
o Consumers want data privacy and
transparency from retailers who handle their
personal information carefully - many shoppers
are becoming warier about how companies
interact with them as they browse through social
media feeds or purchase items online.
o WITH BLOCKCHAIN, the world has never
been more connected, but how do you get your
brand in front of consumers?
o Brands can now communicate with their
consumers on a blockchain-based platform.
o The system incentivizes engagement by
rewarding users for their quality data and
increasing exposure through injections into users'
feeds or push notifications that include offers
from advertisers who want access to this highly
targeted audience base.
4 Ways Blockchain Transform Digital Marketing
1. Effecting the Privacy of Data- provides
security features like encryption and two-factor
 authentication system that ensures the privacy
of data.
2. Tracking Keywords - marketers could have
real numbers when keyword tracking and can
use this information to create more accurate
campaigns.
3. Changes in Digital Advertising - companies
are introducing apps such as basic Attention
Tokens that bring changes to the interaction
between advertisers, users, and publishers.
4. Provide Highly Transparency - allows
advertisers to know who is seeing their ads and
if it is marketed to the right audience.
Consumer-Centric Blockchain Advertising
1. Brave
o Helps to block unwanted ads and, via its
Brave Rewards, enables users, publishers and
creators to earn rewards in the form of Basic
Attention Tokens (BAT).
o Through Brave Private Ads, “privacy-
preserving, first-party ads” users can opt in to
view in exchange for BAT, advertisers earn
revenue and gain insight on their ads’
effectiveness without violating user privacy.
o Brave’s ad blocker uses blockchain to track
harmful ad popups and neutralize them before
they can spread malware. The shields are
completely customizable and on a per-site
basis.
2. BitClave
o uses blockchain to reward consumers for
sharing their personal data with marketing
teams.
o Via a transparent ledger, the BitClave Active
Search Ecosystem (BASE) enables users to
control their identity and decide who can and
cannot access their information.
o In exchange for access to information,
marketing and advertising teams build direct
relationships with customers and offer them
uniquely targeted promotions to match their
preferences.
MEDIA APPLICATIONS
o the main means of mass communication
(broadcasting, publishing, and the internet)
regarded collectively.
o The ledger technology may aid the
production of new content by allowing content
creators to have more authority over their
production
o easily monetize
o Artists will earn much more than they
currently do under the centralized media and
entertainment production system
o The distributed ledger technology will
enable content creators and entertainers to
handle projects involving different locations,
countries, and continents using the hash
mechanism representation.
o Blockchain will also enable content creators
and artists to keep track of milestones achieved
and the production budget aligned with the
milestones.
Piracy and Plagiarism in Media and Entertainment
o If developers entirely built the internet on
the blockchain’s distributed ledger technology,
trucking of unlawful actions would be very easy to
detect, follow up, and stop.
o Users must seek permission from owners
before sharing or benefiting from other people’s
content.
Peer-to-Peer Media and Entertainment Transactions
o Peer-to-peer transactions in the blockchain
network will allow direct commercial transactions
between the content creator and the media
consumer.
o A peer-to-peer business model will enable
compensation of copyrighted content. The
process will occur passively through validating
smart contracts between the two parties
Blockchain in Television Broadcasting
o Once a news event is validated in the
network through the hash embedded in all
blockchains, unverified information, such as
rumors, will no longer be published and broadcast
to the mainstream audience. It will be impossible
or very difficult to publish fake news or videos.
The Ledger Technology in Film Distribution
o Blockchain technology will enable the
actors to follow through with each verified view
on the network. Since no one can erase the
viewing information, the information embedded
in the blocks is reliable and may be retrieved at
any time, at the discretion of the actor.
o Content creators will also have the privilege
of following up on advertisements placed upon
their content and accurately price them during
monetization.
o Contracts involving media companies and
actors will be stored in the blockchain network as
smart contracts. Blockchain security will preserve
these contracts in their original form, making each
involved party accountable to the signed
contracts.
