When will blockchain technology
deliver on its promise?

  

How Blockchain Technology might be useful as a Security Tool

This week, the International Telecommunications Union is holding a workshop to see how blockchain technology might be useful as a security tool. It’s a good indicator of the technology’s ongoing success. Eight years after the original bitcoin blockchain emerged, efforts are well under way to push its security benefits into multiple industries. What strengths does it carry, and what challenges will it face, as a next-generation security tool?

We explained basic blockchain operations here. The technology’s biggest security benefit is its ability to cut out the middleman. Instead of transacting via a trusted arbiter, parties get to transact with each other directly and seal the outcome so that neither can dispute it in the future.

Why is this useful, if trusted third parties promise to do all that work for you? The problem with trusted third parties is that you can’t always trust them. Just look at what happens if your trusted third party happens to be Wells Fargo, or Bank of America, say.  Or Deutsche Bank, or Barclays, UBS, Rabobank, and the Royal Bank of Scotland. We could fill an entire article with links like this. You get the picture.

Secure all the things

The second security benefit complements the first; blockchain technology allows participants to “seal” transactions so that they are visible but immutable, which keeps everyone honest. Different implementations use different techniques. Bitcoin chews up the computing power of a small city to preserve its transactions in digital resin. Other techniques include proof of stake. Each has its own technical and economic implications. No wonder, then, that people are experimenting with blockchains for security reasons. Some, such as the Danish Liberal Alliance and Australia, hope to use it for voting, perhaps misunderstanding some of the bigger security concerns with online votes.

This mad rush to capitalise on new technology fuels the early curve of the Gartner Hype Cycle, leading to an inevitable crash as the technology fails to meet expectations. It’s happening with AI right now, and also with blockchain technology, some argue. We can see this as the blockchain moves to the cloud. Decentralization was an important characteristic of the original blockchain, but Microsoft’s Project Bletchley runs blockchain middleware and application marketplaces in Azure. IBM does something similar on its Bluemix cloud platform.

All this stuff will be cryptographically protected, of course, but it’s still facilitated by a single trusted party, and in effect turns the blockchain into something else. Marketing types at Microsoft are already playing with the inevitable, depressing moniker “Blockchain as a Service”, which pretty much negates the whole idea of a decentralized, independent network.

Once the tech industry stops being so breathless about the blockchain and the blue chips have reinvented it in their own image, it will face other problems. Standardization is one of them. There are many different approaches to blockchain technology, each claiming its own advantage. It will be important for these to work well together. Standardization efforts are now  in the works; The International Organization for Standardization (ISO) already has a committee looking at it.

Good concepts and bad code

The other problem for blockchain technology revolves around software security. Just because blockchain’s underlying concept offers security doesn’t mean that the implementations follow suit. China, which has its own interest in cryptocurrency, recently analysed 25 of the top blockchain-related software projects, and found significant software security flaws in many of them. Most of the software tools related to input validation.

These issues aren’t just theoretical. They’re antithetical to what many blockchain projects are hoping to achieve. Coding flaws in blockchain implementations are serious, and lead to financial losses, such as the $400,000 theft of Zcoins last month. As blockchain software becomes more sophisticated, the attack surface and scope will expand. A key factor here will be smart contracts. Whereas the original bitcoin blockchain only holds records of digital transactions, more recent efforts have bigger ambitions. Smart contracts are in effect programs designed to run on the blockchain.

Imagine replacing a legal contract with a computer program. Instead of paying a lawyer to govern the contract, all parties can run it independently, and the blockchain makes the program’s output immutable and transparent. The program checks external conditions and executes its clauses accordingly. Let’s say Bob and Jane both own equal shares in a company. If the share price hits a certain threshold, they get a bonus dividend based on the number and class of their shares. Normally, a lawyer would have to take care of that, charging handsomely for the privilege. A smart contract with access to company funds would do it automatically.

That whole access to company funds thing is a bit scary, though, given that a smart contract is just a computer program, and computer programs have security flaws. The DAO, a company created entirely from smart contracts on the Ethereum blockchain, lost the equivalent of $50m or so last year in Ethereum’s Ether cryptocurrency. An enterprising hacker found a flaw in the smart contract code and flushed it all into another account.

