Blockchain Technology – Story from Anonymity to Mass Adoption

INTRODUCTION

The year 2020 was?unprecedented?and cannot be defined as normal. Things and situations that were never imagined or imagined only through fiction or movies had happened. Almost 60% of the world was confined to four walls of their house. The world comes to a standstill with no flights taking place. From masks and sanitizers to panic shopping of toilet rolls and the Stock market crashed all happened in 2020. However, 2020 was also the year, which marked the mainstream adoption of cryptocurrencies and mass adoption of blockchain. After the sunshine year of 2017, a long crypto winter casts a cloud of doubts on whether this so-called disruptive technology will ever gain mass adoption. Bitcoin, the flag bearer of blockchain technology saw six times jump in its evaluation within a short period and now worth more than Visa and MasterCard combined. It took 10 years for the overall market cap of all cryptocurrencies to reach the 12-digit market capitalization (1 Trillion) on Jan 6th, 2020, but it took less than 100 days to reach to next milestone of the $ 2 Trillion market capitalization.

Over the past 12 months, the parabolic rise of bitcoin and other cryptocurrencies had come as institutional investors have started showing their interest in this technology. The wave of 2017 was credited to retail investors but the tsunami of 2020 is largely driven by institutional investors that have the firepower and deep pocket to put big money in it. Reaching the $ 1 trillion market cap was a big psychological milestone as it cements cryptocurrencies as an investable asset. Crypto market cap is still only a fraction of gold, equities, and many other assets, but crypto is in a unique position to be the most important asset class of the 21st century and still has room to grow. ?

In this whitepaper, I will throw light on how blockchain, bitcoin, and other related technology are coming out of age and gaining wider acceptance at organizational levels outside the realm of retail investors. I will also examine the status, the road ahead, and the key factors that can affect mass adoption.

?BLOCKCHAIN – THE NEXT DISRUPTIVE TECHNOLOGY

Bitcoin and blockchain are often used interchangeably for each other. Most people do not know the basic difference between the two. However, there is a fundamental difference between the two.

Blockchain is the technology platform while bitcoin is a virtual digital currency that was created using the concept of blockchain. Therefore, bitcoin was the first example of blockchain in action and without blockchain, there would be no bitcoin. That is why the two names are so often used interchangeably. Bitcoin is just one example of a cryptocurrency, though; other cryptocurrency networks are also powered by blockchain technology. Not only cryptocurrencies but also blockchain use cases are now being utilized and explored in other areas like Decentralized Finances (DeFi), Decentralized Exchanges (DEx), Non-Fungible Tokens (NFT), etc.

Blockchain is an innovation in the registration of information and distribution with the elimination of trusted intermediaries that were required to establish the digital relationship.

Though being perceived as an innovation, blockchain is not new but rather it is an amalgamation of already proven technologies (the internet, Private Key cryptography, and a protocol governing incentivization). This amalgamation results in a system of digital interaction that does not need a trusted third party (e.g. banks, governments, financial institutions, stock exchanges, settlement agency), and digital relationship is established by a robust network architecture of blockchain technology which functions as a single version of the truth.

At the core of technology, a blockchain is a decentralized, distributed, and public ledger with a growing list of records linked to other blocks using cryptography. The records once written on the ledger cannot be changed retroactively without the alteration of all subsequent blocks and with the consensus of the network and hence blockchain is tamperproof. In a blockchain network, a central authority does not govern records; instead, all the participating entities in the network can view, store, exchange & verify the record. Since blockchain is created on a distributed network, hence the chances of the monopoly of central authority, corruption, and failure are eliminated. All parties to the transaction maintain a copy of the ledger (i.e. the blockchain), which means it would be practically impossible to amend every copy of the ledger globally to fake a transaction.

The credit of writing the first whitepaper behind the concept of bitcoin goes to a mysterious character who goes by the name of Satoshi Nakamoto. Nobody knows who is he or she, whether he/she is a person or an organization, or even an alien. Even, it is not clear whether he is alive or dead because the bitcoin that was mined (or created) by Satoshi as part of initial mining had never been back on blockchain. When Satoshi published his research paper in 2008, his main idea behind the cryptocurrency was to create an electronic payment system that was more secure and resistant to fraud than credit cards and eliminated the need for trusted intermediaries like financial institutions, banks, and governments. A central institution like a government or even a governing nonprofit should not control cryptocurrencies; they are supposed to give the holder the reliability of gold, without the inconvenience of having to transfer a physical item to make a transaction.

