There exists a vast array of assets in the world which people freely choose as a store of value, a transactional medium, or an investment. We believe the blockchain is a better technology for transacting, storing, and accounting for these assets. Most estimates measure global wealth around 250 trillion dollars with much of that being held by banks or similar financial institutions. The migration of these assets onto the blockchain represents a proportionally large opportunity.
Blockchain was created as “an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.” Blockchain created a new class of currency, a decentralized digital currency or cryptocurrency.
Some of the primary advantages of cryptocurrencies are: low transaction costs, international borderless transferability and convertibility, trustless ownership and exchange, pseudo anonymity, real-time transparency, and immunity from legacy banking system problems. Common explanations for the current limited mainstream use of cryptocurrencies include: volatile price swings, inadequate mass-market understanding of the technology, and insufficient ease fuse for nontechnical users.
One should note that all exchanges and wallets which allow you to hold value as a fiat currency already provide a similar service in that users can avoid the volatility (or other traits) of a particular cryptocurrency by selling them for fiat currency, gold, or another asset. Further, almost all types of existing financial institutions, payment providers, etc., which allow you to hold fiat value (or other assets) subsequently provide a similar service. In this white paper we focus on applications wherein the fiat value is stored and transmitted with software that is open source, cryptographically secure, and uses distributed ledger technology, i.e. a true cryptocurrency.
While the goal of any successful cryptocurrency is to completely eliminate the requirement of trust, each of the aforementioned implementations either rely on a trusted third party or have other technical, market based, or process based drawbacks and limitations.
We need a way for the payee to know that the previous owners did not sign any earlier transactions. For our purposes, the earliest transaction is the one that counts, so we don't care about later attempts to double-spend. The only way to confirm the absence of a transaction is to be aware of all transactions. In the mint based model, the mint was aware of all transactions and decided which arrived first. To accomplish this without a trusted party, transactions must be publicly announced , and we need a system for participants to agree on a single history of the order in which they were received. The payee needs proof that at the time of each transaction, the majority of nodes agreed it was the first received.
The incentive is funded with transaction fees and is completely inflation free. The incentive may help encourage nodes to stay honest.
Public block chains are likely to substitute a majority of functions provided by common financial establishments. This is possible due to enhanced software that changes traditional financial system approaches.
Most of blockchain use the consensus algorithms that are publicly accessible and defined as non permissioned. In particular, this means that all users: