How Bitcoin Changed More Than Just Currency
By Patrick Alberts
What forms the foundation of any human exchange? The two main components are communication and trust. Communication has come a long way through the development of new media and means of sharing information. Most notably, the creation of the internet was a massive leap in the ability for humans to communicate with one another. However, trust seems to have been left in the dust. With the help of the internet, someone selling a pair of shoes in Europe can connect with someone from California and communicate to determine the exchange of the shoes. However, these individuals have no way of personally trusting each other without the help of a third-party institution (i.e. a bank). The internet alone can’t guarantee the trustworthiness of its users.
Throughout history, there have been many different proposed solutions to the issue of trust. The ultimate champion, and the system we have today, is to have third party institutions which verify that each party is valid and authorized to perform whatever action they were looking to take. For example, for me to write you a check, I have to get a note from my bank that verifies that I actually have the money that I say I will give you, and that I won’t still have that money after the exchange. This system is a pretty good way to verify interactions, but the middleman always takes a cut and can slow down the process. If I wanted to make a contract with you, I would have to get a third-party institution to create and process that for us as well as hold us accountable for it (i.e. your local government). It can take many days or potentially weeks before we can put that contract to use. But what if there were a way to cut out the middle man entirely and be able to personally trust each other without even knowing each other?
Well, the genius mind/minds of Satoshi Nakamoto (the anonymous creator of Bitcoin and author of the Bitcoin whitepaper) laid the groundwork for a breakthrough cryptographic method, on the basis of which networks called blockchains can keep a distributed public ledger of transactions. Blockchain technology eliminates the need for these middlemen by keeping a permanent record of all transactions/exchanges that occur, with each individual action being verified by a decentralized network of high-powered computers. The technology behind blockchain involves a proof-of-work method in which computers try to solve difficult problems and once one computer solves it, (and the answer is verified by all others in the network) it is rewarded for doing so with a cryptocurrency (such as Bitcoin).
If the creation of the internet was the democratization of information, then the creation of blockchain was the democratization of trust. With blockchain, two individuals who do not know each other at all can make an exchange with full confidence, without the need for a third-party institution. Instead, this network of computers, paired with the immutable ledger that they produce, can verify the exchange very quickly. The transaction can occur instantaneously without a third-party middleman slowing down the process or taking a cut of the money being exchanged. The bottom line is this: blockchain technology has the capability of fundamentally altering the power of individuals in society.
In addition to an increased ability to trust one another, blockchain technology empowers individuals in society by allowing them to take full control of their own data. In today’s world, personal data has become a highly-valued asset by governments and private companies alike. Data derived from an individual’s digital actions is collected by companies such as Facebook and can be utilized and sold without the individual ever knowing. As Don Tapscott said in his TED talk on the power of blockchain, in today’s digital landscape, “the virtual you is not owned by you”. However, with the power of blockchain, software can be developed that keeps track of all of your personal data and ensures that the only information being shared with others is the bit that is essential to the action that is taking place, and your data cannot be shared with others without your permission (because that exchange would have to get verified by the blockchain). Thus, the potential of blockchain opens the door for this tremendous power shift: instead of Facebook selling our data without us knowing it, we will be able to sell our own data and be in control of exactly where it goes.
While most of the world has not yet come to realize the true potential of blockchain, (as is par for the course with new technologies) some early adopters are making strides in many different kinds of industries. For instance, recording artist Imogen Heap is now exclusively releasing her music on a blockchain ecosystem. In doing so, she is preventing people from making copies of her songs to do with them as they please (i.e. pirating). Rather, any attempted interaction with her song will have be verified by the blockchain, eliminating the chance for a digital copy to be made. This is just one example of how expansive the effects of blockchain can be in an industry that may not immediately come to mind when thinking about this new technology.
Although it is not likely that we will see the full effects of blockchain technology for at least a lifetime, at some point we will look back and realize that it indeed changed way more than just currency.