Blockchain Media and Social Media Companies
o Live Bash -allows performers — from
musicians to comedians — to book stage time,
livestream a set and create NFTs of performance
moments on the fly. These minted moments,
which fans can buy and collect, are built on
proprietary blockchain technology.
o Binded -is a blockchain copyrighting
technology for photographers. Photographers
upload their images, which are stored on a
copyright vault that is secured by a unique
fingerprint saved on a blockchain. Once images
are uploaded and secured, artists can share their
work and track similar images to help thwart any
copyright infringements.
o Sapien - is a social news platform that gives
users control of data and content. By posting
content the community unanimously agrees is
true — or by interacting with other members —
Sapien creators earn SPN tokens they can use
throughout the platform and marketplace.
o Rally - an online platform helps creators set
up communities and economies to drive further
engagement with their followers. It allows users to
launch their own branded cryptocurrency, set up
ways to incentivize and reward fans, and gate
exclusive content. Best of all? The company says
using Rally requires no prior crypto experience.
o Audius - is a music-streaming platform for
the Web3 era. That means users can listen to
curated playlists, discover new emerging artists
and share songs with friends — all while earning
token rewards. On the other side, Audius positions
itself as a creator-friendly service, equipping
artists with metrics and tools to deepen
engagement with fans, so they can grow their
platform while maintaining their independence
from major labels.
o Mirror - is an online publishing platform
pushing the media industry into the far reaches of
Web3. With Mirror, you log in with Ethereum,
store your writing on Arweave (a decentralized
storage network), mint your posts as collectibles,
collect crypto subscription payments and set up a
DAO. You can even embed NFTs in your posts.
o Verasity - bills itself as a blockchain
company where eSports, adtech and digital rights
management collide. More specifically, the
company aims to increase advertising revenue for
video publishers by eliminating ad fraud with its
Proof-of-View technology. And on the eSports
side, Verasity has partnered with some big gaming
names like PUBG Mobile and Riot Games.
Web 3.0, also known as Web3, is the third generation of the
World Wide Web. Web 3.0 is meant to be decentralized,
open to everyone (with a bottom-up design), and built on top
of blockchain technologies and developments in the Semantic
Web, which describes the web as a network of meaningfully
linked data.
The main distinctions between Web 2.0 and Web 3.0 involve
data storage, connectivity, currency, and decentralization.
Web 2.0 is about creating content and interacting with
websites. Web 3.0 means immersing yourself in the digital
experience, and it involves concepts like individual control of
personal data, cryptocurrency, and decentralized record
keeping on the blockchain.
XI. INTERNET OF THINGS (IOT)
o The internet of things, or IoT, is a system of
interrelated computing devices, mechanical and
digital machines, objects, animals or people that
are provided with unique identifiers (UIDs) and
the ability to transfer data over a network without
requiring human-to-human or human-to
computer interaction.
o An IoT ecosystem consists of web-enabled
smart devices that use embedded systems, such
as processors, sensors and communication
hardware, to collect, send and act on data they
acquire from their environments.
o IoT devices share the sensor data they
collect by connecting to an IoT gateway or other
edge device where data is either sent to the cloud
to be analyzed or analyzed locally.
o IoT enables devices across the Internet to
send data to private blockchain networks to
create tamper-resistant records of shared
transactions. IBM Blockchain enables your
business partners to share and access IoT data
with you — but without the need for central
control and management. Each transaction can be
verified to prevent disputes and build trust among
all permissioned network members.
Benefits of IoT and Blockchain
o Build trust in your IoT data -Each
transaction is recorded, put into a data block, and
added to a secure, immutable data chain that
cannot be changed — only added to.
o Rely on added security - With the Watson
IoT® Platform you can select the data to be
managed, analyzed, customized, and shared
among permissioned clients and partners.
o Gain greater flexibility - The IBM Blockchain
Platform is open, interoperable and is built for
your multicloud world, using the latest version of
the leading Hyperledger Fabric platform,
optimized for Red Hat® OpenShift®.
o Generate new efficiencies - IBM Blockchain
streamlines processes and creates new business
value across your ecosystem by drawing on the
data supplied by IoT devices and sensors.