BLOCKCHAlN BEYOND CRYPTOCURRENCY

Blockchain actually has much wider applications beyond cryptocurrency networks. In fact, blockchain’s potential is so great that many people (myself included) believe the technology will revolutionize the way we do business, just as the internet did before it.

Here are just a few examples of the wider applications of blockchain beyond bitcoin and other cryptocurrencies:

• Executing smart contracts - Thanks to bitcoin, we already know that blockchain is great for facilitating digital transactions, but it can also be used for formalizing digital relationships through smart contracts. Smart contracts execute automatically once their terms are met, without the need for human intervention, which promises to save time and help to reduce inconsistencies or solve disputes.
• ?Maintaining a shared, transparent system of record - Blockchain is the ideal solution for maintaining a long-term, secure and transparent record of assets (land rights would be a good example) that all parties can access securely.
• Auditing the supply chain - Blockchain allows users to trace the records of ownership for goods all the way back to the source. As an example of this, a blockchain-based system could ensure a chain-of-custody log, tracking each step of the supply chain at the individual drug or product level. It will help in complete audit trail of purchase of raw material, manufacturing, purchase and distribution of drug.
• Providing proof of insurance - Nationwide insurance company is planning to use blockchain to provide proof-of-insurance information. The tool would help police officers, insurers and customers verify insurance coverage instantly, which should help to speed up the claims process.

KEY BLOCKCHAIN CONCEPTS

Smart Contract

As mentioned above, a smart contract is a self-executing computer program with the terms of the buyer and seller’s agreement directly embedded into lines of code. The program, along with the agreement it contains, is distributed across a decentralized blockchain network such as Ethereum or ontology. A smart contract is automatically executed when certain conditions are met. Once the code is executed, it is virtually impossible to reverse or alter.

Smart contracts enable transactions and agreements to be anonymously executed among two or more parties that do not trust each other, without the need for a third-party authority, justice system, or another external mechanism.

A smart contract is analogous to a vending machine, as opposed to a store where you have to pay a merchant to buy. With a vending machine, you don't have to deal directly with the merchant (vending machine owner) since you can simply transact automatically by inserting coins in the machine and your chosen item will drop. This direct way of transacting without the need to know or trust who you’re dealing with is what makes a smart contract favorable. Businesses have already started implementing smart contracts in their systems as they provide better protection from losses, as well as make customers feel safe.

Decentralized Applications (DApps)

DApps are any computer applications whose operation is maintained by a distributed network of computer nodes, as opposed to a single server.

The concept of a decentralized application was enabled by blockchain platforms that support smart contracts, the first of which was Ethereum (ETH). In addition to being a regular cryptocurrency, Ethereum supports something called the Ethereum Virtual Machine (EVM), which can be described as a distributed computer, whose state at any given moment is defined through a consensus algorithm.

EVM is Turing-complete, which means that it can execute every operation a regular computer is expected to be able to perform. It has its own programming language, Solidity, which allows developers to code and run any application they want on the EVM in a decentralized manner.

As a result of the way they are executed, DApps can provide the same quality of service that regular apps are capable of, while at the same time enjoying full advantages of decentralization, such as almost constant uptime and resistance to censorship and corruption.

There are many examples of successful DApps with millions of dollars in market capitalization and hundreds of active users, such as the Augur (REP) prediction market platform, the Golem (GNT) market for idle computer power and the Basic Attention Token (BAT) blockchain-based digital advertising platform.

Other examples of popular DApps platforms besides Ethereum include Neo (NEO) and NEM (XEM).

Decentralized Exchanges (DEx)

Decentralized exchanges or DEXs are autonomous decentralized applications (DApps) that allow cryptocurrency buyers or sellers to trade without having to give up control over their funds to any intermediary or custodian.

This type of infrastructure is entirely different from centralized exchanges where users hand over their crypto assets to the exchange, which acts as a custodian and essentially issues IOUs for users to trade with on the platform.?

DEXs were initially conceptualized to eliminate the need for any authority to supervise and approve trades made within a particular exchange. Through the help of smart contracts, DEXs operate automated order books (or automated market makers) and trades. This makes them “truly peer-to-peer.”

Decentralized Finance (DeFi)

Decentralized finance, also known as DeFi, is an ecosystem of financial applications and it uses cryptocurrency and blockchain technology to manage financial transactions. The term DeFi was coined in August 2018 in a Telegram chat between Ethereum Developers. DeFi aims to democratize finance by replacing legacy, centralized institutions with peer-to-peer relationships that can provide a full spectrum of financial services, from everyday banking, loans, and mortgages, to complicated contractual relationships and asset trading.

