I have been reading a bit about bitshares and find them very appealing as an investment vehicle. With the need to have a decentralized and trust less environment bitshares aim to fulfil the gap/need for a high growth strategy and an alternate investment strategy for those who find bitcoin prices too volatile. We will cover some basics in this post to understand the concepts.
What is blockchain
Satoshi Nakamoto, the anonymous Inventor of Bitcoin, created a piece of technology which is built on blockchain. Blockchain is a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly
Before the creation of the blockchain, it was necessary to use third parties like Visa, Paypal or banks to record payment between parties. Both parties to the transaction agreed that the records kept by the third-party should be considered evidence of payment.
Blockchain is not only applicable to currencies and crypto but will disrupt many industries and businesses. Lets take a look at some examples:-
- Currently NASDAQ is the depository or the third party which records a selling or buying of a stock in future blockchain can provide the environment to record these transactions
- Similarly a real estate purchase transaction can also be a good use case to document these transactions using blockchain rather than on a piece of paper in a government
- If enroll in a heath facility, instead of handing over your information in their local database, it can be stoed using a blockchain
Decentralized Autonomous Companies or DAC's
Bitcoin was the worlds first DAC. Bitcoin has a product. It's a payment service. It competes with banks, Visa, Paypal, Western Union. Mastercard and others, for sending payments from one party to another all around the world. It has revenues. Bitcoin charges small fees on some transactions. Bitcoin has shareholders (people buying and selling bitcoins)
DAC’s thus have all the characteristics of a company
- Revenues
- Cost
- Profit or a loss
- Employees
- Shareholders
- Voting Rights for shareholders
- Charter
- Product
- Customer Base
What is BitShares?
BitShares is a powerful open-source business engine built on blockchain technology. The Developers of BitShares have made a number innovations to the blockchain technology as used by Bitcoin. BitShares is a DAC.
All of these new industry disruptors built on blockchain technology will need to be traded somewhere, just like Netflix and Facebook stocks are traded on the NASDAQ. So the BitShares team went ahead and built a blockchain based trading floor to be the NASDAQ for all future blockchain based solutions.
This decentralized trading may disrupt not only the $700 Trillion dollar derivatives market but can also change how to manage loyalty programs like frequent flyer miles.
But what does this DAC do? It offers a service. The service is matching willing buyers and sellers of financial instruments and assets.
One of Bitcoin's biggest drawbacks is its volatility. For the mainstream business, Bitcoin is generally received and then immediately sold into a more stable store of value. Generally trading into their local currency.
So what if we could have all of the benefits of the Bitcoin payment network, plus the price stability of things like gold, silver, the Euro, or even the US Dollar?
One of the many things BitShares has achieved, is that cryptocurrency just like Bitcoin, but with the price stability of the US Dollar, the Euro, gold, silver, or whatever asset the customer desires. These cryptocurrencies with price stability, are called BitAssets. And the first to begin gaining traction is bitUSD.
As you might imagine, it [bitUSD] functions just like a cryptocurrency, but its value is pegged to the US Dollar. One bitUSD is always worth close to 1 actual US Dollar. Apart from the price stability you are rewarded with an interest rate for your holdings of bitassets. This is another powerful feature for everyday consumers. While Bitcoin is phenomenal for merchants, its advantages are not quite as strong for consumers.
Think of BitShares as a decentralized company and BitAssets as its products.
Image Source: Cointelegraph