A blockchain is an electronic ledger made up of blocks (containing groups of transactions or data) which are appended sequentially.
The primary economic value of a blockchain is to provide a dependable data set that is acceptable to all parties who wish to coordinate on some, but not all, dimensions with each other and do not wish to trust a third party.
Interested in learning more? Check out Geeq’s Glossary entry for Blockchain.
When is Blockchain Useful?
There are five key criteria that make it likely that blockchain is a better approach to addressing a problem than conventional distributed data systems or a cloud-based Software-as-a-Service (SaaS) solution:
The problem requires secure transfer of value, possibly in very small increments; for example, micropayments for content or web services and machine to machine markets, and person to person payments such as small charitable contributions or sharing the cost of a meal among a group of friends.
The problem involves agents who do not know or do not trust each other; for example, peer to peer markets for goods and services, escrows, and providing proof that all parties are what they say and behaved honestly.
The problem involves many different actors from different organizations whose interests do not align; for example, logistics or chain of custody applications that transfer responsibilities from party to party.
The problem requires objective provability of facts or data; for example, audit trails and telemetry collected from connected industrial, medical, and infrastructure devices.
The problem involves agents who might wish to censor, alter, or hide data; for example, securities, land title, and financial transactions where theft and fraud are real possibilities.
For blockchain to offer a viable solution to these problems it must be secure, inexpensive and scalable. For Blockchain as a Service (BaaS) to become a realistic alternative to private databases, it needs to be flexible, upgradable, environmentally sustainable, and protect users from unreasonable volatility in token value.
What is Blockchain Technology?
Blockchain technology describes a class of technologies that constructs a sequentially linked database (a blockchain) that is stored, after each block is appended, as a distributed database. A distributed database means the database exists redundantly on a network of computers.
Each blockchain technology specifies its own set of protocols. Protocols define the set of rules that agents are supposed to follow when they update and store the database on their own computers. Depending on the protocol, these agents may be called nodes, validators, or miners.
Geeq does not include mining. Why not? We explain below.
Why Are There No Miners at Geeq?
Bitcoin and Ethereum (among others) famously use mining in their Proof of Work (PoW) protocols, why doesn’t Geeq?
The short answer is: mining creates problematic incentives from the point of view of the user of a blockchain-based application.
Who Benefits from Mining? Miners.
Mining can be profitable for miners, who are in charge of the construction and maintenance of Proof of Work-based blockchains. That is why they do it.
An interesting feature of the mining market is that profits can be uncertain. The rewards change and sources of income are also fairly dynamic. In fact, the “block rewards” portion of their earnings are explicitly based on a mechanism that is a bit like playing a lottery. In a competitive market for mining, miners are incentivized to adopt strategies that give them an advantage.
We have already seen miners’ strategies adapt over time to maximize their profits. One response to the bitcoin blockchain, in particular, has been to set up mining “farms” comprised of many high powered computers. As the owner of many computers, a mining farm increases the odds it will make profits. This should not be surprising: it is like someone who buys many tickets to a lottery in order to increase their chances of winning.
For the user of PoW-based blockchains, these two features of the mining market introduce risks to the users that are out of their own control: a) miners have incentives that diverge from the users’ and b) mining sets up an uneven playing field. A more concentrated market for mining also concentrates power over the construction and maintenance of the Proof of Work-based blockchain. This means a PoW-based blockchain database is vulnerable to attack.
The most well-known vulnerability is the 51% attack, which has happened several times. There are other threats that are more complicated and also relatively unknown, so we will not include them here. Suffice to say that every potential threat introduces risk of disruptions in service and controversy, especially when attacks within protocol yield unexpected results. Some of the outcomes may result in transactions that are rolled back or censored, which is exactly what blockchain-based DApps are supposed to disallow.
Geeq is focused on providing value to the end user of any Geeq-enabled service.
As you use the Geeq platform, you have the security of knowing Geeq’s blockchain-based payment system is at the leading edge of blockchain technology. All Distributed Applications (DApps) built on the Geeq platform are based on underlying blockchain databases that have the integrity and dependability blockchains are supposed to have. As a result, DApp providers and consumers are able to focus on the quality of services DApps provide, with an emphasis on making them useful and easy to use.
Geeq’s Proof of HonestyTM (PoH) is a next generation, proprietary blockchain technology that enables a new hybrid platform. The platform itself is truly decentralized.
Geeq was built with the end goals of a blockchain-based, decentralized economy in mind. In order to arrive at that destination, we had to re-think all the layers of the blockchain “stack”, from the market for nodes and validators up through the final markets for new DApp-based goods and services.
Simply put, Geeq doesn’t have miners because their incentives are not aligned with our vision of a decentralized economy. In Geeq’s ecosystem, all incentives are aligned with those of the honest user, including the nodes and validators who construct and maintain the blockchains. At Geeq, market power doesn’t matter. Honesty does.