Ethereum had to fork its own blockchain – going back to rewrite history – to get the cash back. Several developers didn’t like that idea, and retained the original Ethereum code, thus creating Ethereum and Ethereum Classic. We wonder if the Coca Cola Company would have approved? None of this sounds like the basis for a bright, secure future. What it means in practice is that we must get much better programming this stuff before we begin trusting huge swathes of our economy with it or enthusiastically using it to organize the Internet of Things.

Vinay Gupta, one of the original members of the Ethereum team and author of this HBR article on the blockchain’s security promise, has said that we should look to more rigorous disciplines like functional programming to avoid costly screw-ups in the future. The problem is that few people have that rigour. Raise the bar for blockchain coding, and half of the startup projects lining up for their virtual crowdsales would probably disappear. The blockchain holds promise, but it might have to go through Gartner’s trough of disillusionment before it becomes a major item in the security industry’s toolbox. We might have to keep revising our coding practices, too.

The blockchain is today where the web was in 1994. Two decades later, the web is the Justin Bieber of tech – recently come of age, hugely successful, but addled and tarnished by its runaway success. It’s is a beautiful but insane place let down by a dystopic mixture of dodgy Javascript and rampant cybercrime, and ruled by privacy-eating monoliths. Wouldn’t it be nice if we could learn from our mistakes while priming the Next Big Thing?

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

IBM unveils Blockchain as a Service based on open source Hyperledger Fabric technology

IBM unveiled its “Blockchain as a Service”

Yes, IBM has unveiled its “Blockchain as a Service” today, which is based on the open source Hyperledger Fabric, version 1.0 from The Linux Foundation. IBM Blockchain is a public cloud service that customers can use to build secure blockchain networks. The company introduced the idea last year, but this is the first ready-for-primetime implementation built using that technology. The blockchain is a notion that came into the public consciousness around 2008 as a way to track bitcoin digital currency transactions. At its core blockchain is a transparent and tamper-proof digital ledger. Just as it could track bitcoin’s activity in a secure and transparent fashion, it’s capable of tracking other types of data in private blockchain networks.

This could allow any private company or government agency to set up a trusted network, which would allow the members to share information freely, knowing that only the members could see it, and the information couldn’t be altered once it’s been entered. Jerry Cuomo, VP of blockchain technology at IBM, says his company is offering a set of cloud services to help customers create, deploy and manage blockchain networks. This fits in with IBM’s broader strategy to offer a wide range of cloud services to its customers.

Although the blockchain piece is based on the open source Hyperledger Fabric project of which IBM is a participating member, it has added a set of security services to make it more palatable for enterprise customers, while offering it as a cloud service helps simplify a complex set of technologies, making it more accessible than trying to do this alone in a private datacenter. “Some time ago, we and several other members of the industry came to view that there needs to be a group looking after, governing and shepherding technology around blockchain for serious business,” Cuomo told TechCrunch.

The Hyperledger Fabric project was born around the end of 2015 to facilitate this and includes other industry heavyweights such as State Street Bank, Accenture, Fujitsu, Intel and others as members. While the work these companies have done to safeguard blockchain networks, including setting up a network, inviting members and offering encrypted credentials, was done under the guise of building extra safe networks, IBM believes it can make them even safer by offering an additional set of security services inside the IBM cloud.

While Cuomo acknowledges that he can’t guarantee that IBM’s blockchain service is unbreachable, he says the company has taken some serious safeguards to protect it. This includes isolating the ledger from the general cloud computing environment, building a security container for the ledger to prevent unauthorized access, and offering tamper-responsive hardware, which can actually shut itself down if it detects someone trying to hack a ledger.

What’s more, IBM claims their blockchain product is built in a highly auditable way to track all of the activity that happens within a network, giving administrators an audit trail in the event something did go awry. In addition to the blockchain service itself, IBM announced a customer, Secure Key Technologies, a digital identity and attribute sharing network. The company has been testing a consumer digital identity network built on top of the IBM blockchain technology with banks in Canada.

If it works as advertised, it could end up greatly simplifying and securing how we maintain and share our identities in a digital context, allowing us to expose only the information the requesting authority requires (and no more), while enabling us to revoke those sharing privileges at any time.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

The First "Commercial Application"

Tech giant IBM is set to unveil what it's calling the first "commercial application" of Hyperledger’s open-source Fabric codebase. Previously released in beta and scheduled for official release today, the offering – dubbed "IBM Blockchain" – is formally debuting in front of a group of 20,000 developers at the Interconnect conference. There, its first two major deployments will also be detailed.