DeFi protocols are built on a public blockchain like Ethereum. Thousands of nodes run these blockchain, the rails to this new financial system; ––computers running the blockchain’s software–– spread out across the globe, so that it is almost impossible to control and manipulate them. While not all DeFi apps are completely decentralized, they are working to get there with teams gradually relinquishing control over their protocols.

On top of the base layer of decentralization, DeFi platforms are built to be managed by a community of users, and not centrally controlled. Users become owners of their financial applications; they’re able to participate in major decisions, including by proposing changes themselves and benefit from their growth and success. No centralized party can unilaterally take control of funds or change the rules of the game.

These Decentralized Finance protocols allow people to have control over their assets and data and for value to be transferred from one person to another, without the need to use intermediaries like banks and other financial institutions. Users are the only ones who hold the keys to their wallets and control their funds. Thus, DeFi protocols are “non-custodial”

These networks are truly global, which means there are no borders in this parallel financial system, and everyone can access it. It is like the internet, but instead of information being transferred globally, seamlessly, and creatively, the same is happening with money. It is an internet of value.?The code for these financial applications is open for anyone to see.

Although Ethereum is the clear frontrunner in DeFi, projects such as Cosmos, Tron, and Polkadot are becoming increasingly popular, largely due to interoperability and freedom of opportunity provided outside of the Ethereum network. The DeFi narrative has changed considerably in the past few months; many projects, which were once on the fringe, are showing increasing signs of crypto mass adoption, therefore increasing opportunity for developers and investors.

Yield Farming

Yield Farming involves trying to get the maximum possible return from cryptocurrency. This involves earning interest by lending digital assets to others, or locking up the crypto in a liquidity pool. Some decentralized finance protocols also issue governance tokens as a reward for participants.

Yield farmers calculate their estimated returns using the annual percentage yield metric, because APY takes compounding in to account. Investors will normally switch between different DeFi protocols in order to get the best deal possible. But, this is not risk free as DeFi protocols are evolving and currently they can be subjected to loopholes in the source code, which makes the fund of investors at risk. Hence, due diligence is suggested before entering the world of DeFi.

Non-Fungible Tokens (NFT)

The beginning of 2021 was marked by an unprecedented high interest in the non-fungible token, or NFT, technology in various fields, the peak of which occurred in March. Nowadays, news about art deals with NFTs appears every day. Everyone from?social media influencers?to?celebrities?have embraced NFTs.

In March, Time magazine cashed in on the NFT mania by listing a set of?tokenized magazine covers?on NFT marketplace?SuperRare, with the “TIME Space Exploration - January 19th, 1959” non-fungible token?fetching?135 Ether (ETH) worth almost $250,000 on March 30.

Jack Dorsey, founder of micro-blogging site Twitter, recently put his first tweet for auction as NFT. The Tweet – “Just Setting up my twttr” was Dorsey's first tweet, made on March 21st, 2006. The tweet was sold on auction on a platform called Valuables and fetch him $2.9Million, which he decides to give to charity for the treatment of people infected with Covid-19 in Africa.

Non-Fungible goods are irreplaceable, unique, and limited in quantity. These can be represented on the blockchain via non-fungible tokens (NFTs). NFTs cannot be replaced, faked, or divided. NFTs can represent artwork, collectibles memorabilia, and personal data. Other examples include gaming characters, digital identities, and certificates.?

The author of the token can prove their ownership or the fact that a transfer of said ownership has taken place. That is, the owner of such a product can tokenize it by releasing an NFT, assigning a price to it, and putting it up for auction. The buyer of such tokens receives the right to own and dispose of the goods, while information about this is recorded on the blockchain. Each NFT has its own blockchain-based digital signature, which serves as a public ledger, allowing anyone to verify the asset’s authenticity and ownership.?

Whether NFT is a temporary craze or will it offer a much more interesting approach than simple marketplaces is something to look out for future.?

BITCOIN

Bitcoin most unique advantage comes from the fact that it was the very first cryptocurrency to appear on the market as well as there is limited supply for it. There will be 21million bitcoin that will be created by 2040 and after that, no more bitcoin will be mined (created).

It has managed to create a global community and gives birth to an entirely new industry of millions of enthusiasts who create, invest in, trade and use bitcoin and other cryptocurrencies in everyday lives. It has created a conceptual and technological basis that subsequently inspired the development of thousands of competing projects.

Mining Process

Bitcoin’s total supply is limited by its software and will never exceed 21,000,000 coins. New coins are created through a process known as Mining. As transactions are communicated across the network, they are picked up by miners and packaged into blocks, which are in turn protected by complex cryptographic calculations.

