Cryptocurrency, ICO, and Blockchain Technology
Event April 12, 2018
By Kristen Schneider
On April 12th, GIT-Paris members gathered at WeWork Lafayette to learn about the emergence of Cryptocurrency, ICO and Blockchain technology from Brian O’Hagan and Emilie Debedde of Paris’ La Maison du Bitcoin. We often hear the terms “blockchain”,”bitcoin” and “cryptocurrency” today but what do these words actually mean?
I had a vague idea about blockchain technology, bitcoins and other cryptocurrencies before I attended this event but the presentation helped me get a clearer understanding of what these terms mean. I left the presentation marveling at how simple these concepts are to understand while at the same time seeming complicated with all the use cases and players who are out there today.
Basically, blockchain is a type of distributed ledger technology. It enables decentralization and maintenance of transaction history among those who are part of the chain, i.e., “nodes” in an encrypted environment. With this technology, the transactions are secure and no intermediary/middleman needs to be involved. This saves a lot of time and money since it’s the nodes on the blockchain which verify the transaction and the parties involved.
Brian explained that today there are many blockchains out there but all have the following common characteristics:
Immutable, i.e., unchangeable
Distributed, i.e., spread among participants
Can store any type of data
One application of blockchain technology is for cryptocurrency. Cryptocurrency is a digital asset which serves as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.
Bitcoin, first released in 2009, is generally considered the first decentralized cryptocurrency. At one point in 2011, 1 bitcoin equalled $1. Since then, over 4,000 altcoin (alternative coin) variants of bitcoin have been created.
Brian told us that today there are approximately 100,000 online websites that accept bitcoin payments. A person can pay this without sharing any personal data and the merchant doesn’t have to pay any interchange fee.
There is even a physical store in Paris’ second district which accepts bitcoins.
To send, receive, and store bitcoin, you need a “wallet” which is a piece of software or hardware which communicates with a bitcoin network. Examples of hardware wallets include Trezor and Ledger Wallet. To receive bitcoins from another user on the network, you need what’s called a public key (e.g., an email address) which can be communicated to another party. You also need a private key which is secret information that allows you to transfer your bitcoins. The participant is responsible for the safety of his or her bitcoins. If you lose your private key, you need a “recovery phrase” to restore your wallet. The recovery phrase is a sequence of English words picked at random.
More than 1,500 cryptocurrencies exist today. Names include Ethereum, Ripple, Iota, and Minero.
For more information, I recommend visiting blockchain.info which is updated every 10 minutes. When I last checked, 1 bitcoin equalled $7,265.74!
That said, Brian and Emilie urged those who are interested in buying cryptocurrency should thoroughly research it to avoid being scammed.
An initial coin offering (ICO) or initial currency offering, a type of crowdfunding using cryptocurrencies, is a means of raising capital. An ICO can be a source of capital for startup companies. In an ICO, a quantity of the crowdfunded cryptocurrency is sold to investors in the form of “tokens”, in exchange for legal tender or other cryptocurrencies such as bitcoin or ethereum. These tokens are promoted as future functional units of currency if or when the ICO’s funding goal is met and the project launches.
ICOs provide a means by which startups avoid costs of regulatory compliance and intermediaries, such as venture capitalists, bank and stock exchanges while increasing risk for investors.
Cryptocurrency is by no means the only example of the practical use of blockchain technology. For other examples, see https://www.linkedin.com/pulse/30-practical-uses-blockchain-technology-you-should-know-bernard-marr/