One of those is a blockchain identity solution built with SecureKey, in which it will power a public-private partnership that saw six Canadian banks invest $27m. In addition, it will be revealed that a Chinese energy company is using the IBM Blockchain to create an exchange for trading carbon credits. In conversation with CoinDesk, Jerry Cuomo, IBM's vice-president of blockchain technologies, described how the company used Hyperledger's open-source code to create a series of new features, which are now in use as part of its IBM Blockchain product.

Cuomo said:

"Hyperledger Fabric is the operating system for IBM Blockchain, and the IBM Blockchain built an environment to develop, govern and operate a production, permissioned blockchain."

Currently available on IBM's BlueMix cloud computing store, the commercial blockchain application will be available on a graded price scale based on the size of the implementation, with startups being charged less than enterprise builders. The announcement comes after Fabric became the first of several open-source projects to emerge from the Linux Foundation-backed Hyperledger's "incubation" period into "active" status.

Secured using IBM hardware security modules that cost on average about $10,000 per month for four nodes, IBM Blockchain gives users the ability to spin up blockchain networks with tailored governance models for onboarding new customers, supporting about 1,000 transactions per second, according to a statement. Previously revealed clients that we now know are also using IBM Blockchain include the Bank of Tokyo-Mitsubishi UFJ, Everledger, Maersk, Northern Trust and Walmart.

Identity for banks

At the conference, Toronto-based SecureKey will discuss an identity network built in partnership with Canadian banks BMO, CIBC, Desjardins, RBC, Scotiabank and TD Bank. Using the platform, the banks will be able to share information about onboarding clients with one another – for a fee – while potentially also saving money by paying one another less than they currently pay credit agencies for the same information. The idea, according to Cuomo, is to create a blockchain identity solution that would make it simpler to verify identities while also reducing the amount of data shared.

To develop the identity network, a group of regulators, including the Digital ID and Authentication Council of Canada (DIACC), the Command Control and a research center funded by the US Department of Homeland Security, took part in the project. Notably, Cuomo said the group has solved the problem of adhering to the "right to be forgotten" requirements of some governments that don’t want their citizens permanently recorded, while still using the immutable Fabric blockchain. "We do have a patent pending, so I don’t want to go into too much detail," said Cuomo. "But we solved it without deleting from the blockchain, which is pretty cool."

Carbon credits

The second commercial-scale deployment revealed today involves Beijing-based Energy-Blockchain Labs Limited. The firm announced what it described as the "world’s first blockchain-based green assets trading platform," built with Hyperledger Fabric and deployed using IBM Blockchain. The so-called "cap-and-trade" system allows companies a certain amount of carbon emissions and lets them exchange those allowances with one another to incentivize the creation of policies and technologies that minimize emissions. But a lack of transparency in the system has resulted in fraud concerns, both in China and elsewhere.

Cuomo told CoinDesk the blockchain-based carbon credits exchange is designed to make it easier for companies that generate pollution to trade credits as part of the build-up to China’s transfer to a unified national market later this year. It's an application that has won the support of the Chinese government as well. The director of China’s National Climate Change Strategy Research and International Cooperation Center, Li Junfeng, said in a statement:

"We must work to limit high energy consumption and high emission industries, encourage clean energy development and further promote energy saving and emission reduction. These tasks are not only necessary for China’s own sustainable development, but for the welfare of the entire human family."

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

Full Disclosure of Your Salary:
Blockchain Remuneration Models

  

Alan Zibluk – Markethive Founding Member

Some of the Most Successful
Cryptocurrency
ICOs to Date

World of Cryptocurrency

One of the most popular trends in the world of cryptocurrency comes in the form of companies raising funds through an ICO. Several of these projects have proven to be quite successful in the process, raising millions of dollars from investors all over the world. The list below highlights some of the successful crypto ICOs.

ICONOMI

The ICONOMI project has attracted a lot of interest from cryptocurrency investors during their crowd sale. The company aims to provide a connection to the distributed economy by allowing anyone to create their own Digital Asset Arrays. This digital asset management platform allows anyone in the world to create their own DAA and manages it accordingly. However, the project should not be looked at as just a marketplace for value tokens.

During the ICONOMI ICO, the team hoped to raise around US$10m in funding. It was quite an ambitious goal at that time, yet the investors helped the team reach that goal with relative ease. Even though US$10.5m sounds like a lot of money, it pales in comparison to some of the other recent successful ICOs. The company reported nearly 4,000 investors from all over the world partook in this ICO, which is quite intriguing.