As compensation for spending their computational resources, the miners receive rewards for every block that they successfully add to the blockchain. At the moment of bitcoin’s launch, the reward was 50 bitcoins per block. This number is halved with every 210,000 new blocks mined, which takes the network roughly four years. As of 2020, the block reward has been halved three times and the reward is now 6.25 bitcoins per block. Mining bitcoins can be very profitable for miners, depending on the current hash rate and the price of bitcoin.

Bitcoin Network Security

Bitcoin is secured with the SHA-256 algorithm, which belongs to the SHA-2 family of hashing algorithms, which is also used by its fork Bitcoin Cash (BCH), as well as several other cryptocurrencies.

Value of Bitcoin

The current valuation of Bitcoin is constantly moving, all day every day. It is a truly global asset. From a start of under one cent per coin, BTC has risen in price by thousands of percent to the current level (All time high of USD~65K). The prices of all cryptocurrencies are quite volatile, sometime going up by 100% and going half with in few hours. However, there are times when different countries and exchanges show different prices and understanding how much is bitcoin will be a function of a person’s location.

Consensus Protocols

Consensus protocols form the backbone of blockchain by helping all the nodes in the network authenticate the transactions. The consensus protocol used in bitcoin is called Proof-of-Work. It is the idea that a person’s odds of getting rewards of a mined block depends on the amount of work he/she put in. A simple but revolutionary idea that is changing the world.

Before bitcoin, the framework of government-issued currencies called fiat currencies worked like this –

There are two categories of citizens:

1. Ordinary Citizens – Ordinary citizens have to work hard to be paid in fiat currency. Once they earn them, they should spend or invest this currency as soon as possible because this money, sitting idle, loses value every day, as more and more money is printed.?
2. Privileged Citizen – Whenever new money is created, most of it goes to privileged citizens via interest income, cronyism, and various rent-seeking mechanism.?

Over time, the distribution mechanism ensures that all real wealth is redistributed from ordinary to the privileged group. At some point, group 1 can no longer accept this injustice. A battle ensues, unrest begins and civilizations collapse.?

In bitcoin, the issuance of new coins is distributed via “Proof-of-Work”. All a miner has to do to earn new coins is to show “Proof-of-Work”.

Unlike in fiat money, there is no privileged class. Nobody earns bitcoins free. With this one simple idea, bitcoin leveled the field for humanity. The world is fairer when wealth is distributed to those who do the work.

Proof-of-Work

Reversing back to October 31, 2008, when Satoshi publishes the bitcoin whitepaper. Bitcoin's Proof-of- Work (PoW) was originally invented as a measure against email spam. However, Satoshi adapts it to be used in digital cash. PoW mining using dedicated machines to convert electricity into bitcoins (via block reward). The machine repeatedly performs hash operations (guesses/votes) until it solves a cryptographic puzzle and receives bitcoins (block reward). The solution to the puzzle proves that the miner spent energy in the form of electricity, proof that a miner put in work. PoW is proof of burn, or the validation that energy was burnt. It is the most simpleminded and fair way for the physical world to validate something in the digital world. Bitcoin is a super commodity, minted from energy, the fundamental commodity of the universe. PoW transmutes electricity into digital gold.

Many critics criticize Proof-of-Work for being energy-intensive. However, the fact is that the bitcoin ledger can only be immutable if and only if it is costly to produce. The fact is that the Proof-of-Work (POW) is costly as a feature and not as a bug. Until now, to secure something valuable, it was required to build a thick physical wall around that thing. Bitcoin's public ledger is secured by its collective hashing Power: the sum of all energy expended to build the wall. In addition, through its transparent costly design, it would take an equivalent amount of energy to tear it down.?

Proof-of-Stake

Bitcoin uses Proof-of-Work (PoW) as its consensus protocol, which is energy and time-intensive. The rate of verification of transactions in bitcoin is relatively slow compared to Visa and MasterCard. Therefore, alternate consensus protocols were proposed. The Proof-of-Stake (PoS) seeks to address this issue by attributing mining power to the proportion of coins held by a miner. This way, instead of utilizing energy to answer PoW puzzles, a PoS miner is limited to mining a percentage of transactions that are reflective of his or her ownership stake. For instance, a miner who owns 5% of the currency available can theoretically mine only 5% of the blocks.

Proof-of-Stake must have a way of defining the next valid block in any blockchain. Selection by account balance would result in (undesirable) centralization, as the single richest member would have a permanent advantage. Instead, several different methods of selection have been devised.

Ethereum is the largest (by market cap) cryptocurrency that moved from PoW to adopt PoS.

