Blockchain = Trust?
By Max Folaron on ALTCOIN MAGAZINE
Blockchain — a buzz word. A word, that sparks people, either because of its power or because of its hype. Are we witnessing the next revolution overcoming the one, we’ve had 20 years ago with the Internet? Or are we a part of one of the biggest information ‘bubble’? Can we really trust this technology?
In order to answer this question, let’s ask ourselves: What is the world we currently live in? What do you think about the current world and what is your point of view at it?
When I ask myself this question, I think that the current world is in hands of only few people. By people, I mean both governments and financial institutions such as banks. These institutions are very centralised. They’ve got one system, one database and also one point of failure. They also have only few authorised people who have access to it. Only few authorised people who can make any kind of change into this system, and you are just a number in this system without any real power.
Over the course of the last hundreds of years, these institutions have developed one very important feature — the trust. Majority of us trust these institutions in every transaction they do, and we take this trust for granted. Although, history shows, that these institutions has clearly disappointed us plenty of times, I still have to admit that the job they do is quite good… However, do you know what is the biggest issue I can see with them? That, we — people, especially in well-established, developed economies have cultivated an awful attribute in ourselves. It all came to the point, that we — people, trust these institutions, but we do not trust each other anymore. This is what hurts me because we are loosing the most important attribute, which can be developed between two individuals — the trust.
That’s one of the reasons, there is such a huge interest in this technology. For the first time ever, we’ve got this extraordinary situation, that the trust can be generated not by an individual or institution, but by the technology. Blockchain is the technology, that generates trust because of the way it is created. And you know what is extremely important? These institutions have the power to stop any kind of individual or a company, but they cannot stop this technology. The only way to stop it, is to turn off the Internet, which means turning off the world.
Bitcoin was the first fully-working application of this technology, which has allowed to transact any amount of value (in form of Bitcoin) between two individuals, who do not know each other, hence do not trust each other, and could do that 100% securely in 10 minutes, paying less than a cent for a transaction. All of it without using any financial institutions, which used to be the only way to generate such a trust. Isn’t it an important innovation when you think about it? How about thinking further?
I hope you are aware, that there are around 2 billion unbanked people all over the world. Banks do not provide its services to them because of high costs of infrastructure that would have to be set up together with unsure profits. But, as discussed earlier, if a bank is an institution, which allows for storing and sending money between one and another, hence it provides the trust, do these unbanked people have the power to be their own bank with the use of technology which creates this trust? Can you see how powerful is that question? Could such a situation ever occur?
Few weeks ago, I had a pleasure of educating 450 Malaysians about the blockchain technology in Kuala Lumpur. I’ve asked them three very important questions: How many of you have a relatives abroad? Do you support them financially on a monthly basis? How much does it cost you in percentages to send that money to them?
For the first question, I could see around 90% of hands up. For the second question, it went down to around 80% of the room. For the last question, the average would be around 7–8%. Do you know how do I call this 7–8%? A rip-off.
$670bn was sent in form of remittances last year. The average transaction fee together with the exchange rate fee was around 10%. Hence, $67bn was taken in form of a fee for all the remittances last year. Now, think big — there are 3bn people around the world, who live for less than $2.50 a day — that’s a fact. Assuming, that these people were also the ones to which these remittances were directed to, do you think these $67bn, which was ‘stolen’ by banks or companies such as Western Union or MoneyGram would not help these people in need? Of course it would! And what’s more, those $67bn would have the power to change the whole economies. If these people had that money delivered, they would be able to spend more, hence generating the tax for the town/city/country. That’s how you make the wheel running.
Now, what if there was a solution to that, and all these people would need is a smartphone. They could have a wallet in which they could store a cryptocurrency, in form of an mobile app, which is also based on the blockchain — hence its very secure. Now, I’m grateful that Bitcoin has appeared in 2009, but I don’t see much potential in it in helping unbanked people on a larger scale.
What if we had a cryptocurrency, which we could send in the real time, which would be stored on a decentralised wallet and what’s more, which we could pay everywhere with the use of our smartphone? Can you imagine it?
I’m currently sitting in a cafe in Singapore and a friend of mine from Philippines is calling me saying, that he is standing in a queue in the shop and he doesn’t have any funds on his card. I can open an app and send him equivalent of $50 in ‘x’ cryptocurrency. He would get it in the real time, and would be able to pay with it in the shop using existing infrastructure (Visa/MasterCard terminals). Does the merchant know that he paid using cryptocurrency? No, because while paying there is a 3 seconds ‘window’ in which coins are being sold on the exchange and converted into the FIAT currency of the country he is currently paying in. Brilliant or brilliant?
And you know what? — This solution already exists.
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