Applications of IoT and Blockchain
 Freight transportation
  Component tracking and compliance  Efficiency Gains
 Log operational maintenance data  Regulatory Compliance
 Centralized Governance
R7: Galulu, Ismylyn Marie T. Cons
C. What makes a Blockchain suitable for  Limited Transparency
business?  Higher Corruption Risks
o Shared/Distributed Ledger  Censorship Potential
o Permission  Centralization Risks
o Consensus Permissionless blockchain- are public blockchain networks
o Smart Contract that impose no restrictions on access or participation. Some
of the salient features of a permissionless blockchain include:
I. SHARED/DISTRIBUTED LEDGER o Fully Open Access- In contrast to
An immutable record of all transactions on the network, a permissioned blockchains, anyone globally can
record that all network participants can access. join, submit transactions, and participate in
Three Characteristics of a Shared Ledger consensus mechanisms like mining in
1. Records all transactions across the business permissionless blockchains without needing
network; the shared ledger is the system of approval.
record, the single source of truth. o Full Transparency- All transactions are
2. Is shared among all participants in the publicly visible to every node in a default
network; through replication, each participant permissionless blockchain like Bitcoin
has a duplicate copy of the ledger. o Pseudo-Anonymity- Users interact through
3. Is permissioned, so participants see only cryptographic key pairs rather than real-world
those transactions they’re authorized to view. identities.
o Censorship Resistance- With no central
II. PERMISSION authority and distributed consensus mechanisms
PERMISSIONED BLOCKCHAIN VS. PERMISSIONLESS like proof-of-work, no single entity can tamper
BLOCKCHAIN with transaction histories or censor activity on a
Permissioned Blockchains- is a type of private blockchain permissionless blockchain like Bitcoin.
network that places restrictions on access and participation. o Incentivized Participation- Tokens are used
Some of the salient features of a permissioned blockchain to incentivize nodes to verify transactions and
include: secure the network through mining and staking.
o Closed and Controlled Access- Users must
be granted permission to join, and there is Pros and Cons of Permissionless Blockchain
typically a central authority that approves Pros
memberships.  Censorship Resistance
o Partially Decentralized- While permissioned  Transparency
blockchains are distributed across multiple peers  Security Resilience
or nodes like other blockchains, the network  Immutable Records
participants are limited to approved entities  Accessibility
rather than anonymous nodes. Cons
o Identity Verification- In permissioned  Performance Limitations
blockchains, real-world identities can be  Energy Intensive
associated with user addresses and transactions  Minimal Privacy
through identity verification processes.  Potential for Crime
o Customized Permissions- Administrators in
permissioned blockchains can define granular R8: Manaloto, Kathleen Ed T.
access policies and permissions for different types III. CONSENSUS
of members and roles. All parties agree to network verifiable transactions.
o Flexible Consensus Models- Permissioned
blockchains can utilize faster and more energy- Two Approaches of Consensus
efficient consensus models like PBFT and voting- o Centralized
based schemes rather than resource-intensive o Decentralized
proof-of-work.
Consensus Mechanisms
Pros and Cons of Permissioned Blockchain o The process by which a group of peers – or
Pros nodes – on a network determine which blockchain
 Increased Privacy and Security transactions are valid and which are not.
 Customizability
 o Are used to verify transactions and maintain
the security of the underlying blockchain.
Different types of Consensus Mechanisms
o Proof of Work (PoW)
o Miners essentially compete against
one another to solve extremely complex
computational puzzles using high-powered
computers.
o Proof of Stake (PoS)
o Miners are required to pledge a
‘stake’ of digital currency for a chance to be
randomly chosen as a validator. The process
is not unlike a lottery whereby the more
coins you stake, the better your odds.
o Delegated Proof of Stake (DPoS)
o Relies upon a reputation-based
voting system to achieve consensus.
o Proof of Capacity / Proof of Space
(PoC/PoSpace)
o Miners generate a list of all the
possible hashes beforehand in a process
called ‘plotting’.
o Proof of Activity (PoA)
o The mining process begins like
PoW, with miners competing to solve an
elaborate mathematical problem using
immense computing power.
o Proof of Burn (PoB)
o Miners gain the power to mine a
block by ‘burning’ (destroying) a data transfer will occur between traditional
predetermined amount of tokens in a
verifiable manner-namely, sending them to
an ‘eater address’ where they cannot be
recovered or spent.
Two most popular Consensus Mechanism
 Proof of Work (PoW)
 Proof of Stake (PoS)
I. Pros and Cons of Blockchain and Cryptocurrency
R9: Sevilla, Benigno Jr.
IV. SMART CONTRACT
o is a program stored on a blockchain that
runs when predetermined conditions are met.
o is stored on the blockchain and is executed
automatically as part of a transaction.
o may have many contractual clauses that
could be made partially or fully self-executing,
self-enforcing, or both.