Proof-of-Space

Proof-of-Space, also known as PoSpace, is a network consensus protocol similar to the Proof-of-Work consensus protocol. Instead of the computational resources, PoSpace uses disk storage to validate transactions. This consensus protocol again favors the miners with the maximum amount of space. It is resource biased, and therefore, miners with less amount of space cannot participate actively. This problem goes against the concept of decentralization.

Proof-of-Elapsed Time

Proof-of-Elapsed Time (PoET) is a network consensus protocol developed by the Intel Corporation. The algorithm is primarily used in permissioned blockchain ledgers. The hardware used in PoET is specially designed for this protocol. For example, Intel Software Guarded Extension (SGX) is used in networks using PoET.

This consensus protocol is used to allocate blocks to miners on the network. In permissioned blockchain systems, the miners’ identity is determined before allowing access into the network. Therefore, anonymity is not a feature in this protocol.

Each node in the network is assigned a random waiting time. The first node to complete the randomly chosen period validates the new block. The specialized hardware puts the processor to sleep during the wait time—this repeats over all the blocks in the network.

Forking

Forking on the blockchain changes the already existing rules and moves towards a new set of pre-specified rules. The rules that are put forward can either be supported by all, some, or none of the network participants.?

The word Fork has brought much upheaval in the crypto market in the short span of circulating. A Fork can be the result of differences in opinion, communication, or any other divergence between the members. In General, Forks can be considered of two types, Soft Fork and Hard Fork.

A?soft fork?is any change to a blockchain protocol that stops the rule-set enforced by full nodes that update to enforce the soft fork rules. In other words, a soft fork means that if a new set of rules are introduced that need not gain the majority, they can or cannot be applied by all the nodes. A block that is considered valid before the soft fork activates will be considered valid by others even after that. New rules are brought forward.

A Soft Fork is usually backward compatible. For instance, if an old node decides to make and verify a block, it will be considered valid by all other nodes on the network, new or old.

A hard fork is a non-backward compatible upgrade to an existing blockchain. This means that all the network nodes on a particular blockchain must either comply with the fork and update their protocol software or continue with the same outdated protocol by forming another separate blockchain entity. ??A hard fork is non-backwards compatible fork because any changes made using nodes that run on the old set of rules will be considered invalid. In simple words, if an old node decides to make and verify a block, it will not be considered valid. All changes made during a hard fork cannot be changed or deleted after the fork has been completed. Some of the most famous hard forks are the Bitcoin vs. Bitcoin Cash hard forks, Ethereum vs. Ethereum Classic hard fork, etc.

Hard Forks can further be divided into two types-

Contentious Hard Fork: A contentious hard fork is a type of hard fork that is non-reversible and non-backward compatible. It usually happens when there is a disagreement within the community. The faction that disagrees goes on to fork the chain and implement the changes they want on their new chain. Contentious Hard Forks usually result in a chain split.

Non-Contentious Hard Fork: A non-contentious hard fork is also a type of hard fork that is non-reversible and non-backward compatible. The difference being that a non-contentious hard fork is carried out to upgrade the protocol and contains consensus from all the nodes in the network.

Popular Fork in the crypto industry

BTC/BCH Hard Fork – Contentious Hard Fork

Bitcoin Cash (BCH) is a cryptocurrency created in August 2017 from a fork of?Bitcoin (BTC). Bitcoin Cash increases the size of blocks, allowing more transactions to be processed.

Bitcoin Cash?was started?by bitcoin miners and developers concerned with the future of the bitcoin and its ability to scale effectively. The key difference between BTC and BCH is the block size. The bitcoin?block size is limited to 1 MB, while bitcoin cash offers a block size of 8 MB, which was later upgraded to 32 MB.

Ethereum/Ethereum Classic Hard Fork – Contentious Hard Fork

A contentious hard fork on Ethereum occurred in July 2016, when participants disagreed over whether to revert the blockchain to cancel out the effects of a major hack. This affected the DAO, a decentralized autonomous organization (DAO that has raised approximately $150 million in an initial coin offering).

Segregated Witness (SegWit)

SegWit is a?soft fork?upgrade to the?bitcoin?network, meant largely for mitigating scalability problems by increasing block size limits on its blockchain. SegWit works by removing signature data and reducing the size of the?transactions, allowing more transactions to be included in the same block.??

A further SegWit proposal called SegWit2x aimed to not only change transaction batching but also increase bitcoin’s block size from 1MB to 2MB. However, as SegWit2x required a hard fork and was a more fundamental change to the bitcoin protocol, the developer community could not reach consensus and ultimately the proposal was abandoned.

