Introduction to Qtum. Part 2

Qtum as a combination of Bitcoin and Ethereum. Decentralized nature of cryptocurrencies. Limitations of Bitcoin.

 

Another problem with existing currencies that Bitcoin has solved is centralization. Qtum has borrowed Bitcoin’s approach to solving the issue.

Satoshi Nakamoto launched the Bitcoin network in 2009, right after 2007/2008 world financial crisis, which is a perfect example of the problem of centralization when it comes to currencies. During and after the crisis, many of the banks all over the world started engaging in quantitative easing. In lay terms this means that they started printing more money. In many cases, they have started doing so to save the companies that made a lot of mistakes, such as Goldman Sachs, AIG, and others. In other cases, they wanted to devalue the currency of their country to make the products and services of the country more competitive on the global market. In both scenarios, it is the citizens of the country that are paying for it, which means that there is one central authority that can decide to pay for the mistakes of a few companies that are too big to fail with the money of the broad taxpayer base and transfer the debt of private companies to the public purse.

With Bitcoin and Qtum, such a scenario is impossible because both networks have a pre-determined number of coins and no one can decide to increase the number.

The Bitcoin network creates new Bitcoins when miners on the network mine new blocks of the Bitcoin blockchain. It then gives the Bitcoins as a reward to miners for mining the blocks. For the first 210,000 blocks of the Bitcoin blockchain, the reward was 50 bitcoins per block. Then, the network has split the reward in half for the next 210,000 blocks and will keep doing so per every 210,000. This means that the total circulation of Bitcoin cannot exceed 21 million coins. As of the beginning of spring of 2018, over 16.5 million coins have been added to the circulation, which is a little over 80% of all the coins that will ever exist on the network and the number of coins left to mine is about 4 million. The next estimated date of the reward drop on the Bitcoin network is May 31, 2020. This is when the reward will go down from 12.5 to 6.25 bitcoins.

On the Qtum network, there can be 100 million total coins. The Qtum foundation made 51% of the coins available for sale to the public. The remaining 49% are being distributed as follows: 20% went to the founders, original developers and early backers. Another 20% have been reserved for business development purposes, including planning and support of the associated projects. Finally, the remaining 9% of the coins have been allocated for education and academic research.

 

Limitations of Bitcoin

While Bitcoin has proven itself as a viable digital currency, the network has a lot of limitations. The biggest one is that Bitcoin is just one application of the blockchain technology. It is purely a financial network for sending and receiving irreversible financial transactions, while the blockchain technology can be used for much more than that, including tracking of assets, voting rights, and documents. Combined with a programming language, a blockchain network can run and execute smart contracts without a need for third parties monitoring the execution of contracts.

Insurance industry is just one example of potential application of blockchain technology. With insurance on a blockchain network, both customers and insurance companies could manage the claims in a truly independent and transparent manner. A network could first record all the contracts. Then, it could validate and process claims, eliminating the need to spend resources on processing and managing invalid claims.

Blockchain networks could also work for tracking goods in supply chains all over the world. Entries on a blockchain network could serve as a queue of events and perform tasks such as allocation of goods to different containers in a port.

A blockchain network could also store healthcare records of patients. A private blockchain could have a full medical history, allowing doctors to make sure that they have access to full information of their patients. A public blockchain could contain information such as age, gender and immunization records. As specialized medical devices become cheaper to produce and more popular, a blockchain network could connect such devices to the information about the patients to ensure that devices are delivering the best care to patients.

Finally, in media a blockchain network could store content of creators, serve as a distribution medium for the content and reward authors accordingly. This is what already is happening with platforms such as Steemit.

In government, blockchain networks could be a solution for the management of records, be it birth and death dates, or records about real estate and other kinds of properties.