Benefits of Smart Contract
 Speed, Efficiency, and Accuracy
 Trust and Transparency
 Security
 Savings
D. IDENTIFYING PARTICIPANTS AND THEIR
ROLES
1. Blockchain user
o A participant (typically a business user) with
permissions to join the blockchain network
and conduct transactions with other network
participants.
o Blockchain technology operates in the
background, so the blockchain user has no
awareness of it.
2. Regulator
o A blockchain user with special permissions
to oversee the transactions happening within
the network. Regulators may be prohibited
from conducting transactions.
3. Blockchain developer
o Programmers who create the applications
and smart contracts that enable blockchain
users to conduct transactions on the
blockchain network. Applications serve as a
conduit between users and the blockchain.
4. Blockchain network operator
o Individuals who have special permissions
and authority to define, create, manage, and
monitor the blockchain network.
5. Traditional processing platforms
o Existing computer systems that may be
used by the blockchain to augment
processing.
6. Traditional data sources
o Existing data systems that may provide data
to influence the behavior of smart contracts
and help to define how communications and
applications/data and the blockchain — via API
calls, thru MQ style cloud messaging, or both.
7. Certificate authority
o An individual who issues and manages the
different types of certificates required to run a
permissioned blockchain.
CHAPTER 3: Limitation and Challenges
A. What is Blockchain?
The concept of blockchain was initially introduced
in November 2008 and was implemented in January
2009. A presumed pseudonymous person or persons named
Satoshi Nakamoto developed the virtual currency, bitcoin,
and published the bitcoin white paper. In this paper, a
decentralized, publicly available, and cryptographically
secure system based on a chain of blocks was proposed,
allowing peer-to-peer digital currency trading, and
eliminating the need for centralized financial institutions to
enable currency issuance or transaction settlement (Dai &
Vasarhelyi, 2017; Murray, 2018; Nakamoto, 2008). Bitcoin
and blockchain are not synonymous. Blockchain
provides the infrastructure for recording and storing
bitcoin transactions; it has many uses besides bitcoin.
Bitcoin is the first application of blockchain.
 Moreover, blockchain should be considered as an
overarching idea that includes various technologies and
applications. The concept of blockchain can be compared to
the Internet, which has many technologies and applications.
It is argued that blockchain is likely to transform business
in as great a manner as the Internet. Blockchain can
disrupt in a positive manner central banking platforms and
many business models and use cases, including trades,
financial services, supply chains, business process
improvement, health information sharing, and logistics
management (Woodside et al., 2017).
B. Pros of Blockchain (Wajde Baiod, Janet Light, & Aniket
Mahanti, 2021 — page 84)
1. Transparency
2. Business Continuity
3. Trust
4. Smart Contracts
Benefits of Blockchain Technology Blockchain technology
is still embryonic, but it has changed many businesses and has
become an appealing technology for many industries, even in
this formative stage. Some of the vital benefits of blockchain
application include the following (Beck, 2018; Herlihy, 2019;
Kumar, 2019; Workie & Jain, 2017):
1. Transparency: In a blockchain, a
complete history of transactions is permanently
maintained and simultaneously available to all
network users. All users involved in a transaction are
aware of any actions taken on any data or transactions
executed, thus promoting increased transparency.
2. Business Continuity: The availability and
continuity of services provided is a crucial
requirement for all businesses. The absence of a
vulnerable single failure point in the blockchain
technology means the system is never down, despite
some parts' failure, thus supporting business
continuity. Disintermediation: Blockchain
infrastructure’s being truly decentralized enables a
significant level of disintermediation. Technology
protocols and elements can replace intermediaries,
enhancing efficiency, and reducing friction-related
direct and indirect costs between individuals and
organizations, due to decreased trust.
3. Trust: The blockchain mechanism's
underlying concept is the establishment of a
trustworthy record between untrusted parties. The
good design of blockchainembedded protocols and
cryptography property enforce trust and ease its
verification.
4. Smart Contracts: Some functionality can
be added to ledgers, as most blockchain
applications provide some scripting languages. For
instance, a rudimentary stack-based language is
contained in bitcoin, whereas a language similar to
JavaScript, a Turingcomplete imperative language, is
provided by Ethereum. These programs, so-called
smart contracts, are computer codes/software designed
to digitally facilitate, verify, and enforce the business
logic's negotiation or performance. Smart contracts are
selfexecuted and automate the execution of credible
transactions and actions (e.g., exchange of property,
money, shares, or anything that has a value), without a
middleman, as the terms of agreements are fulfilled.
