In this guest article explains Stefanie and Jan, Token Engineer in the Blockchain-business consulting, DW Innovate, the development of a decentralized market place. Clearly and understandably you outlines the Blockchain-Primus Bitcoin. As with the help of a Token coordination and trust in a decentralized network is achieved.
By Stefanie from Jan
13. July 2019BTC$11.461,00 -0.95%part Facebook Twitter LinkedIn xing mail
The Blockchain technology, the creation of a network that works permanently without a Central entity allows. This is perfect ensured by, in principle, unchangeable rules, which the market participants agree to when they join the network voluntarily. These rules are enshrined in computer code at the Protocol level and the compliance of which will be set by the network.
This is in strong contrast to the traditional market behavior, in which a law-breaking only by the tedious and inefficient response to the court can be pursued. In addition, national borders are abolished, as the networks are accessible to everyone regardless of national jurisdictions.
Bitcoin is the best example of a decentralized network. There is no single party that has the Bitcoin Protocol, because it is decentralized and operated by the Community and is open to everyone – whether it be in Mining to participate, to develop the Protocol, or to use it just for transactions.
In the Mining process, Miner deploy their Hashing Power to validate transactions and to ensure the security of the network. The basic functionalities and rules of Bitcoin are anchored since the Launch of the Bitcoin network in January 2009, to fix in the Code.
Economic incentive mechanisms in decentralized networks
a Variety of technical, economic and game-theoretic mechanisms are used by these market rules to enforce. On the one hand, the market participants receive compensation, if you are doing valuable work for the network. On the other hand, market participants can be punished financially, if you need the network to your personal advantage, poor work, or try the network and to the other participants to play (e.g. by Spamming).
all of the rules without the application of a legislation must be by a jurisdiktive violence to enforce, as the participation is generally anonymous and the network is operated by any legally tangible entity or managed. For example, a financial application prior to the active Act in the network can be deposited as a Deposit (Stake), which will be retained in the case of the rules of contradictory behavior from the network, and redistributed.
to participate in order for Miner to continue the Bitcoin Blockchain, you must have an incentive to make their costly energy and to invest in expensive Hardware. A pre-defined remuneration per Block to ensure this. The Miner who has dug out of the ground as the first successfully to the next Block, these pre-defined remuneration, which consists of the transaction fees and the Block subsidy, with the former subject to fluctuations, and the latter currently amounts to 12.5 Bitcoins. The Block subsidy is halved every four years. Because miners receive the fees for the transaction, it is ensured that miners have to be significantly reduced Block subsidy is an incentive to make the network service available.
Bitcoin is so designed that there is no possibility of fraud. This is because the consensus in the Bitcoin network is designed to be very easy in comparison to other marketplaces, which need to be taken into account for a global consensus to a higher degree of complexity. For a consensus-formation in the network Bitcoin only needs the proof that energy has been expended – Proof-of-Work.
This consensus leads to a solution to the Double Spending problem without a Central decision-makers: There is no possibility of money more than once is. Only those transactions will be accepted by the network, which correspond to the predefined rules, and this Double Spending excludes. That is why it is important to wait as the recipient of the payment to the confirmation of the payment through the network, to prevent fraud.
Inherent trust by predefined rules, which are set automatically by the Code by a
can trust To enable market participants to the fact that the rules are enforced, they must be publicly defined, visible and unalterable in the Code. This is what is meant by the term “vertrauenslos”. Changes are only by pre-defined control mechanisms, the need, in principle, a clear majority of the network. The holder of the Token have an interest in the improvement of the network, as your Token corresponds to a share on the network. An increase in the value of the network should be reflected in the value of the Token. This means in reverse conclusion that the network belongs to all the contributors, as they will determine the further development and any increase in the value participate.