WAVES

The year 2016 was quite a positive one for cryptocurrency projects looking to raise a lot of money. WAVES made quite an impact, as the team raised the US$16m worth of bitcoin in the end. That is quite a significant amount, although some other projects raised more funds in the process. Unfortunately, the WAVES ICO turned into a very controversial topic later on, as allegations were filed of how the company successfully scammed investors. The thread on bitcoin talk is worth reading through, that much is certain. Despite these allegations, new projects are still built on top of WAVES, indicating some of these rumors might be overstating things.

Lisk

The Lisk platform has seen its fair share of success, especially during the ICO phase. With US$5.8m raises in a short amount of time, investors were more than excited to invest in this new crypto-based project. Ever since launching the platform in Q2 of 2016, the team has been actively working on adding improvements to the project and its wallet. The team also liquidates some of their bitcoin raised during the ICO as part of their liquidation plan. A total of 101,000 BTC remains under their control, according to a recent Twitter update.

Golem Project

Raising US$8.6m in mere minutes is quite an amazing feat, and most people will always remember the Golem Project for achieving that goal. This significant amount of interest was not entirely unexpected, considering Golem is a decentralized global market for computing power. It is evident these types of ICOs will always see great interest from investors all over the world. Being able to rent computer resources from other people in exchange for Golem Network Tokens is something to look forward to.

Ethereum

The Ethereum ICO was one of the first of its kind to put this concept of an initial coin offering on the map. The team successfully raised US$18m over the course of 42 days, making it the number one most funded ICO in cryptocurrency. Ever since receiving that amount of funding, Ethereum has quickly grown and successfully became the second-most valuable cryptocurrency ecosystem in the world today. Although it is not the most successful ICO – The DAO raised US$150m but the project had to be abandoned – Ethereum has proven to be very successful in its own right.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

Say farewell to the Pound:
Millennials using the blockchain could lead to local currencies

For Generation Y, ATM's were the right technology at the right time. Now, millenials are turning to blockchainx

Successful ideas have as much to do with good timing as they do with great technology. For Generation Y, ATMs were the right technology at the right time, offering quick cash on demand and changing our relationship with money. For millennials, what's the next big thing in managing their hard-earned wages?

Move over Bitcoin, the blockchain is only just getting started

It may just be local currencies. These can be used in certain cities or neighbourhoods to shop in local stores, buy local goods and even pay bills for rent and local utilities. The timing is right for such a paradigm shift in the way we pay. Why? Because of the confluence of three key phenomena.The first is urbanisation. According to the United Nations Population Fund (UNFPA), the world is undergoing the largest wave of urban growth in history. More than half of the world's population lives in cities. By 2030 the number of urban dwellers worldwide will swell to around five billion. That means cities will increasingly become primary drivers of economic growth. And as the municipal hub becomes the global nexus for financial progress, so will demand growth for unique currencies that reflect this shift.

But there's another reason to expect a rise in local currencies, one that's more in line with the social and cultural norms which characterise the coming of age of the millennial generation: ironically, the denser living that comes with urbanisation does not usually engender community. As cities grow and we live in closer proximity, we feel less connected to each another. That's one reason that city living is linked to increased rates of depression.

But millennials famously need to feel connected, to feel a sense of community and belonging. Just look at the booming phenomenon of shared living – not just spaces such as WeLive and Common, but also the tendency of millennials to choose to live with room-mates rather than on their own. Yes, part of this is economic, but it also has to do with millennials' well-documented desire to reclaim a sense of the "social" that social media alone has failed to provide.

               

Why expensive security alarms could actually be putting your valuables at risk

That is exactly what local currencies are doing – building urban communities from the wallet up. Local currencies create this sense of community that millennials crave by giving city residents the chance to support local merchants and vice versa. Rather than seeing hard-earned cash go into invisible pockets, it stays within the locality of the spender. When money is kept within the confines of the community, it expands opportunities within, adding value to every dollar spent. Consider the American Independent Business Alliance study that found that for every dollar spent at a locally-owned business, 48 % stayed in the community as opposed to 14% of every dollar spent at a chain. In other words, we can use money itself in the form of local currencies to help create community in an otherwise alienating and lonely urban landscape, turning the city itself into a driver of economic growth and change while revitalising the way people feel about spending their money.