Smart contracts can be utilized in traditional systems,
but data integrity and data availability to all parties
make blockchain the right technology platform to
leverage smart contracts.
The Majority Attack (51% Attacks): The blockchain
employs a distributed consensus mechanism to create
mutual trust. This consensus mechanism is susceptible to
51% vulnerability. Attackers might exploit this issue to
control the entire blockchain (Li et al., 2017; Monrat et al.,
2019). In the simplest terms, if a user controls over 51% of
the network, they can then manipulate and modify the
blockchain. As they control most of the network, they can
dictate the consensus (McBee & Wilcox, 2020; Nawari,
2019).
 Privacy leakage: Blockchain is considered
a very safe system because users connect with
pseudonymity, only making transactions with
generated addresses, not with their real identities,
and can generate many addresses to protect
against information leakage (Zheng et al., 2018).
It is possible to trace the users' behaviors in
the blockchain; thus, blockchain takes
precautions to protect users' transaction
privacy.
Private key security: It is argued that blockchain is only as
secure as private keys (Yeoman, 2018). Users' private keys are
considered the identity and security credentials in blockchain
systems. These keys are generated and maintained by users
and used to prove ownership of a crypto asset (i.e., bitcoin).
However, it is impossible to recover private keys if lost
(McBee & Wilcox, 2020). If criminals obtain private keys,
they can manipulate users' blockchain accounts. Moreover,
blockchain does not rely on any centralized trusted third party,
so if private keys are stolen, tracking the criminal's behaviors
and recovering the modified blockchain information becomes
difficult (Li et al., 2017).
What is cryptocurrency?
A cryptocurrency is a unique form of currency. It’s ability to
use encryption techniques to encode transactions sets it apart
from any other currency we have ever used in the past.
Pros of Cryptocurrency:
Transparency When trading in digital currency all
transactions are recorded and monitored. When a transaction
has been completed, it is added to the ledger, and it becomes a
permanent part of the record.
Example:
TRONSCAN- is a first block-chain browser in the tron
community. It supports multiple login methods and provides a
complete browsing and search experience.
Global Reach: no matter where you are in the world, if you
have access to the Internet you can trade in cryptocurrency,
but because it is not backed by any geographical boundaries or
governmental institutions, it is accepted and used in most
countries of the world.
Low Transaction Fees: the fact that the transaction fees for
trading in cryptocurrency are a mere fraction of the fees that
most financial institutions charge which makes it extremely
appealing.
Better Security: unlike traditional payments, like cash and
credit cards, cryptocurrencies are digital and encrypted; you
cannot be ripped off in a transaction as you can be with legacy
payment systems, and it is much harder to steal
cryptocurrency compared to a full wallet cash.
You Control Your Money. Void of any middleman or third-
party interests, no one is in charge of your money. There is no
other electronic cash system in which your account isn’t
owned by someone else.
With cryptocurrency, you own the private key and the
corresponding public key that makes up your cryptocurrency
address. No one can take that away from you (unless you lose
it yourself or host it with a web-based wallet service that loses
it for you.)
Cons of Cryptocurrency:
Lack of Acceptance: One of the biggest negatives with
cryptocurrencies is their newness.
Volatile: while bitcoin is a pretty stable currency, most other
cryptocurrencies are not.
Cannot be Recovered if Lost: Cryptocurrencies cannot be
recovered if they are lost. Unlike financial institutions that
have regulations to protect your investment, a single incident
of hacking could literally wipe you out.
Still in Development: It is still in development, and there will
likely be many changes coming in the future. Investors must
be prepared to accept and adapt to these changes before the
system is fully perfected.
II. Limitations
A. Technical Challenges
1. Throughput
Throughput refers to the capacity of a blockchain
network to process a specific number of transactions within a
designated timeframe. It acts as a measure of the efficiency
and capability of a blockchain.
Two kinds of Throughput Metrics
a. Transaction per Second
b. Block Confirmation Time
Bitcoin network has a potential issue with throughput
in that it is processing only one transaction per second (tps).
Compared with: VISA 2000 tps, twitter 5000tps, advertising
network <100000tps.
2. Latency
Blockchain network latency is the time between
submitting a transaction to a network and the first
confirmation of acceptance by the network. After the first
confirmation, the transaction becomes more final as more
blocks are added beyond the initial confirmation.
