Last updated September 2017
The Potential of the Blockchain
To many people, blockchain is a buzzword that accompanies the now-mainstream Bitcoin, but they don’t always know what it means, and they definitely don’t understand its potential. Blockchain technology is the backbone of Bitcoin, but has way more potential than that single application.
Blockchain technology is essentially a way of scaling trust. The way it works is by creating a public record, or “ledger” as it is termed, that can keep track of all the transactions or events that occur. The buzzword that is constantly being used is “decentralization”, since that is exactly what blockchain technology helps the world accomplish. There is no longer a need for a central controlling force and that makes it possible to have a system run itself. This is all to say that blockchain can be used to create systems that are self-regulating and decentralized.
This way, everyone can trust everyone else to a much higher scale. The original publication by Satoshi Nakamoto called this a “trustless system” because no trust was required between the participants since they have absolute trust in the system. There is less of a need for face-to-face meetings because of the way the technology prevents fraud and the like. This scalable trust is expected to change the world and how business is done in every industry, not just financial services. Blockchain is a simple idea with complex technology that will open up a ton of different options for how the world runs in the future.
As you probably know from reading the news and watching how the economy works, the financial services market is the largest industry in the world. Bitcoin and other currencies and technology that employ blockchain are expected to take a chunk out of that in the near future, which could mean huge potential in business terms. And that is just the beginning.
Financial services is the first and most obvious application of this technology because of its omnipresence in our lives, but the idea of a ledger that keeps track of all transactions can apply to nearly everything.
Even if Bitcoin never becomes a mainstream form of cash, the cryptographic technology that Satoshi Nakamoto conceived has the potential to be a game changer in a ton of different industries. In the Bitcoin world, a ledger is just a record of who owns how much Bitcoin. There is no reason that this simple concept couldn’t be applied throughout every industry where ownership is a factor (which is nearly all of them).
And as we are seeing with the implementation of Ethereum, smart contracts are going to give rise to exponentially more possibilities for the application of blockchain technology. Smart contracts employ logic and rules on top of blockchain in order to manage and run a system. In a sense, blockchain is the operating system and smart contracts are the applications.
The goal of Ethereum is to create something akin to a world computer that uses smart contracts to manage and run nearly everything. It is going to be hard to ignore the possibilities and potential that is going to come as time goes on and more plans come to fruition.
If you look back at how the Internet has changed the last two decades, then you can see that blockchain is likely going to change the next two. The Internet merely connected people more efficiently, so what is going to happen when they can deal with each other more efficiently?
Blockchain’s Application in the Future
If you really want to get an idea of how many different applications blockchain technology may have in the future, think of every single instance where there is the potential for fraud or a lack of trust. In every single one of these case, blockchain has the potential to create a system that is decentralized and manages the transactions more efficiently.
Since the early 2000’s, the music industry has been constantly disrupted by the advent and spread of the Internet. The piracy of music and movies has cost these industries a lot of money, and their response was always to try and send people to jail over it, but it may be that the better way to handle the problem is by creating a new technology that guards intellectual property much more intelligently.
A company called Mycelia has begun to roll out a system that allows for the proper tracking of the sale of anything copyrighted and directly pays the artist. Not only will this help to eliminate piracy, but it has the potential to turn into a publishing platform that effectively cuts out the middlemen that take a large portion of artist’s and producer’s income.
This intellectual property management case also extends into the management of physical goods. From artwork to diamonds, a ledger could be created to manage the trading and possession of these goods, which would effectively kill the counterfeit market. There are already companies like Everledger doing this to keep track of who owns what, and this is still early on Identity management is another major application that gets a lot of attention because of its simplicity. You are in possession of your identity and it is a set value that could be presented anywhere from the border to bars and be nearly impossible to spoof. Identity also becomes much more powerful in an online context since it is very difficult to properly verify proof-of-identity online.
Where things get really cool is when you see the potential that blockchain technology has to disrupt a lot of industries we already consider quite disruptive. Every instance where there is a middleman creates a possibility to use blockchain technology to cut that middleman out. For example, Uber is a revolutionary company that has changed the way the transportation industry works, but just as much as it is making people’s lives better, it is harnessing data for the future and taking a cut of every transaction. If a system running on smart contracts could be invented that solved this problem, the costs to users would be lower and there wouldn’t be the same worries about proprietary data etc.
The same applies to Twitter. We are starting to see a lot of censorship and free speech issues pop up, and there is no reason that a version of Twitter that was decentralized and didn’t have any of those issues couldn’t be invented. It is even possible that many parts of the government, including voting, will run on this system, as that is much more efficient than the current methods we see in operation.
Basically, the entire future could end up being run on blockchain and smart contracts based on blockchain technology. There is huge potential for anyone who can learn how to harness these opportunities and create great new systems for it. Blockchain is essentially an early version of artificial intelligence, but is much more benevolent and likely to help the whole world. If the goal was to create a world that ran more smoothly, then blockchain is probably the best bet for creating this world. The technology is complex, but the idea is simple, and we will see where it takes every industry from financial services to identity management in the future.