ORGANIZATIONS USHERING THE WAY TOWARDS MASS ADOPTION

Institutional demand for bitcoin has grown significantly over the past 12 months. The arrival of major players like MicroStrategy, Tesla, PayPal and SQUARE have made BTC investments more pleasant to mainstream investors who were once critical of the digital asset class. Institutions like pension funds, hedge funds, as well as high-net-worth individuals with trillions of dollars in combined value are starting to pay attention and learn about bitcoin for the first time. Additionally, large institutions are recognizing the importance of bitcoin as a store of value, with many adding millions of dollars of the asset to their balance sheets, including Goldman Sachs, Standard Chartered BlackRock, Fidelity Investment and many more.

Elon Musk and his Electric Vehicle pioneer company Tesla are in news in 2021 for announcing their adoption of bitcoin. With this, now buyers can buy Tesla with bitcoin. Tesla currently holds an estimated 48,000 BTC, a number that should grow as people exchange their bitcoin for the company's electric vehicles.?

However, Elon Musk is the most prolific promoter of bitcoin but he is not the first one to adopt it.?Overstock.com was one of the major early adopters of bitcoin as a method of payment. Thanks to the CEO Patrick Bryne, Bitcoin was being accepted as a payment option on Overstock.com way back in January 2014. It collaborated with Coinbase, a bitcoin platform, to enable bitcoin as a form of payment on Overstock.com. Coinbase is a bitcoin wallet that allows consumers to buy, sell, send, and receive bitcoins. To demonstrate his trust in blockchain, Byrne also launched a venture capital firm within Overstock called Medici Ventures, intended to fund blockchain startups with his personal finances.

MicroStrategy is a company that provides business intelligence, mobile software, and cloud-based services. Although, MicroStrategy’ s underlying business has nothing to do with bitcoin or cryptocurrency, the company has become a corporate flag bearer of bitcoin ever since CEO Michael Saylor decided to convert a large portion of the company's balance sheet into the digital asset.?The company now holds close to 91K bitcoin and is adding more bitcoins at every appropriate opportunity. Recently, a filing with the United States Securities and Exchange Commission revealed that MicroStrategy’ s board of directors will receive bonus payouts in BTC instead of cash.

A number of key players in the traditional financial sector are congregating to cryptocurrencies, despite previous attempts to disparage the technology and distort its potential.?Visa,?MasterCard, SQUARE, and?PayPal?are looking to claim their place at the cryptocurrency table in an attempt to explore new markets and stay relevant by offering crypto services?to their existing customer base.

Institutional fund manager Grayscale has collaborated with Time Magazine to produce an educational video series on the subject of crypto assets. The partnership announced in April 2021 by Grayscale CEO Michael Sonnenshein, revealing that Time will receive payment in bitcoin. Further, Time does not intend to convert the bitcoin it receives through the deal into fiat and will hold the crypto asset on its balance sheet. Grayscale was founded in 2013 and has $46 Billion worth of crypto assets under management, including roughly #% of bitcoin total circulating supply.

Not just the Institutional organizations, large number of celebrities are also joining the bandwagon. Below are couple of notable celebs who have publicly declared their association and interest in cryptocurrency.

1. Maisie Williams - The Games of Throne actor, when asked on Twitter in November of 2020 whether she would buy bitcoin, tweeted that she “bought some already.”
2. Mike Tyson - The world-famous boxer has his own line of Bitcoin ATMs complete with face tattoo branding designs. He also collaborated with Bitcoin Direct to launch a Bitcoin wallet of the same branding.
3. Ashton Kutcher-?The That 70’s Show actor is a well-known investor in BitPay, a payments processor that allows merchants to accept payments in bitcoin. He has spoken out in the past, stating, “Bitcoins are obviously becoming more and more relevant.”
4. Russel Okung - The Carolina Panthers player is the first NFL player to “get half of his salary paid in bitcoin.” However, this is not technically true as all of his salary is fully paid in USD, but he immediately has half converted to BTC. Nevertheless, this is still a big step in favor of crypto.
5. Paris Hilton - The heiress of Hilton Hotels auctioned off a digital painting of her pet cat for $17,000 worth of Ethereum on the online auction platform Cryptograph.
6. Akon - The singer, songwriter, philanthropist launched his own cryptocurrency, the “Akoin,” to power a smart city in Senegal, which he plans to build.

This is not an exhaustive list of high worth individuals who have publicly supported crypto and there are many more who are coming out and openly supporting the crypto ecosystem. However, they have influencing powers but the real power lies in the hand of CEO’s, entrepreneurs, policymakers and regulators who wield more power in regulating and creating laws for crypto.