Bitcoin right now takes 10 minutes to process,
meaning that at least 10 minutes for your transaction to be
confirmed. For sufficient security, you should wait more time
– about an hour – and for larger transfer amounts it needs to be
even longer, because it must outweigh the cost of double
spend attack.
3. Size and Bandwidth
Bandwidth is the data transfer capacity of a network
in bits per second (Bps). The term may also be used
colloquially to indicate a person's capacity for tasks or deep
thoughts at a point in time.
Blockchain size refers to the size of all blocks within
a blockchain, where each block is a permanent record of
transactions.
The Bitcoin community calls the size problem
“bloat,” but that assumes that we want a small blockchain;
however, to really scale to mainstream use, the blockchain
would need to be big, just more efficiently accessed.
4. Security
Security is all about being safe, i.e., free from danger,
harm, or fear. Security is managed in order to protect some
vital information so that hackers or other unauthorized users
do not get access to it. With the increasing dependency on
Blockchain networks, Blockchain security has become a prime
concern.
Blockchain's security measures have often been
touted as key strengths of the technology — but the security of
blockchain networks is not without its challenges.
There are some potential security issues with the
Bitcoin blockchain. The most worrisome is the possibility of a
51-percent attack, in which one mining entity could grab
control of the blockchain and double-spend
5. Wasted Resources
In economics, the term "wasted resources" refers to
the inefficient allocation and utilization of factors of
production (such as labor, capital, and materials) in the
production of goods and services.
In cryptocurrency, mining consumes substantial
energy, all of it wasted. The earlier estimate cited was $15
million per day, and other estimates are higher, raising
environmental concerns (carbon footprint).
6. Usability
The API for working with Bitcoin (the full node of all code) is
far less user-friendly than the current standards of other easy-
to-use modern APIs, such as widely used REST APIs.
7. Versioning, Hard Forks, Multiple Chains
Versioning is the creation and management of
multiple product releases, all of which have the same general
function, but are improved, upgraded or customized.
Blockchain networks, like any software systems, may undergo
updates, improvements, or modification overtime.
A fork is a change to the protocol, or a divergence
from the previous version of the Blockchain. When a new,
alternative block is generated by a rogue miner, the system
reaches consensus that this block is not valid, and this ‘orphan
block’ is very soon abandoned by the other miners.
2 types of Forks
a. Soft Fork – backward compatible. Meaning
they are compatible with old protocols
b. Hard Fork – incompatible with the older
versions.
Multi-chain is a process where projects deploy smart
contracts across multiple blockchains, connecting isolated
chains together as one network. Also, it refers to the growing
ecosystem of hundreds of blockchains that exist today.
8. Proposed Solutions to the Technical Issues
a. Offline wallets to store the majority of
coins.
 Offline wallets, also known as cold storage
or cold wallet, are used for long-term secure storage
of cryptocurrencies and typically hold large amounts
of money that are not intended to be touched very
frequently.
 Different manners of offline wallets could
be used to store the bulk of consumer cryptocoins—
for example, paper wallets, cold storage, and bit
cards.
 Paper wallet: Physical paper with printed
private and public keys.
 Cold storage: Keeping cryptocurrency
offline, away from internet-connected devices.
 Bit cards (Crypto Debit Cards): Prepaid
cards loaded with cyptocurrency.
b. Dark pools
 Private exchanges for trading securities that
are not accessible to the investing public. Also
known as dark pools of liquidity, the name of these
exchanges is a reference to their complete lack of
transparency.
 Created to facilitate block trading by
institutional investors who did not wish to impact the
markets with their large orders and obtain adverse
prices for their trades.
Types of Dark Pools
1. Broker-Dealer-Owned Dark Pool
2. Agency Broker or Exchange-Owned Dark Pool
3. Electronic Market Maker Dark Pools
c. Alternative hashing algorithms
 Cryptocurrency algorithm or hashing
algorithm – is a mechanism that encrypts virtual
currency or digital currency
 It is like a special tool that takes a piece of
data, like a transaction, and turns it into a unique
code, called hash (serves as a digital fingerprint of
the original data)
 Alternative hashing algorithms are like
different types of locks for securing information on
the blockchain.
 Example: Litecoin and other
cryptocurrencies use an algorithm called Scrypt
d. Alternatives to proof of work for
Byzantine consensus
 There are many other consensus models
proposed—such as proof of stake, hybrids, and
variants—that have lower latency, require less
computational power, waste fewer resources, and
improve security for smaller chains.
