Blockchain Tech Will Soon Overthrow Traditional Ways Of Doing Business
The technology likely to have the greatest impact on the next few decades has arrived, and it’s not social media, big data, robotics or even AI.
You’ll be surprised to learn that it’s the underlying technology of digital currencies like Bitcoin, and it’s called the blockchain. It is not the most sonorous word in the world, but we believe that this is going to be the next generation of the internet, and that it holds massive potential for every business, every society, and for you, individually.
Over the past few decades, we’ve had the internet of information. When someone sends you a file, they are actually not sending you the original one, they are just sending you a copy. This is known as “democratized information”. But when it comes to assets –things like money, intellectual property, music, art, a vote, financial assets like stocks and bonds, loyalty points, carbon credit and other assets –sending you a copy is not really a good idea.
In current times, we rely entirely on intermediaries –middle grounds like banks, government, big social media companies, credit card companies, etc to inculcate trust within our economy. These intermediaries perform all the business and transaction processes for us, from authentication and identification of people, to clearing, settling and keeping records.
But there are other growing problems.
Firstly, they’re centralized. That means they can be hacked easily, JP Morgan, the US Federal Government, LinkedIn, Home Depot and others had to find that out the hard way. They do not include billions of people from the global economy. It takes a second for an email to send around the world, but it takes days or even weeks for money transactions to send through the banking system just across a city.
And they take a big piece of fee, roughly 10-20% just to send money to another country. They capture our data, which means we cannot monetize it or use it to manage our lives better. Our privacy is being undermined. And the biggest problem is that overall, they’ve framed the digital age asymmetrically, where we have wealth creation, but we do not have social equality.
So, what if there were not just an internet of information, but also an internet of value i.e. some kind of global distributed ledger operating on millions of computers, which available to everybody, where every kind of asset could be moved, stored, transacted, exchanged and managed, all without the presence of intermediaries?
Back in 2008, the financial industry crashed and an anonymous person called Satoshi Nakamoto created a paper where he built a protocol for digital cash which operated on Bitcoin, an underlying cryptocurrency.
This cryptocurrency allowed people to establish trust and do transactions without the presence of an intermediary. The small act set off a spark, ignited the world, and got everyone excited, terrified or even otherwise interested.
Bitcoin is an asset; which goes up and down, and that should be of interest to you if you’re a speculator. On a broader note, it’s a cryptocurrency. It’s not a fiat currency controlled by a nation-state, and that is of greater interest.
But the real factor here is the underlying technology.
For the first time now in human history, people anywhere around the globe can trust each other and transact peer to peer. And this trust is established, not by some big institution, but by collaboration, by cryptography and by some clever code. Trust is native to the technology, we call this, “The Trust Protocol.”
How does this thing work?
Digital assets like music and money and everything between it, are not stored in a central place, but they’re stored in a distributed global ledger with the help of a highest level of cryptography.
When a transaction is being conducted, it’s posted globally, across millions and millions of computers.
Around the world, is a group of people called “miners”. They have massive computing power at their fingertips, perhaps 10-100 times bigger than all of Google worldwide. Every 10 minutes, a block is created that comprises of all the transactions from the previous 10 minutes. Then the miners start trying to solve these tough problems.
And they compete: the first miner to find out the truth and to validate the block, is rewarded in digital currency, in the case of the Bitcoin blockchain, with Bitcoin. Further, that block is linked to the previous block and the previous block to create a chain of blocks. Every block is time-stamped.
Therefore, if someone wanted to go and hack a block, they’d have to hack that particular block, then all the preceding blocks, the entire history of transactions on that blockchain, not just on one computer but millions of computers, simultaneously, all using the highest levels of encryption.
Hence, this is infinitely more secure than the computer systems that we have today.
The Ethereum blockchain was developed by a Russian-Canadian called Vitalik Buterin, and this blockchain has some extremely extraordinary capabilities. One of them is that you can build smart contracts, which is basically a contract that self-executes, and handles the enforcement, the management, performance and payment of agreements between people.
Companies are working with governments to store records of land titles on a blockchain. And once it’s there, this is immutable, no one can hack it. This creates an environment of prosperity for potentially almost billions of people.
A lot of transactions, the seller doesn’t even need to know who you are. They only require to know that they are paid. And then this avatar is sweeping up all of this data and enabling you to monetize it, which is a good thing, because it can also help us protect our privacy, and privacy is the key factor of a free society.
Due to all of these reasons (and many more), the technology genie has escaped from the bottle, and it was summoned by an unknown people at this uncertain time in human history, and it’s giving us another kick at the can, another opportunity to rewrite the economic power grid and the old order of things, and solve some of the world’s most difficult problems, if we want it to. Blockchain clearly has great potential to solve a lot of problems in a wide range of industries.