The two technologies that I find exciting these days are Artificial Intelligence and The Blockchain. I wrote my thoughts on the former, which is more developed, in a different post. The below is an introduction to blockchain technology.
While Blockchain technology is relatively new, it's also a continuation of a very human story. As humans, we find ways to lower uncertainty about one another so that we can exchange value. Bettina Warburg, TED Conference 2016
In 2008, an individual or a group, by the name of Satoshi Nakamoto invented Bitcoin and the Blockchain. For the first time in history, this invention made it possible to send money around the world without banks, governments or any other money intermediary, and this is where the punk rock 🤘 analogy comes from. A system that is totally radical.
Blockchain ≠ Bitcoin
[Blockchain] is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.Sally Davies, FT Technology Reporter
Many experts are debating about future applications of Blockchain technology and the general consensus today is that we still don't know what the true potential is. We can think about the early days of the World Wide Web, a system with a handful of computers in different locations capable of exchanging information amongst a few universities and researchers... Did Tim Berners Lee foresee our fixation with cat pictures? 🐱 Oh, humans...
What is Blockchain?
Blockchain technology is a decentralised database that stores a ledger of assets and transactions across a peer-to-peer network. It's basically a public registry of who owns what and who transacts what. The transactions are secured through cryptography and over time, that transaction history gets locked in blocks of data that are cryptographically linked together and secured. Hence the name of a blockchain. This creates an immutable and unforgeable record of all of the transactions across this network. This record is replicated on every computer that is connected to the network.
It's not an app, it's not a company, it's more like... Wikipedia. The Blockchain is open source, it stores information and all changes are registered and they are visible to anyone. You can think of the Blockchain as an open infrastructure that stores many kinds of assets. It stores the history of custodianship, ownership and location for assets like the digital currency Bitcoin or other digital assets such as a title of ownership of IP, certificates, contracts, real world objects or even personal identifiable information.
And that's The Blockchain in a nutshell. A public registry that stores transactions in a network and is replicated so it's very secure and hard to tamper with. This is why the Blockchain can help us lower uncertainty and help us transform our economic systems in radical ways.
The Blockchain as a technology has two main ingredients:
Cryptography (asymmetric cryptography)
Distributed systems
Blockchains are networks, some interesting examples of networks that we see today are Uber, Airbnb, Alibaba, etc which are centralised networks. The Blockchain is decentralised, it works as a cooperative and at this early stage, the discussion amongst experts is more about the technology itself than how these networks will be deployed.
Something to highlight is the grassroots origin of the blockchain. As far as we know, it wasn't invented by an established business to provide a new USP or competitive advantage. This was a bottom-up movement driven by geeks ➡️ punk-rock.
Paradigm shifts and Blockchain
It is easy to look at technologies in hindsight and point out the paradigm shifts that were created. Today, we can all see the disruptions created by the printing press, the steam engine or the Internet. On the other hand, foresight is really difficult and many experts are still trying to figure this out with Blockchain and its potential use cases. Only time will tell.
One way to look at paradigm shifts is by looking at the gaps each of these technologies filled for everyone. The printing press filled the Knowledge gap, the steam engine provided us with Power, The Internet made the world a much smaller place.
The gap that The Blockchain could fill is TRUST. Not just how we trust each other, but how we trust in business. Trust, is the fundamental currency of Commerce.
Today, we use ledgers that are temperable and this is why we use many intermediaries in every transaction. Banks, credit reporting agencies, insurance companies, etc help to partially fill the trust gap between parties. The remaining gap gets filled with... gut feeling.
The blockchain ledger, as explained earlier, is an epic upgrade on the ledgers that we use today.
Also, Blockchain could help with:
Identity theft - more than 15 million cases a year in the US alone
Digital devices coming online - (IoT) Internet of Things - According to IHS, 75 Billion devices will be online by 2025
The Blockchain and financial inclusion
According to the World Bank, 74% of the world's population doesn't have access to basic financial services. In the US, 50% of the population does not have access to basic financial services including bank accounts. There is a huge amount of people around the world that don't get to experience and be a part of the global economy because they don't have access to the financial system for a variety of reasons. The technology could lift many people out of poverty and it could also be seen as an inclusive technology that allows more people to engage in global commerce.
Network experts Ericsson predict that there will be more than 6 Billion smartphones in use by 2020. Nearly every person living in poverty will have access to a smartphone and will be connected to a network and that is... game-changing. When you have digital wallets on these phones and when you have the ability to trade assets, we will finally face the question of... What happens when everybody has money? As we all know, on this side of the world, capitalism has thrived in some areas by the natural exclusion of others from markets. It uses that scarcity principle as its driving basis.
Undoubtedly, as with previous paradigm shifts, affected companies will try to slow down the implementation of a new and more efficient technology. Cars were not allowed in cities because they were too dangerous, fax-machine companies were offering you a 'better' deal than the Internet, etc, etc.
When the technology that has the potential for revolutionizing an industry emerges, established companies typically see it as unattractive: it’s not something their mainstream customers want, and its projected profit margins aren’t sufficient to cover big-company cost structure. As a result, the new technology tends to get ignored in favor of what’s currently popular with the best customers. But then another company steps in to bring the innovation to a new market. Once the disruptive technology becomes established there, smaller-scale innovation rapidly raise the technology’s performance on attributes that mainstream customers’ value. Joseph Bower
Technologies, especially at early stages, can feel foreign, complex and abstract to many people. The reality is, the average consumer doesn't need to understand how a GPS device works in order to get from A to B. We all use technologies that we don't fully understand but help us to get the job done. There is a quote I always use in my 9 to 5 life as a marketer and it feels right to end this post with it.
People don't want to buy a quarter-inch drill, they want a quarter-inch hole. Theodore Levitt
Sources:
Bettina Warburg, TED Conference 2016
Manuel Stagars, The Blockchain and Us, 2017
Richie Etwaru, TEDx Morristown 2017
Andreas Antonopoulos, The Internet of Money, 2016
Shai Rubin, CTO of Citi Innovation Lab, What is Blockchain