Blockchain may sound a little bit scientific or like rocket science, but in reality, it is nothing but just advanced web technology. So before jumping directly to the block chain, let’s find out how it came and what is the history of web technologies.
So basically there are 3 generations of web technologies till now since the internet came into human’s life.
- Web 1.0 — Web 1.0 is the very first generation of web technology where the owner of a website owns all content. So right now there are many web 1.0 websites that are static where users can’t do anything but only see the content or images on those websites or download them and print them. They can’t interact with the website. Ex — All kinds of company official websites like our own VT website come under this technology.
- Web 2.0 — This is the 2nd generation web technology where users not only read the content, but also can add their own content to the website. Ex — Facebook, Twitter, YouTube, IMDB and many more where users can post content, hit a like button or retweet something. So right now most of the websites come under web 2.0
- Web 3.0 — This is the latest web technology and a little bit complex as compared to other twos. Here the content of any website or technology is not owned by any organization. Rather, those are replicated among several computers. There is not a single owner, but we all audience, whoever have a computer, can be the equal owner. So here the term decentralized web technology comes to the birth and we can refer to it as block chain.
So what is blockchain. If we divide it into 2 words, It will be block + chain. So blocks means many computers and chain means the internet which is binding all computers in a single network. Think about any popular website like Google or Facebook. All the content present on their sites are owned by Facebook or Google. Imagine a situation, let’s say someone hacked Facebook, then they can get all of your data and can manipulate it or delete it. Or let’s say Facebook will ban your account, then they can delete your data. So actually you do not own your own content, but the company Facebook is owning your content and they can do anything with your data and even they are doing this like selling your data to third parties or showing personalized ads etc. So to solve this problem, Decentralized or block chain technology came. So your data can't be owned by any 3rd party company. Your data will be copied to thousands or millions of computers on that network. Even if you have a computer, you can also part of that network and store data. All you have to do is, just install their software in your computer and that’s all. If you are part of their network, you can also be called as a miner. Even you can earn lots of money just helping them to be part of their network as a miner. What is the role of a miner and how can you earn money? I will explain this later in today’s presentation. So imagine a blockchain having millions of computers or miners, any hacker may hack 1 or 2 or 10 computers, But it is not possible to hack millions of computers. Also for any reason all millions of computer users can’t ban your account. So this is the main advantage of blockchain. Though blockchain got popular after 2020, there were few software ways back in 2000 which were based on the same technology. One example is BitTorrent. So I don’t know how many of you know about BitTorrent, But I have been a big fan of BitTorrent since my childhood. It is a software where users can share movies, games, etc without hosting them in a single server. So you can download games from other online user computers simultaneously. So it was super fast to share files as in the old days the internet was costly as well as so slow.
So based on this concept digital money or you can say crypto currency was born. So the world’s 1st crypto currency bitcoin started this revolution. How bitcoin works, let's understand this from another example. Let’s say you are a customer of ICICI bank. So, all your money resides in an ICICI account. Let’s say someone hacked your account, he literally can take all your money. Or under some circumstances, ICICI bank goes bankrupt, Then also you will lose all your money. So you don’t have any option rather than trusting your bank. So what bitcoin is doing is that it has a blockchain of millions of computers. Let’s say Sarathi has 1000 bitcoin. So that information is stored across all million computers of the bitcoin blockchain. Let’s say a hacker hacked 1 computer and tried to steal all my bitcoins, But the software is able to detect all other millions of computers and found only 1 computer says Sarathi has 0 bitcoin but the rest are saying Sarathi has 1000 bitcoin. So it automatically rectifies it and again changes that hacked computer data to Sarathi has 1000 bitcoin. So until and unless a hacker will hack more than 50% of computers of that blockchain, he can't steal my bitcoin and which is really impossible for a hacker to hack half million of computers across the world. That’s why crypto has been always safe. That’s the reason people started storing their money in digital or crypto forms instead of any bank. That’s why within a short period of time, bitcoin values grew exponentially.