CHALLENGES TO MASS ADOPTION OF BLOCKCHAIN AND BITCOIN

• The role of Regulators - With passage of time, there has been growing consensus among government agencies and regulators about the benefits of blockchain. However, bitcoin is still looked down suspiciously. Legislators becoming aware of blockchain technology and its benefits is a good thing for adoption. However, at the same time, the demand for regulating any new technology suppresses innovation. The regulator believes that most of the tokens are securities and should comply with applicable laws. This has dampened the spirit of entrepreneurship and innovation.?

Take the recent example of the crackdown by US SEC (United States’ Security Exchange Commission) on Ripple Labs. The United States Securities and Exchange Commission initiated a lawsuit against Ripple alleging that the firm had been indulging in the sale of securities worth $1.3 billion. After this, a number of prominent exchanges across the globe (including Coinbase, Kraken) proceeded to delist Ripple's native cryptocurrency, XRP, from their platforms.?In turn, Ripple’s defense counsel has challenged the SEC’s suit, stating that the XRP token is similar to other prominent cryptocurrencies, such as bitcoin (BTC) or Ether (ETH), both of which have been classified as commodities by SEC.

Whatever may be the outcome of this case, such news have deep impact on the mindset of investors and puts credibility of whole ecosystem in doubt.

• ?Massive consumption of electricity in Proof-of-Work based platforms - I already discussed this point above when discussing Consensus protocols. The Proof-of-Work protocol requires miners to consume huge electricity in order to solve complex puzzles to be rewarded. With passage of time, this electricity consumption is growing as more people are getting involved in ‘mining’ as well as puzzles are getting harder. Bitcoin consumption of electricity has increased 66 times than it did in 2015. As per the statistics, bitcoin alone accounts for 0.5% of global electricity consumption, which is more than the annual consumption of entire countries like Argentina and Holland. Crypto Mining is undoubtedly energy-intensive and could face greater regulatory scrutiny as adoption expands. Especially, more people believe that preserving the environment is more important now than it was pre-COVID-19.
• Crypto related crimes – There are concerns that due to the anonymous nature of crypto, it give rise to criminal activities especially of the nature of terrorism funding, money laundering, frauds and ransomware attacks. This is true to some extent and whenever news of such crimes are reported, they impacted the morale of investors who wants to enter in the world of crypto but are afraid to get swindled of hard earned money.

Up to the year 2019, scams made up the majority of all cryptocurrency-related crime. The enormous PlusToken Ponzi scheme, took over $2 billion from millions of victims. Darknet markets were the second-largest crime category.?

However, the big story for cryptocurrency-based crime in 2020 was ransomware. Ransomware allows cyber criminals to block access to their victims’ data. This allows them to leverage control and blackmail the victims in order to get the ransom. Cryptocurrencies make it virtually impossible to trace the cybercriminals and reveal their identities. This explains why ransomware attacks are seeing such growth. Payment of ransom in the past often had to be done in cash. While this is no longer the case, the concept, however, is alive and thriving in the form of cryptocurrencies like bitcoin and other alt-coins.

• Scalability - The current process of buying cryptocurrencies requires user to have a wallet and go through a list of complicated steps to make the transaction complete. Compared to existing cross-border payment alternatives, decentralized applications that use blockchain technology have processes that are complicated for the average user.?

There is also a high barrier to entry even for developers looking to create new blockchain-based applications. Furthermore, the current blockchain transactional speeds are slow.

For bitcoin and Ethereum to compete with more mainstream systems like visa and PayPal, they need to seriously step up their game when it comes to transaction times. While PayPal manages around 200 transactions per second and visa manages approximately 1700 transactions per second, Ethereum does only 20 transactions per second while bitcoin manages only 7 transactions per second. The only way that these numbers can be improved is if they work on their scalability.

• Talent challenges – Talent challenges is another area, which need to be ironed out before deciding to adopt blockchain. Most organizations will have to find additional skills in areas such as public key infrastructure (PKI), cryptography, information architecture, software engineering, network infrastructure and integration, and user interface/ user experience. Not just finding the right talent with blockchain technology, organization have to make sure there are proper coordination with experts in legal, regulatory, business strategy and cybersecurity teams.

THE WAY AHEAD

• Regulation but maintain Decentralization - Though blockchain is still in a nascent stage of development and testing and everything is in the experimental stage & and will need a couple of years or maybe a decade to reach the maturity level accepted by a mainstream audience.?However, its potential to redesign various industries, starting from the decentralization of the financial industry, is not hidden and almost everyone is discussing it in varying amounts within their organization and homes. Everyone is convinced that it will bring a paradigm-shift in not just the technological arena; but its implications will extend across legal, cultural, and social parameters.