 Consensus without mining is another area
being explored, such as in Tendermint’s modified
version of DLS (the solution to the Byzantine
Generals’ Problem by Dwork, Lynch, and
Stockmeyer), with bonded coins belonging to
byzantine participants.
 Another idea for consensus without mining
or proof of work is through a consensus algorithm
such as Hyper‐ledger’s, which is based on the
Practical Byzantine Fault Tolerance algorithm.
e. Only focus on the most recent or unspent
outputs
 Many blockchain operations could be based
on surface calculations of the most recent or unspent
outputs, similar to how credit card transactions
operate.
 “Thin wallets” operate this way making
transactions quicker and more efficient and this is
how Bitcoin e-wallets work on phones.
 Cryptonite is a related idea that uses a
“mini-blockchain scheme”, a scheme designed for
maximum scalability, achieved by addressing the
problem of blockchain bloat and providing a
solution that allows all old transactions to be
forgotten by the network after they become old
enough.
f. Blockchain Interoperability
 Blockchain interoperability refers to the
ability of blockchains to communicate with other
blockchains.
 To coordinate transactions between
blockchains, there are several side chain projects
proposed, such as those by Blockstream.
 Sidechains are independent blockchains that
connect to their parent chains via a two-way
bridge. This bridge allows the transfer of assets
between the two.
g. Posting Bond Deposits
 Requiring miners to post bond deposits to
blockchains, preventing malicious activities such as
double-spend attacks.
 A double-spending attack is a critical flaw
that allows the same unit of a cryptocurrency to be
spent more than once, leading to potential inflation,
theft, and the erosion of trust in the digital monetary
system.
 Bond deposits could be posted to
blockchains like Tendermint does, making it costly
to fork and possibly improving operability and
security.
h. REST APIs
 Application Programming Interface
(API) is a piece of code that specifies how different
software components should interact and
communicate programmatically.
 REST stands for Representational State
Transfer and REST APIs play a crucial role in the
cryptocurrency ecosystem, facilitating
 communication and interaction between various
applications, services, and blockchain networks.
 REST APIs enable secure real-time calls,
enhancing usability in specific cases.
 Many blockchain companies offer
alternative wallet interfaces with REST API
functionality, such as Blockchain.info.
B. Business Model Challenges
 It is the way a business utilizes Blockchain
technology in its business operations to create
and generate value.
Types of Blockchain Business Models
 P2P (peer-to-peer) Blockchain Business
Model - utilize Blockchain to facilitate direct
transactions between individuals.
 Blockchain as a Service (BaaS) Business
Model - allows businesses to build and deploy
their Blockchain-based solutions using cloud-
based infrastructure and tools.
 Token Economy - Utility Token Business
Model - leverages the creation and use of tokens
to drive its operations. Utility tokens are a
specific type of cryptocurrency that can be used
to access a particular product or service within a
particular platform.
 Blockchain-Based Software Products -
focuses on building software products that utilize
the power of Blockchain technology to solve
particular problems.
 Development Platforms - offers the tools
and infrastructure for other companies and
developers to develop and deploy their
Blockchain solutions.
Challenges Associated with Blockchain Business Models
1. Regulations
 Lack of clear regulatory guidance makes it
difficult for businesses to know how to comply
with the law.
2. Adoption
 Limited knowledge and awareness of
blockchain
 Difficulty in gaining traction and user base
 Need for education and awareness
initiatives
3. Interoperability
 Difficulty in interaction between different
blockchain platforms and exchanging data
seamlessly
4. Complexity
 Technical nature of blockchain technology
 Requirement of significant technical
expertise and resources.
5. Integration
 Challenge in integrating blockchain into
existing systems
 Need for technical expertise and resources
C. Scandals and Public Perception
The Public's Perception of Bitcoin
 Bitcoin is often associated with illegal
activities like drug-related and money-
laundering.
 Bitcoin and blockchain are neutral
technologies that can be applied for either good
or bad.
 Benefits of Bitcoin outweigh potential
drawbacks.

Difference Between Traditional Business Models and The Pseudonymous Enabler: Bitcoin
Blockchain Business Models  Bitcoin has the potential to enable malicious
Traditional Blockchain and illicit activity, which could result in "Red
Business Models Business Models Queen" reactions.
uses a  Malicious players have been identified
decentralized through the use of computer virus detection
rely on a centralized
network of software.