Do you want to imagine how much it grew?? In 2010 1 bitcoin value was only 0.04 rupees and in 2021 it reached at it’s all time high to around 50 lakh rupees per bitcoin. So imagine if you would have invested only 100 RS on bitcoin in 2010, Then now it would become 125 Crores of rupees. So 100 RS to 125Crores in just over 11 years. So how are your feelings now? Feeling guilty that why didn’t you just know about crypto 10 years back? Same here, I’m also feeling that. But still, it’s not that late. There are many other crypto coins whose values are under 1 rupees and can grow to lacks in a few years. But the problem is that you need to understand and research on which coin you should invest now as there are thousands of coins in the market at present. So why bitcoin values increased. Because unlike dollars or Indian rupees, the system can’t print as much bitcoin on a regular basis. So when initially bitcoin came to market, there were total 18,962,004 number of coins and that number is same till now. Because there is no way to introduce more bitcoins due to the protocol of this blockchain. But if you consider the world population now, It is about 775 crores. So on average, there is 1 bitcoin for about 408 people or in reverse there is only 0.002 bitcoin for each individual. So you can imagine how rare bitcoin is. That’s why with the increase in demand, the values came to this point and may even grow 100X in next few years, Who knows?
Now I will jump a little bit deeper into how blockchain or bitcoin transactions works. I won’t go into much dipper technology wise as it will be more complex to understand the full architecture of the technology. So let’s start with Gas fees. Many of you must have heard about Gas fees when talking about crypto. So what is this. As from the term “Gas”, it means some fuel to run the system. Just like in the USA people call a petrol pump a Gas station. Because Gas can be anything, Diesel, Petrol, LPG or electricity. So as previously I said there are millions of miners or you can say computers are part of a single block chain. All computers need to be connected to the network all the time. Means each user in that block chain has to power on his computer all the time and for that he needs to pay the electricity and internet bill. So for every transaction the data to be updated on all computers on that blockchain network. Let’s take an example. Sarathi has 1000 bitcoins and Gangadhar has 100 bitcoins. So this data is there on all the computers. So Sarathi transferred 100 bitcoin to Gangadhar. So after the transfer Sarathi should have 900 bitcoins and Gangadhar should have 200 bitcoins. So that new data to be updated on all computers and validated by all. So some gas fees to be distributed among all the miners. So now the average cost of a bitcoin transaction is around 10$ but 80$ for Ethereum. I will come to Ethereum later. But think, For every transaction, I must distribute 10$ for miners. So in this way miners earn money. That’s why to earn more, many big agencies are also working as miners. They don’t need a computer for that. To do the processing, they only need a hard-disk and a GPU. So right now in the market,you can purchase many cheap GPUs if you want to earn money as miners. Frame starts from 8000 Rs and each GPU around 20000 Rs and a motherboard 22000 Rs.
Here you can see a set of 8 mining GPUs you only have to pay 8K+160K+22K. So just for 2lacks RS investment you can be an 8 blocks miner which is way less than buying 8 super graphics computers. You don’t need to do anything. Just connect that GPUs to the internet and power it on. That’s all. And with the software provided by blockchain you can see how much you earn each day. So as you can see this is a very profitable business, so many more new miners are joining the blockchain everyday. That’s why the gas fees were increasing with the time. So a few years back Ethereum gas fees were only 1 dollar, but now it is 80$. Because more miners means more electricity and so the cost of gas. But more miners means more security and more decentralization.
Now let’s talk about Etherium. So after the success of bitcoin, Ethereum came into existence. Ethereum fundamental was, Why only digital coin, why not decentralize the whole software system. So it is able to run some sort of code across all the computers. I won’t go deep into Ethirium technology, Because even 2 hours won’t be enough just to touch its basis and I have only 30 minutes. Anyway, just think, Ethereum is a framework which allows us to create our own crypto in a few hours. So after the release of Ethirum thousands of new crypto built as It was giving the framework to create a new crypto currency. Before that, to create a new coin, It would be years of work with proper blockchain expertise. But again with the popularity of Etherium, Number of miners increased and so did the gas fees also. So that is the real problem now in this industry. So for every transaction it needs on average 80$ of gas fees. Which is so high. Let’s take an example. You want to transfer 10$ of crypto to your friend. But you have to pay 80$ gas fees. So it is not feasible for small transactions. So only big transactions like millions of dollars can be done with Ethirum. But here it loses the game because people can’t make small transactions. That’s why many other blockchain came like Solana, Binance etc. They are making transactions with less gas fees because they don’t add more miners. They added only a few thousand miners to their network. But again this is against the principle of decentralization. Because less miners means less decentralized, which means less secured. So to solve the Ethereum problem Layer2 and ZKRollUp technology came.