To mass adopt blockchain and related cryptocurrencies, it is important to bring some kind of regulation but it is also important at the same time to maintain the basic guiding principle of this technology – Decentralization. Internet was able to succeed and become a revolution because it is free of too much regulation. Whatever information is available to a privileged individual, the same is available to an ordinary citizen. Therefore, it was a level playing field. It is expected from blockchain to provide a common ground where third-party intermediaries are eliminated and information exchange happened peer- to-peer and at a very low cost. It was the very fundamental thought why Satoshi Nakamoto conceptualized bitcoin.

• Formation of alliances - Formation of crypto alliances and better coordination with policy makers and regulators to guide them about the benefits and changes that blockchain could bring in the life of ordinary citizens is an important next step for mass adoption. There is a strong resistance from governing authorities towards cryptocurrencies. Anti-crypto rhetoric advocated by regulators around the world often echo misrepresentations about the crypto industry. United States Treasury Secretary Janet Yellen declared that cryptocurrencies were being increasingly used for criminal activities.?Yellen is not alone in such assertions despite existing research showing that the criminal share of global cryptocurrency commerce is less than 1%. An effective communication with regulatory stakeholders will help to separate “fact from perception” as far as cryptocurrencies are concerned.

Major stakeholders in the cryptocurrency scene, like Coinbase and Square, have formed an alliance to better relate with policymakers and regulators on the subject of crypto regulations.?They are joined by other major players in the cryptocurrency scene, such as Fidelity Digital Assets and crypto-focused investment firm Paradigm. There are other groups like the blockchain Association and Coin Center also working toward sensible cryptocurrency regulations and establishing standards for collaboration to speed up development.?

Crypto lobbying groups have recorded some successes in fighting harsh cryptocurrency laws. In India, a coalition of industry proponents under the aegis of the Internet and Mobile Association of India, or IAMAI, led the charge against the central bank (Reserve Bank of India) ban of 2018, leading to a reversal of the decree by the Supreme Court in March 2020. Members of the IAMAI are currently trying to convince government officials to adopt a more pragmatic approach to crypto regulations in India.

• Bitcoin Upgrade - Currently, bitcoin is synonymous with blockchain. Being the first cryptocurrency based on blockchain it is considered as granddaddy among all the cryptocurrencies and even today, bitcoin alone constitute more than 50% dominance of entire market cap. However, bitcoin has its own technical challenges like slow transaction rate & high consumption of electricity. A lot many new projects are targeting these shortcomings of bitcoin and coming up with their improved versions. The team behind bitcoin, though, is sluggish in adopting to improve these shortcomings. If these shortcomings are not improved, then there is possibility that someday, just like Apple or Samsung overtook Nokia and wipe it out completely, bitcoin may lose it relevance. For example, Ethereum is far behind than bitcoin in terms of market cap, but it has far more use case since it also support smart contracts on which DeFi, NFT and DEx based platforms are built. It has also moved from energy intensive Proof-of-Work protocol to less energy consuming Proof-of-Stake protocol, making it more sustainable.
• Green Crypto - Not all cryptocurrencies are as energy-consumptive as bitcoin, but each has its own unique carbon footprint, and they all contribute to the climate crisis to varying degrees.?To answer the crypto environmental problem, there is need to look at ways to make crypto fit better into a world whose number one priority should be mitigating climate change. This is especially important because US President Joe Biden has promised to cut U.S. carbon emissions to half of their 2005 levels by 2030 and urge other world leaders to follow.

There are signs that the crypto industry could be a driver of positive environmental change. Crypto mining can, over time, accelerate a transition from fossil fuels to renewable energy, as miners will naturally look for lower-cost renewable energy sources (solar and wind). If the industry takes the lead in the carbon removal field as well, it can modify its reputation from being a beleaguered major emitter to a responsible, carbon-neutral space. In addition, there are new ways to conduct greener bitcoin transactions, like “the Lightning Network,” a payment channel that uses less energy.

• Create Awareness - Lastly, for mass adoption to happen there need to be some way that it become easy for end users to use it. Every time a person reads a sentence about blockchain, it has two or three terms where they are like ‘What does that mean?’ Then they read the next sentence and find some more incomprehensible terms. Therefore, educating people about it is required for it to be adopted at mass level. Making things easy to use and getting your grandmother to complete a cross-chain transaction by clicking a button instead of researching what that even means will be the real test for mass adoption.

We will know blockchain technology has become mainstream when we are no longer talking about it, but we are simply using it in everyday life, just like the Internet, emails, and mobile phones.