How blockchain tackles notorious double-spending problem

One of the main positive, game-changing features of blockchain technology, promulgated by the technology’s proponents is the tackling the notorious “double-spending” problem - covering the issue of digital currencies’ proneness to being easily reproduced and thus, to being sent to counterparty multiple times, if the transaction is not checked properly. This problem hadn’t been existing before the dawn of financial technologies, but it became a real challenge in late 2000’s with proliferation of online banking usage. Traditionally, a trusted, verified intermediary was required to be involved in every transaction in order to play a role of gatekeeper that stores the ledger of all transactions, whether they be internal or they communicate with external networks. Cryptocurrencies bid to get rid of such intermediaries by introducing the publicly-available ledger that stores all validated transactions, and most importantly, this ledger cannot be hacked or tampered with since such a malicious action would require hash computing power compatible with total power spent on validating those blocks in the first place - which is a lot. One estimate shows that hacking a single Bitcoin block (meaning, producing more hash power than the rest of the mining network - “51% attack”) would cost more than $2 bln, without taking into account the storage are for all mining hardware, availability of that hardware, and availability of such amount of electricity.

An ever-growing number of businessmen, tech and policy influencers have extrapolated some of potential implications of blockchain technology with those implication orbiting mainly around the way the market participants transfer money and ownership.

However, some people boasting comprehensive experience in the field of finances and hi-tech, share a common stance on blockchain technology being ‘overhyped’ and also claiming that the public interest in cryptocurrencies is overblown. A lot of people compare the late-2017 hike in all cryptocurrencies’ prices with famous Dutch “Tulip Bubble of the 17th century. Not only do they oppose the cryptocurrencies’ use, but they also claim that the very underlying technology brings no benefit to society, and, worse is only used to make illicit trade easier, evade laws or support criminal activity in other ways. No wonder that some nations have already banned cryptocurrencies use.

No matter how heavily the blockchain technology is criticized and undervalued, the fact that is is getting more applications apart from monetary ones is obvious with the main fields for the technology’s involvement being secure data storage and transfers, as well as games, gambling and other b2c business transactions.

There’s one more technological advancement in blockchain technology that came with Ethereum dawn, which is smart-contracts. They are mechanically capable of valuing themselves in real-time, of auto-reporting their outputs to relevant repositories, of calculation and performing payments with predetermined inputs and of self-termination in the event of counterparty default. Blockchain can also help actors of financial market to work more efficiently with large operational complexities resulting from a lot of regulative aspects taking place, such as mandates, capital requirements and other transactional obstacles placed in the aftermaths of the 2008 financial crisis. Some studies reportedly estimate that DLT is set to cut transaction fees and other associated costs by at least a third, or $16 billion a year - which is a highly optimistic statement, and cut capital requirements by $120 billion. Cutting capital requirements does indeed looks plausible and real, given the economic opportunities that get within fundraisers’ scope of availability.