What will happen to cryptocurrency with the imminent prevalence of Blockchain technology

Security concept of electronic circuit with lock. Her Hakki Hasan EROGLU'na aittir.

Some experts believe that new service businesses such as Airbnb, Uber and those functioning as middlemen or matchmakers between users and services will face a tough time when Blockchain technology becomes prevalent.

Blockchain is a decentralised ledger system that requires decentralised approval from participants in the system, as opposed to the present set-up, in which centralised approval is required. It's also the first decentralised database that is highly tamper-resistant.

"Some people even believe that Blockchain will replace the internet, though I personally don't think so," said Aimaschana Niruntasukrat, researcher at the National Electronics and Computer Technology Centre (Nectec). "But the traditional model like client-server services will be disrupted."

She notes that Blockchain technology creates the backbone for a new type of internet and underlies digital currency such as Bitcoin.

Through Blockchain, the way developers build applications is also revolutionising with the new and improved model called "decentralised application" (Dapp).

The researcher explained that Dapp is an open-source public Blockchain expanded to serve applications. It operates autonomously and with no entity controlling the majority of its tokens. Apart from account-type nodes, Dapp Blockchain has other types of nodes called "smart contract". When a smart contract is called, and the transaction is verified, every node in the network executes the contract.

With this model, she said app developers can put in a code without sending to the app store for users to download, which is how it is done today. And this will totally change the model of app development.

She cites Ethereum as an example of a decentralised platform, the first Dapp Blockchain launched in 2015. The Ethereum platform runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference. This enables developers to create markets, store registries of debts and promises, and move funds in accordance with instructions given long ago, along with the many things that have not been invented yet, all without a middle man.

Besides a digital currency, Bitcoin is also a Dapp that simplifies many aspects of the traditional financial system, such as transferring money across the world.

Both Bitcoin and Ethereum are powered by the principle of distributed ledgers and cryptography, though they differ in purpose.

According to Investopia.com, Bitcoin is created as an alternative to regular money and is thus a medium of payment transaction and storer of value; Ethereum is a platform that facilitates peer-to-peer contracts and apps via its own currency vehicle.

Among several digital currencies, Bitcoin and Ether are increasingly accepted among regulators and government bodies as they offer lower transaction fees than traditional online payment mechanisms and is operated by a decentralised authority. While Bitcoin and Ether are both digital currencies, the primary purpose of Ether is not to establish itself as a payment alternative but to facilitate and monetise the working of Ethereum to enable developers to build and run Dapps.

Aimaschana noted that there are many points of Blockchain to be cautious and concerned about. Blockchain is a very new technology, with a lot of bugs, unreliable compilers, few libraries and materials, and lack of experts.

Using Blockchain carelessly is dangerous, she said, pointing out the case of the decentralised autonomous organisation (DAO), designed to operate like a venture-capital fund empowering its members to fund Ethereum projects.

DAO using open-source code written by Slock.it, a Germany-based Blockchain solution provider for peer-to-peer renting service with smart lock (digital/physical) that opens when being paid to. The private Ethereum Blockchain applications of Slock.it include rental services such as automobiles, properties and appliances.

The DAO runs on Ethereum Blockchain, with the first-use case a venture-capital company and investors who exchanged Ether with DAO tokens as shares of the company. Last year, the company had collected over US$150 million (5.28 billion baht) worth of the cryptocurrency Ether in 28 days. However, the DAO later was attacked, leading to the value of stolen cryptocurrency at more than $60 million.

"It's not all so rosy," Aimaschana said, "but the benefits are there."