Take two successful examples: the Brixton Pound, a currency in south London "designed to support Brixton businesses and encourage local trade… for use by independent local shops and traders", and Tel Aviv's Pishpesh, used by 300 local merchants in the city. Again, cash in the service of a community.

But such currencies wouldn't have been the least bit valuable unless there existed the technological underpinnings to make them viable. And that brings us to the third timely phenomena enabling this shift in the way we view our money: the blockchain enables local currencies in a way similar to how high-speed internet enables Spotify and YouTube. Transactions occurring via blockchain are highly secure, corruption-resistant, accessible to anyone with a smartphone and offer real-time economic data that can be used to help meet the needs of local economies. Blockchain technology affords citizens a way to support local businesses, drive economic growth and increase job opportunities by developing and using a local currency.

In short, the confluence of growing urbanisation, the rise of the millennial generation and emerging blockchain technology is what makes the timing for local currencies so ripe. This can lead to a new way of thinking about money – one based not on scarcity and competition, but rather on cooperation. Imagine you were offered a million pounds, but it came in a box that can never be opened. Would you want it? The answer is no because money itself isn't valuable, it's what you can do with it that gives it worth. That's exactly what millennials are beginning to do with localised currencies – make money more meaningful.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

Bitcoin Price Spikes to $1,600 in Nigeria

 

Nigeria’s Bitcoin Price is Going Crazy

Nigeria is displaying an insatiable appetite for bitcoin right now. NairaEx, one of the leading cryptocurrency exchanges in the country, is trading BTC at nearly US$1,600 each. Considering how the market average is just above US$1,10 right now, the situation raises a lot of questions. Bitcoin is being embraced by the Nigerian population by the look of things, even though no one is quite certain as to the exact cause for this sudden demand.

It is not uncommon to see certain regions of the world trade bitcoin at slightly higher prices. China, for example, has paid a 5% premium for bitcoin for as long as people can remember. Indian exchanges have gone through a similar situation when the demand for bitcoin was met with low liquidity. Nigeria, however, is doing things very different from those countries, as their bitcoin premium price is much higher than one would expect.

To be more precise, trading bitcoin at NairaEx will currently cost traders 494,755 Naira. A quick currency conversion tells us that is equal to nearly US$1,600 at current rates. That means Nigerian traders are  – willingly – paying a near US$600 premium per bitcoin right now. Although this bodes well for cryptocurrency valuation in general, one does wonder what is driving this sudden demand. Moreover, it is unclear why such a steep premium price is not slowing down the demand right now.

A few days ago, it was clear the weekly bitcoin trading volume in Nigeria was on the rise. Just last week, over US$1.3m worth of bitcoin was traded in Nigeria – according to Trail Blazers Nigeria – which is quite a staggering amount. Do keep in mind this volume only represents LocalBitcoins trading and does not take exchange volumes from NairaEx into account. Interestingly enough, the current LocalBitcoins price for bitcoin is nearly the exact same as the one found on NairaEx.

Finding an explanation for this sudden development is not easy, though. Nigeria has seen an uptake in internet and technology use over the past few years, which could eventually lead to increased cryptocurrency adoption. However, there is also the threat of MMMGlobal, which now only accepts bitcoin as a payment method. Even though a lot of people know MMM is a Ponzi Scheme, Nigerians continue to invest bitcoin into this program.

Perhaps the biggest mind shift comes from the growing number of merchants accepting bitcoin payments in Nigeria. Thanks to companies such as BitPesa, it becomes easier to use cryptocurrency for everyday needs. The company recently launched a new feature allowing Nigerian businesses to transfer funds to Chinese partners over the bitcoin network. More efficient payment solutions will lead to a booming economy, all of which is made possible with bitcoin right now.

Last but not least, the local media are paying more positive attention to bitcoin as well. An article about Satoshipay surfaced on the Nigeria Today website yesterday, explaining how anyone can make money with bitcoin. All signs are pointing toward a bright future for bitcoin in Nigeria, even though it remains to be seen if these high premium prices will be sustained for long.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

 

Bitcoin – you might have heard about this digital currency, and it’s gaining some traction in payments. Online retailers like Newegg and Overstock.com accept it. There are services that let consumers convert Bitcoin into gift cards for use at their favorite retailers. And beyond that, bitcoin doesn’t seem to be going away.

Bitcoin, however, is but one piece of the conversation about emerging technologies such as blockchain and distributed ledger technology, thus it helps to first start a conversation about these concepts. You might even be more curious to learn how blockchain and Bitcoin might feature in the future for your business.

