The technology may be relatively new, but it has already produced lots of jargon. Here are the main terms.
A generic term for globally distributed database systems that are decentralised in their control; these include the blockchain technology. Many experts prefer to use this generic term, firstly to distance themselves from the controversial business with cryptocurrencies, but also because more complex versions of the technology are now being developed.
One of these new developments. In contrast to a blockchain, the transaction data is not arranged chronologically in a single strand, but rather in a “tangled” web with lots of different “nodes”. This principle requires no computing power-heavy “miners” to produce new data blocks. Instead, each user who wants to carry out a transaction must first validate two other transactions. This is supposed to allow the network to keep growing forever – while consuming less energy and requiring less computing power than classical blockchains.
Cryptocurrency platforms such as Ethereum allow developers to enter into so-called smart contracts. Any kind of transaction – which might be the purchase of a product or a service – is automatically carried out subject to the condition that all the parties involved have first fulfilled the requirements previously defined in the blockchain. Such blockchain-based contracts can also be integrated into other software applications and digital business models.
Decentralised, autonomously operating applications. In contrast to classical apps, they are developed as open source software and all the data and protocols are stored publically in a blockchain. A DApp creates a token – a kind of digital share certificate in the project – which grants users access to the application.
Decentralised autonomous organisation (DAO)
A DAO is a new form of organisation, whose byelaws, deeds of association or articles are laid down in a smart contract and implemented automatically. This is supposed to make the centrally-organised management of day-to-day business operations redundant.
An initial coin offering (ICO) creates the equivalent of digital shares. Many crypto startups use this method to fund themselves and their projects. A company creates digital tokens (like coupons) and sells them. As ICOs are largely unregulated, this crypto-crowdfunding is controversial and is considered an extremely risky form of investment. Nevertheless, the ICO market is growing rapidly. Companies amassed more capital by this method in the first three months of 2018 than over the entire previous year. The messaging service Telegram currently holds the record for the largest placement of tokens, worth €850m (£740m).
Last year, one of the most successful applications on the blockchain platform Ethereum was the collecting game Kitties, where users bred and traded virtual cats. The most expensive kittens are currently being sold for six-figure sums. The Canadian design studio Axiom Zen, which came up with this viral hit, has just attracted $12m (£9.05m) in venture capital, to develop further blockchain-based games. According to the founders, these will not only turn the game industry upside down – but also communicate the blockchain principle to gamers outside the crypto scene.
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Bruno Gransche, a philosopher of technology and member of the research seminar Designing a Human Future at the University of Siegen, in North Rhine-Westphalia, Germany, does not share the blockchain euphoria.