Introducing the new blockchain asset class
There’s an entirely new field of technology bubbling up beneath the surface of the tech world, often referred to as simply ‘blockchain’. Have you heard of it? It’s the technology behind bitcoin and many agree that it is poised to drastically change our world in the coming years.
“We believe Bitcoin may be the most important technology of this decade.” — Andreesen Horowitz
Blockchain technology (or distributed ledger technology) put simply is tech that allows for multiple parties to maintain a single copy of a shared ledger/database without having to trust any of the other parties. Its name comes from the way new entries are added to the ledger; in batches or blocks that are chained to the previous ones.
In its more robust forms, think of it as a magic piece of paper held by each of thousands of people around the world. How this magic paper works is, whenever any one of these thousands of people writes something to their specific piece of paper, the writing instantly shows up on everyone else’s paper and no-one in the world can erase what was written.
While this may sound mundane, the implications I assure you are not.
Ledgers make up a big part of our world. We’ve organised significant parts of our societies around ledgers. Our National IDs are tied to identity ledgers and the land we live on is tied to a real estate ledger both maintained by our governments; our credit card transactions are tied to currency ledgers maintained by the bank.
Trust also plays a critical role in how our societies function.
“Imagine going to the corner store to buy a carton of milk, only to find that the refrigerator is locked. When you’ve persuaded the shopkeeper to retrieve the milk, you then end up arguing over whether you’re going to hand the money over first, or whether he is going to hand over the milk. Finally you manage to arrange an elaborate simultaneous exchange. A little taste of life in a world without trust … now imagine trying to arrange a mortgage.” — The Economics of Trust, Forbes
Blockchain technology combines these two elements, ledgers & trust, in a unique way to create an entirely different construct; a new primitive (building block) upon which entirely new societal structures and institutions can be built.
Applying this Technology
It has been almost 8 years since we first saw the introduction of this technology to the world, and already we are seeing exciting new applications.
The very first blockchain app, Bitcoin, was a decentralised, natively digital currency. It has been used so far to provide banking services to the unbanked and to help transport money across borders seamlessly. Its initial uptake has been most prominent in those places where the traditional financial system has not been able to effectively service. Bitcoin has been following the expected arch of any disruptive innovation, that is, to provide superior service at the edges where incumbents cannot go, and then slowly make its way toward the centre where the incumbents dominate. We are still very early in this particular arch and it remains to be seen how well Bitcoin will fare in its growth.
Bitcoin was just the first though, and while it did have a significant headstart we are now seeing prominent developments from other projects leveraging the technology in novel ways. Some include for example, applying the technology:
.. to smart contracts
The technology is being used to automate simple contracts where the disputes can be programmatically determined and where settlement can happen automatically & instantly on the blockchain itself.
Read more about Ethereum….. to creating immutable records
There are projects working on applying the technology to create unforgeable and indisputable systems for recording things like ID & land titles. These are being done with a view to providing these basic necessities to persons in underdeveloped regions and to help keep corrupting elements at bay.
Read more about id2020….. to rethinking database architecture
In the software development community, persons are applying this technology behind-the-scenes to create far more resilient and cost-effective structures for those often unseen things that run most of the software and applications that we use today.
Learn more about BigchainDB…
While these are all exciting applications it is important to remember that we are still in the very earliest days of this technology. The question of ‘where can we use blockchain tech?’ is one that is still being actively explored. Much like we’re still figuring out what the internet actually is, blockchain technology represents a powerful solution in search of new applications and paradigms.
The question of value
Each blockchain project is made up of its own unique ideas and cryptographic techniques, centred around a community, and built toward solving a particular problem set; a unique mix of concept, community & execution. It is these three properties combined that arguably serves to give each project its value.
With most new technologies, value is often created from very early on but representations of that value don’t usually come until much later. Imagine for example, being able to attach a share price to the invention of GPS in 1978, email in the 1960s or the Web in 1989. What would the evolution of these technologies have looked like through the lens of a ‘market cap’?
In the blockchain technology space, we have been given the unique opportunity to do just this. We are able to observe and interact with the new value being created from these technologies at the very earliest stages of their development. The way this works is through a curious new artefact that is baked directly into this technology: the blockchain token.
This is a multi-part series exploring the question of what a “blockchain asset” actually is. In this first piece, we looked at first unpacking the idea of “blockchain technology”. In the next piece, we will look at explaining some of the ideas behind “blockchain tokens” as representations of the value generated from this technology.
*Title image courtesy Shutterstock
__________________
Other pieces in this series:
