The past is a funny thing. Humans love to reflect and study the past as a way of trying to make sense of our world today. As Carl Sagan once famously put it “You have to know the past to understand the present.” But the past is also complex and frustrating. The more we try to understand it and learn from it, the more it confounds us. This concept can apply equally at the macro / societal level and at the micro / personal level. Human nature, it seems, is to constantly question and wonder “what if?” This is absolutely true at the personal level. As individuals, we constantly ask ourselves, if I had only done this differently, how would things have changed? Or, what if I said this instead of that, or reacted in this manner as opposed to that manner? While it can be frustrating and resulting in much soul-searching and sleepless nights, I truly believe such introspection is healthy and ultimately helps us in making decisions in the future. Once again, learning from the past to affect the future.
The past and the future are actually not so different. Every past event has a cause or causes that, as we look back at them, typically make sense to us from our vantage point in the present. Likewise, each past event has implications and influences the events that follow it. It can be a very linear sequence that, again, make sense to us when we look back at them. To me, the future works in the exact same way. The difference, of course, is that we don’t know what will happen in the future. Instead, we have a wide range of possible futures. But, just as with a singular event in the past, the events happening today, will shape the ultimate future.
Advancements in technology is an area where past events can provide a good indicator of how future events can transpire. This is especially true when the technological achievements are driven by or impact social trends. As I reflect back on 2017, the technology that I think will make the most future impact is blockchain. The backbone technology behind cryptocurrencies, the distributed nature of blockchain will begin to revolutionize all manner of record keeping such as contracts, individual health records and financial ledgers over the next 5 years. It’s much like the early stages of the internet, where the underlying technology creates a foundation for all manner of ideas and business opportunites.
Let’s take Bitcoin…the primary cryptocurrency built on blockchain…and, using historical examples, try to surmise how this technology and its acceptance will evolve over the next 5 years. I think it will follow one of a few scenarios:
Scenario 1: Also known as the MySpace scenario, this is where the early leader fades into irrelevance due to newer technologies that basically do the same thing, only better. MySpace, which was started in 2003, quickly rose to be the most popular, widely used social network site. Within in a few short years, it was the most popular overall website in the US! As many people will remember, this would not last. In an effort to tap into users creative side, MySpace allowed all sorts of customization options to individuals profile. Users could add music and videos that automatically started playing when their profile was visited. However, many of these features were buggy, ill designed or optimized to run on only the newest PC’s. While these additional features may have appealed to users and in some ways, were ahead of their time, they detracted from overall social networking capabilities people were really after. The end result was that, just as quickly as MySpace rose to the top, it was succumbed by Facebook, which offered a truer social networking site, built on a cleaner, more user friendly interface. Since then, Facebook has been on a rocket ship to billions in revenue built upon a mountain of billions of users. MySpace, which is still around by the way, flounders as a niche entertainment site worth a fraction of the amount it peaked at during its heyday.
Scenario 2: Everyone knows Amazon, the eCommerce juggernaut that is now permeating into almost every aspect of our lives. Not everyone knows (or remembers) that Amazon began in the 1990’s as an online bookstore. It was one of the original dotcoms. It (barely) weathered the dotcom bubble of the late 90’s, reinvented itself as an online super-store and has now reached into our homes with Alexa, Kindle and entertainment programming. This did not happen overnight for Amazon. It built its strategy over many years of reading the markets and adjusting to consumer needs. When they rolled out the original Kindle in 2007 and Alexa in 2014, Amazon was anticipating customer demand by being at the forefront of technological advances. In the space of about 20 years, Amazon evolved from a one-dimensional concept to one of the most important technological and economic companies around.
Which brings me back to Bitcoin and where it’s headed. Will it follow one of these scenarios or do something completely different? It’s entirely possible the Bitcoin of the future may forge its own path from the Bitcoin of the present. As a technology (blockchain) and a concept (cryptocurrency), Bitcoin is still largely misunderstood by the general public. Because of this, social acceptance of Bitcoin has not quite manifested itself and, it is my contention, this acceptance is the key element in shaping the future of Bitcoin.
Looking back at the scenarios for comparison, there really is not much debate that greater user acceptance propelled Facebook past MySpace. This acceptance was of both the technology (Facebook) and the concept (social networking). Facebook was able to deliver the technology in a way that was simple, while users were still trying to understand the concept and capabilities of social networking. The MySpace approach of providing users with customization bells and whistles, while allowing for open networking, did not make for a winning combination.
Likewise, Amazon has fed its growth by combining technology and concept into what is now known as ECommerce. Amazon didn’t invent ECommerce, but, in the opinion on many, they have perfected it. Amazon is, in many ways, a true reflection of capitalism, where demand meets supply in a 24 x 7 orgy of choices and options. They took the same concept that made Walmart the retail behemoth of the 1980s and 90s, into the modern world. This is an eerily similar comparison to Bitcoin in my opinion.
Obviously comparing Bitcoin to Amazon or Facebook is not an apples to apples comparison. There are many differentiating factors, technologies, and principles at play. Bitcoin is a currency and therefore, a store of value that can be used to purchase good or services. While Amazon and Facebook provide value to their users and stockholders, you typically can’t trade share of either for something like a house, without first selling those share for cash. Of course, Bitcoin has already shown a propensity to exceed the analysis of naysayers and bubble predictions that have been made about it, but I believe it’s ultimate survival will depend on whether users can easily use and understand the value of it. The concepts of exchanges and wallets might make sense to the tech savvy, but they are still foreign and intimidating to many in the general public.
Undoubtedly, blockchain technology is here to stay. Again, much like the internet and other technological advancements before it, it will grow exponentially as it becomes easier to develop and more efficient to use. But, for Bitcoin and other cryptocurrencies, simplicity and approachability will go a long way in determining which ones survive in the long run and evolve from the esoteric to the familiar.