The Internet, Round 2.
Author: James Hogben
Published by MOV38, 30/10/2018
The Second Internet is just around the corner, so fear not if you missed out on being burst by the Dot Com bubble, round 2 is up. Or is it…
Everybody seems to know someone whose brother’s girlfriend’s cousin’s step sister held 1 Bitcoin back in 2009 (worth $0.008), when it was introduced by the mysterious and anonymous Satoshi Nakamoto, and sold it in 2017 for almost $20,000. But ask over 80% of business leaders and you will soon learn, Bitcoin is not what’s interesting, as a cryptocurrency it is the fundamental technology which underlies the essence of a cryptocurrency — the Blockchain.
It is vital we explore the applications, regulations and principles behind Blockchain to understand its revolutionary potential.
Blockchain is in itself a new form of technology, that through the utilisation of cryptography, allows a detachment from any centralized entity -decentralization. It is only once you start to realise what this actually means that you can understand the principles and purpose behind the excitement which has sparked this new industry. Don Tapscott, CEO of The Blockchain Research Institution, provides what is argued as the most comprehensible explanation of the technology in Lloyds Bank’s video: Understand blockchain in under 7 minutes: Don Tapscott with Lloyds Bank.
Let’s be clear, the whole industry is based on a foundation of an unknown quantity, this is why it is still very much in its infancy. Listening to a panel of industry leaders talk cryptocurrency and blockchain for an hour, you soon realise that the level of understanding even among this experienced cadre is relatively weak. Blockchain is not yet a household name in any consumer marketplaces, perhaps giving it a more mythical potential that remains to be unlocked
The fundamental concept which decentralization allows us to cultivate is trust. Tapscott says “Trust is not achieved by an intermediary, it is achieved by cryptography, collaboration and some clever code” and strikingly trust is in fact a concept which technology has often left behind. The Blockchain holds data in “blocks” which is connected to another block which had been created prior to this new block to form a “chain” of blocks. A digital seal is stamped and can only be validated if it references with the previous block in the chain. The significance of this is that in order to alter or “hack” this block, all succeeding blocks would need to be hacked also. Scale this up and in order to hack the block you would need to be hacking the history of this chain over millions of computers worldwide, all using the highest level of cryptography.
Today we see hundreds of thousands of companies being formed all harnessing this technology for their own unique applications they are developing. Many of these applications harness the blockchain technology but through the use of cryptocurrencies, and we now have the situation where a new industry has evolved.
But who regulates these blockchain-based technologies? The principles behind the technology calls for standalone industries, void of restrictive regulations. Nevertheless, jurisdictions across the world are waking up to the rise of blockchain, yet as of 2018 only 1 state in the world has produced a comprehensive and holistic regulatory framework…. Malta. The small Mediterranean island is home to some of the largest crypto exchanges in the world, meanwhile fintech and blockchain leaders are setting up there all the time to take advantage of the certainty the framework provides.
Barriers to success in this industry are yet to be addressed in order to be rolled out on a mass market scale. These include:
1. Technological limits to the speed and capacity of transactions on the blockchain at any one time
2. Uncertainty about the regulatory framework governments will impose — we are still waiting on the SEC’s first approval for a Bitcoin ETF
3. Mass acceptance of the legitimacy of the technology stopping its adoption on a large scale
4. Energy consumption — a single crypto network’s annual energy consumption is equivalent to the energy consumption of whole countries including Denmark and Ireland
As I mentioned, Blockchain is an industry in its infancy, there will be many years yet before the bell rings for round 2. Many ideas for its use are far ahead of time, which is why we won’t see any immediate revolution. I liken it to trying to start Netflix, streaming videos online, back in the 1990s — the technology just hasn’t been developed yet. Once that bell rings however, Blockchain can really stamp its mark on our future.