What is blockchain?

The easiest way to understand blockchain is to think of it in terms of a typical bank account. When you spend money, it’s recorded as a transaction in your bank account, right? It’s the same thing with bitcoin or other industries using blockchain technology. A transaction is recorded in a “block.” Think of blocks like your monthly statements, which neatly divide up your transactions for easy reference (month, date, time, vendor, amount, credit or debit). A set of transactions is recorded as a block once it?s been verified by distributed trusted parties.

Once a block of transactions is complete, they become part of the blockchain. They are linked together in proper order (both chronologically and in a linear fashion), and each block links to the block before and after it in the sequence – much like your bank statements for each month showing a starting and ending balance. Blocks are impossible to alter once they’re part of the blockchain, which can create a more trusted, unchanged record of transactions or data that a large network of parties can see and verify.

How does blockchain work within the use case of currency?

To understand how virtual currencies such as bitcoin and other blockchain-based systems work, we have to have a look at credit/debit transactions and cash. Credit/debit transactions are what are referred to as “pull payments.” A merchant terminal (virtual, i.e. online, or physical) processes a customer’s credit card using all of the encoded information and then decides how much money to “pull” from a customer’s account to satisfy a purchase.

Cash, and bitcoin are “push” forms of payment. In every bitcoin and cash transaction, a customer decides how much money to hand over to a merchant to satisfy a purchase. There’s no exchange of sensitive personal information, such as what’s found on a plastic card. Bitcoin and cash are not reversible and each can only be refunded by the holder who is initiating a return. This means that bitcoin and other forms of payments powered by blockchain technology are more like cash than even a debit transaction. It also means that industries outside of payment technology are taking notice of how the foundation, blockchain, could help better manage data and information.

How is blockchain being used outside of payment processing?

The mortgage title industry and diamond industry have begun leveraging blockchain technology to solve some of their most critical challenges. According to a January 2016 report by NASDAQ, these two industries are taking advantage of blockchain technology in a few ways.

The diamond industry has long faced challenges around fraud relating to the certification of diamonds, which can dictate the value of one diamond over another. Blockchain technology allows for the recording of diamond certification and for that information to be immutable and shared between insurers, law enforcement, and those who are filing claims. For the real estate sector, title fraud is also a rampant problem. By recording property titles using blockchain technology, title insurance companies can save millions each year fighting title fraud, because titles become permanent and in historical record once they are part of the blockchain. There are other pending applications for medical technology (such as sensitive patient medical information) and the credit ratings industry as well.

What’s next?

Blockchain technology has been gaining attention for some time, and several industry consortiums have developed to track and innovate with the technology and identify applications for it in business. Just a segment of these groups includes R3 and Chain, two consortium groups, and consulting specialist groups such as SolidX. Ultimately, it will take many factors to determine the applications and use cases of blockchain technology in the coming years, but it has become a promising mechanism for data management, record-keeping, and payment processing in its early stages.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

How blockchain can be a force for good in the developing world

Blockchain is a digital architecture most commonly known as the technology behind bitcoin, the virtual currency. A number of its applications have particular relevance to the developing world.March 17, 2017 —Anita is an in-home care nurse in the United States. Each month she sends a portion of her earnings to relatives back in the Philippines. These monthly gifts ensure that Anita’s two nieces can afford new clothes and school supplies, that her father can pay for quality healthcare, and that her brothers won’t have to worry about covering the costs of the family farm after an unusually harsh season.

Meanwhile, Anita’s monthly support means serious dollar signs for money transfer companies like Western Union. In 2015 alone, migrant workers sent an estimated $582 billion to relatives back in their home countries. With average fees of around 8 percent for international money transfers, the global remittance market has become a reliable cash-cow for traditional financial institutions.

While a $10 transfer fee might not sound like much, it represents nearly three times the daily cost of food for an entire low-income Filipino household. Thinking of all the uses her family might have for an extra $10 each month, Anita recently decided to switch to Abra, an online money transfer service that uses cutting-edge technology to perform secure transactions without any of the typical fees imposed by financial intermediaries. Abra – like Hong Kong-based OKLink or BitPesa out of Nairobi – is just one of a growing number of international money transfer companies that stand poised to upend the global remittance market by using blockchain, a digital architecture most commonly known as the technology behind the virtual currency, Bitcoin.

But what is blockchain?

