Blockchain is an immutable chain of interconnected blocks that will provide accountability, transparency, and efficiency through disrupting current industries as well as creating new opportunities, which include new markets and services that were not possible before. Blockchain technology exists as an additional layer on top of the Internet, similar to the World Wide Web (Mougayar). This technology was first demonstrated on January 3rd, 2009 with the creation of Bitcoin. This was in response to the corrupt and economically illiterate nature of the United States Federal Reserve and the corporate welfare ‘bank bailouts’. The open source code of Bitcoin has allowed other developers to copy or learn how to create different blockchains entirely.
As the World Wide Web was to information, blockchain will do the same for finance (Antonopoulos). When the internet came around in the early 90’s, most people either thought that it was a fad, or that it was going to replace the technologies that they knew, namely phone, fax, etc. Disruptive innovations like electricity, the internet, and blockchain do not just replace what we currently have, but rather they offer radical departures to a brand new world. What blockchain will bring to future societal ecosystems is something that we cannot even comprehend today, that is, until it arrives in mass adoption.
Blockchain offers a new channel to conduct business and function societally, in a smarter and more honest manner. The financial services industry is the main focus, but really, every industry will be impacted somehow. In the coming years, what can be expected is gradual adoption whereas these companies (e.g. banks) selectively choose what they like while disregarding what they do not like about blockchain. Some common intermediaries (third parties) will no longer exist in the future, while others must adapt their services, less they vanish in the night. As the 21st Century is the era of globalization, let us welcome the technology that will connect one another like never before. Right now, I can send $1 or $1000 to my family in the Philippines in a few seconds, for a fraction of a cent. Tell me that is not individual empowerment.
Here is another real life example that demonstrates why one of blockchain’s many applications is better than our current system. What is more secure, a credit card or cryptocurrencies? When using a credit card at a store or online, one must give the merchant their credit card number, expiration date, and ccv2 code. These are effectively their private keys and consumers are required to entrust them to every party that they do business with. A hacker can obtain these secret keys not only from you, but also from your bank, as well as every party you do business with (think: Target, Home Depot, etc.). The private keys on your credit card are too exposed. For Bitcoin, and other cryptocurrencies, only the consumer can see and have access to their own private keys (Antonopoulos). When doing business, one uses a public address that cannot be stolen or tampered with. This is just smarter. Welcome to the future.
Although there is certainly innovation taking place in the blockchain space, I would argue that blockchain’s “killer app” has not yet been realized. Blockchain’s characteristics of a trust services layer through a decentralized, peer-to-peer network are what will result in demonstrable applications and disruption. Instead of trusting old institutions like governments and banks, the future represents trusting the network. On the U.S. dollar, the motto is, “In God we trust.” This can actually be translated to, “In Government we trust.” Blockchains offer a transformative paradigm for instituting transactional trust. Though there will be an initial barrier educationally and psychologically, people should help themselves by being open-minded and “accept that trust will be computed by machines, instead of verified by humans” (Mougayar). No longer does someone have to ask permission from their bank if they can use their own money. No longer does anyone have to request permission from a third party when wanting to settle a transactional agreement. Decentralization means that the power of the network, whether that’s money or the new Internet, rests solely with “we the people.” Having a decentralized system also means security of data, identity and privacy. Imagine a centralized cloud storage being hacked, like Apple iCloud. Through iCloud, users’ data is stored in a single cloud in the sky. With blockchain, decentralized storage networks means that a single file (e.g. picture) will be stored on thousands of interconnected computers throughout the world. To hack a file successfully, the hacker would need to separately penetrate every individual computer, which makes it an unlikely feat. In the future, the saying shall be, “In Blockchain we trust.”
Seeing that blockchain remains in the development and research phase, businesses have not integrated this technology into their backend. Blockchain consists of ten characteristics (Mougayar):
I) Digital Cryptocurrency
II) Decentralized Computing Infrastructure
III) Transaction Platform
IV) Decentralized Database
V) Shared, Distributed Accounting Ledger
VI) Software Development Platform
VII) Open Source Software
VIII) Financial Services Marketplace
IX) Peer-to-Peer Network
X) Trust Services Layer
Digital cryptocurrency is the simplest, and thus was the first application in that of Bitcoin. Currently, cryptocurrency can be spent at thousands of online and brick-mortar stores across the world. Adoption of this technology has led to volatility in the marketplace. Firms see this opportunity to capitalize through investing for considerable gains. Unbeknownst to them, greed will fuel the angelic fire that will one day lead to their departure to Hades.
There are two imminent threats facing blockchain technology. In the United States, regulatory laws that were created more than eighty years ago when the Internet did not exist may potentially block this technology’s growth and adoption. The Internet was partly successful because government was permissive during the early stages of development, which is crucial for an emerging technology’s success (Mougayar). Now, government must do the same for blockchain in order to not stifle innovation and growth. The Web projected freedom of speech, which is a constitutionally protected right. This means that the U.S. government cannot censor speech, but private entities such as Twitter still could. However, blockchain represents the power of the purse. The abolition of the government’s monopoly on money will end their capability to spend recklessly while further devaluing the dollar through an inflation tax. Blockchain is definitely more dangerous to the government, so battles could possibly ensue. There is no need for government to ban books if there is an illiterate populace. With blockchain, every individual can be the owner of their own bank. Now, that is giving power to the people.
If government does not put an end to blockchain technology, then technical limitations is next in line. The first (Bitcoin) and second (Ethereum) generations of blockchain are noticeably slow and the blocks become full with light traffic. Scalability solutions are fervently being researched and developed. Scalability issues could be the silent killer of blockchain. The technology’s main opponents are Directed Acyclic Graph (DAG) projects, such as IOTA and Hashgraph. These projects claim higher measures of interoperability and scalability through their varied connectivity of nodes. Other futuristic technologies such as Internet of Things (IoT) and Artificial Intelligence (AI) can synchronize effectively with blockchain, which will lead to enhancement of all technologies.
As the old adage goes, “The pen is mightier than the sword.” Code is the new pen that not only encourages others, but can create and build a better world. Blockchain will not be stopped. Blockchain is a decentralized technology consisting of people all over the world. The Internet or power grid would have to be shut down completely, but if that were to happen, we may have a bigger problem. Blockchain is the technology of the 21st century, and will become commonplace in the near future. Everyday, people are waking up and realizing that just because things are a certain way does not mean that it has to continue. Allowing the power of the purse to be in hands of the people, instead of governments and hidden banks, essentially means a stop to endless wars for there will no longer be fiat money to be printed limitlessly for their selfish endeavors. Decentralized, peer-to-peer cryptocurrencies are the primary solution to tyranny and corruption. Blockchain is here to stay.
Sources:
- Antonopoulos, Andreas. The Internet of money. Middletown, DE: Merkle Bloom, 2016.
- Mougayar, William. The Business Blockchain. Hoboken, NJ: John Wiley & Sons, 2016.
