Blockchain: The real gold behind Bitcoin.
Last year was quite a ride for the bitcoin community. Watching the price ascend and descend reminded me that all early technology begins life like a roller coaster ride, and that the market is a finicky lover. When it loves you, it embraces you with everything it has, nursing all your aspirations and nudging you toward ultimate success. But she is a tormented soul this free market and when she turns on you, she does so with a scorn that only Shakespeare could describe.
I watched from the side lines wondering when regulation would step in and destroy all the dreams and aspirations of those who sought to make their fortunes in cryptocurrency. I was delighted to discover that my spiritual home town of Ljubljana (as well as Cork and Berlin) had embraced bitcoin (https://www.bitstamp.net/) with a fervour not seen in those parts since capitalism arrived in the early nineties. The more I learned about bitcoin however the more it was the blockchain and all the possibilities it brought with it that truly excited me.
The blockchain in simple terms is a public ledger of transactions. Instead of recording these in a central server, the transactions are broadcast to a distributed system of nodes running software that digest and validate these transactions. In the bitcoin ecosystem there are six company categories: mining, payment processing, wallets, exchanges, financial services and universal services that include innovations that are happening in the blockchain. To understand the variety of startup companies in the bitcoin stack and the performance of the overall ecosystem, I suggest reading “The State of Bitcoin- January 2015” (http://avc.com/2015/01/the-state-of-bitcoin-january-2015/) by @fredwilson.
The blockchain use cases that I am excited about most are the ones that have the capability to change the way we transact in society. The most common transaction is the exchange of fiat money for goods and services rendered, but there are also millions of other transactions a day such as shares, land transfers, etc. One of the companies that is making headway in creating an enabler in this space is Factom (www.factom.org). They are currently building a record keeping network that utilises the blockchain. Going through their white paper, (https://github.com/FactomProject/FactomDocs ) I discovered that applications can be built on their platform to enable legal, financial, gaming, journaling and medical applications utilising the unique characteristics of the blockchain.
Factom doesn’t validate the entries itself as this is done client side by the users themselves and the applications they are running. This means that transactional rules can be independently established for each chain that is created. Factom offers a decentralised way to collect, package and secure data into the blockchain and have created functionality that allows apps to have smaller search spaces instead of having to search through one large ledger that serves all applications.
By recording a hash of a document, the system can provide basic proof of publication. Chains are application-specific entry groupings that document event sequences and provide an audit trail that records that the event or publication in fact occurred. In a world where privacy has become such a sensitive subject but data preservation is also a requirement by so many companies, an application written on a system like this has the capability to create new markets and a new wave of innovations.
The change in investment patterns between 2013 and 2014 saw the greatest amount of investment flowing toward the wallet category which rose from $1.1 in 2013 to $88.1 million last year. Despite the current slide in bitcoin price ($237 at the time of writing: https://www.cryptocoinsnews.com/bitcoin-price) I am sure that companies such as factom and other blockchain application enablers will be ones to watch in 2015. Not only will the nature of transactions evolve because of these innovations, but hopefully so will the societies that embrace them. Happy new year and reach out to me @fuzzielabs.
