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The origin of blockchain platforms

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We’ve heard of digital cash. But what more can blockchains do?

Jonas Bostoen

Photo by Launchpresso on Unsplash

The first and most obvious blockchain application was Bitcoin — digital cash. But actually, this is a blockchain’s most primitive form. As Ethereum showed the world, there’s a lot more blockchains can do. In this article, we’ll explore how platforms like Ethereum came to be, and what they can be used for.

  • Colored coins want to serve as a protocol that would allow people to create their own cryptocurrencies on the Bitcoin blockchain. A bitcoin (1 of the 21 million), is often seen as just a neutral medium of exchange. However, it is possible to assign some sort of “color” to a set of bitcoins so that they can be distinguished from the rest (“color” here being just a property that makes one set of coins different). Those bitcoins can then sort of live a life on their own, since they represent something entirely different. They are just as secure as normal bitcoins though, since technically, they still are bitcoins. And because they’re part of the Bitcoin infrastructure, they don’t need a third party, and can even be exchanged for one another in an atomic swap. These coins could then be used to represent some other form of ownership or value such as smart property, commodity certificates, and other financial instruments.
  • Metacoins — the basic idea of a metacoin is to add extra functionality to the Bitcoin protocol by using Bitcoin transactions to store metacoin transactions (remember, transactions are not only transfers of value, but more like transfers of information. Some information can be value, but it doesn’t necessarily have to be). The promising thing about metacoins is that they can add all sorts of functionality to the Bitcoin network while maintaining the same security. Think of Counterparty, which is a metacoin. One of the things they are building is a decentralized exchange on the Bitcoin blockchain. This might sound like a terribly inefficient exchange, which it is, but with advances in SegWit and Lightning Network, it might become a viable DEX competitor in the future.
  • Build a protocol on top of Bitcoin

Scripting

There is, however, a way to write weak versions of smart contracts. A transaction can be programmed by the simple Bitcoin scripting language. A good example of this is a multisig wallet, or a wallet that needs two or more private keys to be accessed. This scripting language is also used by metacoins.

From their whitepaper:

A blockchain platform is a foundational blockchain layer on which all sorts of smart contracts and decentralized applications can be written that maintain their safety through the underlying blockchain’s infrastructure.

Smart Contracts

Now that we understand what a blockchain platform is, let’s look at some of the things that it can be used for. A common use case is smart contracts, first conceived by Nick Szabo in 1994. A smart contract isn’t some sort of magic contract, it just allows you to solve a lot of problems in a trustless fashion. They help us exchange money, ownership, or anything of value really, in a transparent and conflict-free way without using a middleman. The only thing one has to rely on is the execution of computer code.

Decentralized Applications / dApps

A second big use case of course are decentralized applications. Imagine a company or service (it can be a lot of things) that isn’t controlled by any central entity. It is censorship resistant and there is zero downtime. dApps allow for services to be truly peer to peer, prioritizing the needs of everyone using it.

  • The second category are semi-financial applications. Money is involved, but there’s also a big non-monetary side to the app. A good example of this is Richard Craib’s Numerai, which can be described as a decentralized hedge fund. Every week users get stock market data on which they have to train models to predict the future. Users then stake Numeraire, the cryptocurrency powering Numerai, on their models, and the users that staked on winning models get their investment back and more. Other stakes are destroyed. This makes their hedge fund terribly efficient, since users put their own money in the game. Another example is Golem Project, a decentralized computation platform. Decentralized storage systems like Filecoin and Siacoin are another.
  • The third category are non-financial applications. In the Ethereum whitepaper online voting and decentralized governance are mentioned. Horizon State and their Decision Token focuses on decentralized voting, while Aragon is a project that focuses on decentralized governance. In their own words:

Source: https://medium.com/the-capital/the-origin-of-blockchain-platforms-b8892cc8b51b?source=rss——-8—————–cryptocurrency

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