Now let’s talk a little about Layer2 and ZKRollUp technology without going into so deep. Because again the presentation will be longer to go into details about these 2 new technologies. So Layer2 suggests that, instead of the transaction to be updated on each block or computers, It will randomly select a few of the blocks. Let’s say 100 computers and there it updates the transaction value. Ex — Sarathi has 1000 bitcoin, And if he wants to transfer 100 bitcoins to Gangadhar, Then, instead of updating all millions of blocks on Layer1, It just randomly picks only 100 computers and updates the transaction value there. So here the gas fee is very less. It is around 0.20 $ only. So at the end of a certain period, let’s say one day, It will just ZKRollUp all the transactions. Let’s say 1000 transactions total happened on Layer2 on day1, So it combines all 1000 transactions and updates on Layer1 at one shot. So 80$ Layer1 gas fees will be divided into 1000. So 0.08$ will be the only transaction cost to update from Layer2 to Layer1. So for the end user total gas fees will be 0.20+0.08 = 0.28$ only instead of 80$ . That’s why this new technology is a game changer for Ethereum. Right now one of the best coins that supports this Technology is Loopring. So you can say loopring is the future for Ethereum scale up. Apart from that Loopring has many more other advantages which would be a separate discussion altogether . I advise everyone to do their own research before investing in any crypto.
Now where to buy crypto in India. There are many CEX (Centralised Exchanges) like coindcx, coin switch kuber, wazirx in India. You can create a free account and start buying crypto starting with only 100 Rs. But again your crypto is not safe there because the exchange keeps the private keys of your wallet with them and never gives it to you. So by chance if anyone hacked those exchanges, you may lose your coins. That’s why it is better to create a wallet on any decentralized wallet like meta mask or loopring where you will get your private key and all your crypto are safe. So again loopring is the coin which is giving a framework to build decentralized exchanges, that’s another reason I have invested in it. But unfortunately loopring or metamask is not working in India till now, So we have to depend on a centralized exchange.
Now let’s discuss NFT. NFT stands for non-fungible token. So what is non-fungible? Let’s take an example. So in this whole world, out of 775 crores only 1 Sarathi is there which is me. Let’s say I go to an interview and I may demand 10$/hour as a salary. Imagine a situation, God cloned Sarathi and made 2 Sarathi in this world. So 2nd Sarathi will go to the same interview and ask for 5$/hour. Again I counter the offer for 2$/hour. See how my demand decreased only because of another Sarathi. Think about 5 Sarathi or 100 Sarathi, Then I can’t even get work anywhere. My value is there if and only if there is 1 Sarathi in the whole world. That’s why I’m a non-fungible commodity. Nobody can replace me. Same way, each individual is a NFT in this world. Because there is no 2nd on this earth of the exact same type. That’s why world’s famous Monalisa’s painting costs around 780 million dollars on today’s date. But if we copy it, It won’t cost more than a paper. Such a way, if you buy any limited edition car (limited edition means that model will be manufactured only in few numbers), It’s price will be way higher than normal edition of the same brand. Now we are living in a digital world. So in the digital world, it is very easy to copy any photo or video. That’s why in the blockchain world, there will be only 1 image of each type and there will be only a single owner of any picture. That’s what is called NFT in the blockchain world. Since it is a single copy in the entire blockchain, that’s why the price is so high. So you can upload any of your art on blockchain and list it as NFT. You can earn huge money by selling it at a higher price to another person. So again to upload a NFT on blockchain, the gas fees is high because NFT needs to be copied to all computers in the block chain. That’s why Layer 2 solution like loopring comes handy,which reduces the gas fees to minimal. That’s why with the evolution of Layer2, more and more artists are now interested in creating NFT on blockchain. The NFT price depends on how unique it is. Even Twitter’s Ex-CEO Jack Dorsey sold his first tweet as NFT at a price of 2.9 million dollars. Because the 1st tweet means one of his kind and the 2nd tweet can never be a first tweet. That’s why the value is so high. Also NFT will play a major role in metaverse projects. Again, Metaverse will be a separate discussion altogether. Fun fact is Facebook recently changed its name to Meta.
Anyway this is just an overview of how NFT works on the block chain. If you want to create your own NFT, the most popular marketplace is OpenSea. Go to their website and you can create NFT by paying the Gas fees. If you want to pay less gas fees, then you have to wait for a little longer until Layer 2 like loopring will partner with any other marketplace to support Layer2 NFT.
