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HomeAsiaPart I: The future of blockchains and cryptocurrencies holds even greater disruption

Part I: The future of blockchains and cryptocurrencies holds even greater disruption

Even back in 2017, as the world is going through a Bitcoin revolution, China’s ban on ICOs and cryptocurrency exchanges sent shockwaves across the world last week. An official order from the Chinese government sent out to Beijing-based exchanges asked to cease trading of Bitcoin and immediately notify users of their closure. The crackdown was aimed at limiting risks as consumers pile into a highly speculative market that has grown rapidly this year. The crackdown in China, in fact, indicates the growing acceptability of Bitcoin in the country. China is in the forefront of this revolution, as the biggest Bitcoin miners are all located in this Asian giant. While other fast-growing markets also realise its potential, the ambiguities surrounding this new-age technology persist. What is Blockchain, and what does the future hold for Bitcoin? e27 sat with two experts, Pankaj Jain and Nitin Sharma, who have worked in the venture capital industry for years before delving into Bitcoin, to cast light on the pros and cons of this technology and its future. Edited excerpts: What is the context in which you are collaborating, and what drew you to the Blockchain and crypto space? For many years, we have been venture investors separately across various stages and funds (500 Startups, Lightbox, and NEA) in multiple geographies. We’ve been watching blockchain for a few years and also dabbled in Bitcoin as far back as 2013. Also Read: Bitcoin vs Altcoins: Which is the better investment? Over the course of this year, we dove into various ideas to understand what could fundamentally change the way companies worldwide are built, operated and funded in the future. We have met dozens of participants and stakeholders across the US, Europe, India, and Southeast Asia and learned that innovation is being decentralized and distributed in a way not seen since the early 90s. Source: Coinbase blog The Internet was built on TCP/IP, SMTP, FTP, HTTP and other protocols, which have changed everyone’s life and created trillions of dollars in value. It can be argued that Blockchain and its applications offer the vision of a whole new kind of Internet 2.0. It has been fun for us to dive deep into the space and (a) identify promising investment opportunities and (b) think of ways we can help startups (especially in the US, India or Southeast Asia) with our experience and networks. What is a good way to understand Blockchain, and why is it important? The main idea is “decentralization”, whereby applications or transactions can run without a centralized platform or authority. Examples would be Bitcoin as a currency exchanged without involving a bank, or land records maintained across a network without one central repository, or a new distributed peer-to-peer data storage mechanism not relying on a specific company and its data centres. Blockchain technologies make this possible. The way this is accomplished is via the notion of a distributed ledger. This means that the record of all transactions in a particular system is replicated on hundreds or thousands of different nodes (computers) vs. being with one central party. This ledger is not only distributed but also public and immutable. Also Read: Can Bitcoin help us in the fight against climate change? Additions to the ledger happen via consensus mechanisms that leverage computational resources of the network and guarantee that a majority of nodes validate the accuracy and security. Now, what makes all this possible is the state of connectivity and data infrastructure today and the robust applications of cryptography. There’s a significant amount of cryptographic complexity behind the scenes, but the key is to appreciate that such systems can ensure a high level of trust, transparency and speed without the transaction costs or delays that are normally associated with a central authority. Obviously, all this is worth paying attention to because it challenges many of our notions: Will companies of the future be essentially run on distributed code and smart digital contracts? Is there a different way companies should be funded? Will all this give more power and value to end users? Will social networks be different? People often talk about Bitcoin and Ethereum. Which is a better investment? We don’t want to offer any speculative advice around short-term prices, trading or arbitrage opportunities. What is more important to understand for an average investor just beginning to follow this…


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