In broad strokes, blockchain is a way to securely record transactions in a distributed digital ledger. This distributed ledger shifts the responsibility of verifying transactions from a single trusted authority, like a bank for example, to a shared effort involving every participant in a network. By allowing users to conduct secure transactions with one another directly, blockchain eliminates the need for regulatory middlemen. This allows companies like Abra to save time and money by avoiding the lengthy processing periods and fees imposed by traditional money transfer services.

Even more exciting is that companies like Abra are using blockchain to promote financial inclusion. By allowing unbanked individuals and communities to send and receive cash directly, blockchain-backed transfer services reduce the barriers that keep many of the world’s poor from gaining liquidity. Unsurprisingly, blockchain is rapidly proving to be a powerful force for good in the developing world, and disrupting the remittance market is just the tip of the iceberg. The distributed ledger at the core of blockchain has a dizzying number of applications outside of finance. While national governments have begun experimenting with blockchain-backed land registries, fresh players in the development world have started to explore alternative uses for immutable records and self-enforcing contracts.

Many of blockchain’s potential applications in the development world deal with streamlining internal operations. For example, an Italian startup called Helperbit is using blockchain to rein in the lack of transparency that often hampers disaster relief efforts. By using a distributed ledger to allow donors to monitor the allocation of their funds, Helperbit stands to promote accountability in the nonprofit sector while encouraging would-be donors to get involved. Meanwhile, a host of companies are putting blockchain to work in the field. Provenance, headquartered in London, is using blockchain to shed light on global supply chains and promote socially responsible and sustainably sourced products. A recent pilot study tracked Indonesian yellowfin and skipjack tuna from “catch to consumer” to demonstrate how blockchain can be used to verify sustainability claims and combat rights abuses in the international fishing industry.

Operating in a similar vein, the Brazilian lumber exchange company BVRio recently adopted blockchain backed timber registries to discourage illegal logging operations. The new blockchain registry provides an accessible toolkit for due diligence, encouraging sustainable sourcing in an industry long fraught with violations of environmental law. Like most disruptive new technologies, blockchain has its fair share of critics. Observers in the development sector are right to point out that blockchain’s uses might be seriously hindered by poor energy infrastructure and unreliable internet connections, conditions that frequently affect communities in the developing world.

Still, many of these claims may be overblown. As the market warms and the technology gains traction, blockchain-based services are becoming increasingly accessible to individuals in remote and technologically strained environments. Consider that multiple blockchain-backed currency exchanges can already be operated by SMS alone. With a little instruction, someone in sub-Saharan Africa equipped with nothing more than a pre-paid Nokia cellphone can benefit from blockchain.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

But there's a massive backlog of transactions in bitcoin that are waiting to happen. The number of outstanding transactions is up more than four times from just six months ago, according to data from bitcoin wallet Blockchain. This is bad for a system that has promised fast and cheaper transactions than the traditional financial system.

Because of this, a group called Bitcoin Unlimited has emerged. This faction is suggesting increasing the size of the block which would allow more transactions to be bunched together and processed. Major bitcoin industry players including Roger Ver have backed the plan. But some developers in the community suggest that increasing the block size could be unsafe.

What's this about a fork?

The real concern is if Bitcoin Unlimited gains major support, it could have an impact on the underlying blockchain technology that supports bitcoin. Bitcoin Unlimited has about an 11 percent market share of all the "nodes" in existence. Nodes are the backbone of bitcoin's infrastructure and refer to those mining the transactions as well as those tracking the movement of bitcoin to make sure it is all working correctly.

Nodes can run Blockchain Unlimited software which would signal their support for increasing the block size. If 50 percent of bitcoin miners adopted Bitcoin Unlimited, there would then be two major blockchains and a "fork" would be created made of Bitcoin Core, the current main software behind the infrastructure, and Bitcoin Unlimited. Both blockchains would continue to run as long as there are nodes running them. But there would then be essentially two different coins – Bitcoin and Bitcoin Unlimited.

So why has the price fallen?

And this is why bitcoin has seen sharp declines in price, while other cryptocurrencies like ether have gained support. "Bitcoin traders may have wanted to offset some of their exposure should a fork occur or the scaling deadlock to continue, and ether seems to be the most promising alternative. Bitcoin-ether volumes have surged since and are currently rivaling bitcoin-fiat currency trading liquidity," Aurélien Menant, founder and CEO of Gatecoin, a regulated blockchain assets exchange based in Hong Kong, told CNBC by email on Friday.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member