Why is Blockchain a Big Deal?
After all, blockchain technology is just a distributed ledger. It shouldn’t be that groundbreaking, intuitively. But it is.
The question that should rise when thinking about the impact of a technology is first to understand what it replaces today, in value. Let’s take a simple example: Bitcoin. Bitcoin can both be thought as a distributed currency and a store of value. A currency is complicated to talk about, but what actually is pretty simple is the understanding that Bitcoin can become a better store of value than gold. If that is the case, then potentially Bitcoin could take over the same amount of money which is captured in the gold market. Today, the gold market is around $8 trillion and most of it should be attributed as a historical mechanism of storing value. This number can be then extrapolated to fit into the total value that digital cryptocurrencies can capture.
For blockchain, this type of thinking is even more groundbreaking. What value is captured today that blockchain can take over? The answer is trust. Blockchain provides a mechanism in which everyone can trust. And you know who else? pretty much any institution that holds other people’s assets. And that, my friends, is a much much larger figure. We’re talking banks, pension funds, holding companies, what not.
So, what would happen to banks, pension funds and holding companies? One guess is that their world will be easily disrupted by young start-ups that will be able to give the same service but much cheaper. The more the institution relies on trust and less on other things, the easier it is to replace, because the less you would need to recreate. But at least for trust issues, there’s no longer a need for start-ups to build reputation that provides the feeling of trust. It can be provided mathematically.
Watch out, everyone.