The Bitcoin Code is open to everyone and equipped with fixed rules. There was little change at the Protocol level since the Launch of Bitcoin. The few changes there were, could only be enforced, as the majority of the entire network has agreed to work the course.
build a network by an initial Block subsidy
in order for a marketplace to work and to grow, it requires supply and demand. The demand is usually only when a sustainable supply is available. A focus on building the supply side is needed. Uber and other marketplace-Tech giant invest first in the Development of the supply side to the consumers a stable supply of offer.
In the decentralized market places enables the Emission of a Token, the structure of the supply side in the network. Before consumers make from the range of the network use, can be compensated by the distribution of tokens to the market participants so that an offer arises. This distribution of the Block subsidies in the Form of tokens is usually done in regular time intervals.
Only by Mining you can get the Block subsidy in the Bitcoin Protocol, and thus new Bitcoins emit. In the first four years, 50 Bitcoins per mined Block were awarded. This Bock subsidies constitute an incentive for the Miner of your energy and Hardware for the operation of the Bitcoin Protocol.
A Token without a link with a Real World Asset only has a value if it follows the Sound-Money principles
In the Token Engineering are taken into account the principles of Sound Money Theory, in order to create an economically sustainable and healthy Token. Sound Money Theory is based on two principles:
1) taking into account the interests of the participants and the logical deduction of the behavior (Praxeology).
2) to permit a free market in which the best network and the accompanying Token claims.
the Former was already explained in the above Chapter “Economic incentive mechanisms in decentralized networks”. In the second point above, the demand for the Token serves as a Proxy for the decision-making of market participants, which network you choose. The demand is defined on the basis of the benefits inherent in the Token, which is determined by numerous factors. The demand estimate is useful, it is necessary to take into account the interests of the participants (point 1 above).
The Use of a token
What factors determine the Use of a Token? The Token allows certain activities on the network and serves as the access to the network. Other aspects which determine the Use of the tokens, are: – censorship resistance (resistance against Manipulation or abuse of the system), robustness (uptime), limited range (limited to Inflation), network effects, competition, etc.
censorship resistance plays in decentralised systems a major role, because the data integrity is a top priority. The supply side of the Token is predefined in the Protocol – at least it should be in any well-designed Token so. Because the investors and users of the Protocol need to know what you’re getting into. It is absolutely necessary to know, whether there are a limited number of tokens and how many tokens will come out on the market, as this has a significant impact on the development of prices (the larger the offer the lower price for the same demand) stay.
Bitcoin is the first decentralized monetary system. A little fleshed out, Bitcoin is the first distributed database in the world, only a certain type of data can be stored (Bitcoin transactions). The Bitcoin Token at the same time serves as an access token to a certain storage quota in this database (block space). Here network come to carry the effects: The more people use Bitcoin, the more versatile this block space is usable for transactions with other parties.
in addition, the monetary policy in the Bitcoin-specified Protocol, and virtually non-changeable. This gives the Bitcoin Protocol is a completely new kind of predictability and thus safety for those investing in Bitcoin. Specifically, no more than 21 million Bitcoin can be mined. In addition, will be halved per Halving all of the newly generated Bitcoins per Block. This corresponds to a drastic reduction of the newly mined Bitcoins per time interval. The fact that the absence of Inflation and Manipulation is possible, Bitcoin is referred to as the hardest existing money.
Only due to the excellent Designs of the Bitcoin Blockchain, this meets such a high demand, so that market participants have an incentive in maintaining (Mining) and development of the use of Bitcoin (e.g. by a Second Layer such as Lightning) contribute.
NEW: THE BTC-NAVIGATOR
The German Blockchain Ecosystem brings together in one place:
trading places | JOBS | EVENTS | COMPANY | PRODUCTS | points of ACCEPTANCE | WEBSITES
More on the topic:
the Hash Rate and Bitcoin domination culmination of Why bitcoin’s Proof of Work to achieve no waste of energy is Iran: the Central Bank announced BTC trading illegal#Bitcoin#Decentralized