Centralization vs. authority to manage
computers for
Decentralization business
enhanced security Constant Fraud, Scandals, and Theft
transactions.
and record  Theft, scandals, and scams afflict the
keeping. industry.
Intermediaries vs  MtGox collpase highlighted issues like the
require enable direct
Direct “transaction malleability bug”
intermediaries for transactions
Transactions  Thefts continue to persist.
transactions between parties
rely on high level of
intermediaries like transparency with Industry Models and Supervision for Blockchain
Transparency banks and lawyers open and  For improved safety features and the ability
for trust accessible ledgers to distinguish between trustworthy and dishonest
verification. for all parties. participants, blockchain industry models must
decentralized data develop.
centralized data
storage, enhancing  Rather than coming from outside the
storage, making the
Data Management security and ecosystem, oversight responsibilities ought to be
data vulnerable to
preventing distributed throughout.
hacking
tampering.
  The oversight roles continue to be crucial in
providing checks and balances for the system.
Obstacles and Restrictions
 Metrics like coin market capitalizations,
investment, startup numbers, GitHub code
commitment, and "newspaperink" indicate the
robustness of the blockchain industry.
 Even with advancements, it might be too
soon for digital currencies to become widely
accepted.
 Bitcoin might not be as user-friendly as
Apple Pay, but it could open the door for digital
currencies to be fully accepted by the general
public.
D. Government Regulation
How government regulation unfolds could be one of
the most significant factors and risks in whether the
blockchain industry will flourish into a mature
financial services industry.
A. The potential practical impossibility of carrying out
taxation with current methods.
A decentralized peer-to-peer sharing economy of Airbnb 2.0
and Uber 2.0 run on local implementations of OpenBazaar
with individuals paying with cryptocurrencies renders
traditional taxation structures impossible.
B. The value proposition offered by governments and their
business model.
Some argue that in the modern era of big data, governments
are increasingly unable to keep up with their record-keeping
duties of recording and archiving information and making data
easily accessible.
C. Privacy Challenges for Personal Records
Decentralized solutions enable private information to be
shared securely, while users remain in full control of their
data.
Overall: Decentralization Trends Likely to Persist
What is decentralization?
In blockchain, decentralization refers to the transfer of control
and decision-making from a centralized entity (individual,
organization, or group thereof) to a distributed network.
Why decentralization matters?
Decentralization is not a new concept. When building a
technology solution, three primary network architectures are
typically considered: centralized, distributed, and
decentralized.
Centralized Systems. these are systems that use client/server
architecture where one or more client nodes are directlv
connected to a central server.
Decentralized Systems. In decentralized systems, every node
makes its own decision. The final behavior of the system is the
aggregate of the decisions of the individual nodes.
Distributed Systems. A distributed system is a collection of
computer programs that utilize computational resources across
multiple, separate computation nodes to achieve a common,
shared goal.
Example: Google search system. Each request is worked upon
by hundreds of computers that crawl the web and return the
relevant results. To the user, Google appears to be one system,
but it actually is multiple computers working together to
accomplish one single task (return the results to the search
query).
Advantages of Decentralized Blockchains
Even though blockchain technology is a somewhat new
concept, it has proven itself to be extremely useful in business
and has a number of core advantages. Here's a list of some of
the most important advantages of decentralized blockchains.
1. Fraud Prevention. Because blockchains are
open-sourced ledgers, and because every single
transaction is recorded on them, it is very easy to
tell if fraud is taking place.
2. Protection from Government Meddling.
Blockchain-based cryptocurrencies are not
controlled by any government, bank, or central
bank.
3. Faster Transaction Times. Blockchain-
based
cryptocurrencies provide transaction times that are often
much, much faster than bank transaction times
4. Increased Financial Efficiency.
Decentralized blockchains allow transactions to
be made directly from person to person without
the assistance of a third-party.
Disadvantages of Decentralized Blockchains
1. Crime. Due to the anonymous nature of
decentralized blockchains and the
cryptocurrencies that rely on them, they have
become somewhat of a preferred financial
instrument for criminals.
2. Volatility. Many of the cryptocurrencies that
use decentralized blockchains are extremely
volatile.
3. Storage Issues. Storing blockchain-based
cryptocurrencies can be a problem for people who are not tech
savvy.