In our last blog post about Will the Coder in the Basement Replace the Banker?, we provided an infographic to describe the function and development of this alternative currency that has presented challenges to global currency infrastructure.
While the development of an alternative currency not tied to any oversight body like the Federal Reserve may sound revolutionary, it’s actually the technology behind Bitcoin that’s the real disrupter. So much so, that analysts are predicting the backbone of Bitcoin – known as Blockchain – will end up being as groundbreaking as the Industrial Revolution or the internet.
It may be hard to believe, but Al Gore didn’t invent the internet. The first stages of what we know as today’s world wide web, were actually developed more than 50 years ago during the Cold War, when the U.S. government used this technology as a method for communicating, providing information and monitoring other governments. It wasn’t until the 1990s that the world wide web became a public domain that we could browse for information, use for e-commerce and most recently, connect via social media. This evolution came from no single ‘inventor,’ but rather, from decades of open-source innovation for anyone involved to build upon.
Fast forward 25 years, and welcome the new disrupter – Blockchain. And just like the internet, you really don’t have to understand the technology behind it to use it or comprehend its significance. What makes Blockchain a bigger deal than Bitcoin, and possibly even the internet itself, are the exponential opportunities the concept provides. Blockchain is more than a ledger for bitcoin; it actually works as a database, like a super secure, trackable, visible Excel spreadsheet. It has public visibility, but due to the encrypted coding, also allows for privacy and security.
To explain further, let’s use an analogy of a house. Everyone can see the house from the outside, but only the owners have the keys to get inside to know what’s in the house. So with Blockchain, while everyone can see a transaction between people, the details behind that transaction are only for those who hold the ‘keys’ to the house. And, once the ‘block’ is out there, it’s permanently and publicly available for those in the network to trace but not to access, edit, delete or alter. The unimpeachable nature of the Blockchain means that it provides a simple, secure and streamlined way of tracking large amounts of data.
So enough of the tech-talk; now for the fun part! So what makes Blockchain so revolutionary for it to be compared with the Internet? The most prevalent case for Blockchain thus far is for financial technology or FinTech companies. In fact, the venture arm of Santander has identified at least 20-25 cases where Blockchain could be applied. They describe Blockchain’s potential as, “A world in which parties can effect transactions securely without banks, stock exchanges, or payment processors is a very different one.”
With the distributed ledger technology imbedded in Blockchain, banks could actually realize $15-20 billion in savings on infrastructure cost annually by the year 2022. Because they wouldn’t have to implement technology to track transactions or manually enter information; everything bankers need would be embedded into the code. And it’s not just the financial industry that sees potential applications.
In the public sector, voting and other civic activities could be positively impacted as well. For instance, instead of going to designated polling locations on election day, people could simply use their smartphones to vote from wherever they are. The results would be voting records that are secure, trackable, and unimpeachable. The increased transparency and traceable security capabilities within Blockchain could not only make elections cheaper, but also hinder voter fraud.
Additionally, Blockchain’s flexibility means that it could be scaled for a national election, including nationwide presidential elections, all the way down to local elections. The potential to have immediate election results in a secure environment is something that civil liberty advocates have been dreaming of for decades. Expanding on public sector capabilities further, the tamper-proof nature of the data would also allow governments to use the Blockchain network for everything from vehicle registrations to fraud-proof government benefits disbursements, and even providing digital identities for individuals, such as refugees, who lack government-issued documents.
One government is already well on its way to using Blockchain for government applications. Honduras has implemented a pilot program that utilizes Blockchain for land ownership records in the country. Blockchain has provided the country a way to implement better record-keeping for land deeds, sales and ownership. According to author Jeffrey Maxim a reporter from Bitcoin Magazine ,“The intent is to reduce the corruption and fraud associated with a centralized registry under the control of government officials by substituting a distributed, transparent ledger instead.”
At this point in Blockchain’s development, a lot of the potentialities are at the applied theories stage; it’s like the 1990s of the internet revolution. But even in the theoretical phase, analysts counsel to not underestimate the prospective myriad uses of this technology. So energized are people over Blockchain’s capacity, nearly every industry is emerging with concepts, prototypes, investment, and research and development into ways that the technology can revolutionize nearly every market. In fact, the Fintech Times says, “Lots of different networks being created, all similar, all different, all groundbreaking in their own way.”
Companies diving into the Blockchain pool include a virtual who’s who of big-time players across a variety of industries, including Overstock, JP Morgan, Microsoft, Santander, IBM, Samsung, Philips Healthcare, Amazon, Bank of America, Mastercard, and IBM. Even with all these companies getting in the game, it’s important that the giants of industry collaborate and cooperate at this stage in the technology lifecycle. According to Understanding the Blockchain author William Mougayar, “Let’s hope we don’t create an Android versus iOS situation, where the chasm between operating systems, apps, and app stores became the mobile industry’s Achilles’ heel.”
Another cogent illustration is the lifeline of video over the past thirty years; first VHS and Betamax were in a pitched battle, with VHS the clear winner even though Betamax was smaller and had a better picture. Fast forward to VHS versus DVDs, a short-lived battle where DVDs won but were quickly tossed aside for the convenience of streaming. The migration of video in a short 30-year span demonstrates exactly how innovation can become obsolete, regardless of how market-leading its manufacturers claim it to be. If Blockchain is to live up to its potential, it won’t happen if companies and industries work in a protectionist bunker. To fully realize the next revolution, let’s take a page out of our recent history and remember what it is that made today’s internet possible: early innovators open-sourcing information in the sharing economy.
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