Cryptocurrency skeptics often say that the real value in Bitcoin is not actually the cryptocurrency itself but the Blockchain technology it runs on. This is telling in that regardless of one’s opinion about Bitcoin, Ethereum, or any other cryptocurrency, there is almost unanimous agreement about the revolutionary qualities of Blockchain as a technology. Its security, decentralization, and efficiency in transferring data mean it has a huge number of potential applications.
Over the course of 2016, $1.6 billion was invested in Blockchain technology. By September of 2017 over $4.5 billion had been poured into developing the technology across different applications. The tech magazine Wired places Blockchain at the top of its list of 7 industries that will be the focus of venture capital in 2018. Most of that investment is not going into cryptocurrencies. Venture Capital is “high on the potential value of the underlying Blockchain technology.” But why is the technology first introduced by Bitcoin’s mythical creator Satoshi Nakamoto (a pseudonym) considered to be so revolutionary?
The Raison D'être of Bitcoin and the Birth of Blockchain
When Bitcoin was still a twinkling in the eye of its creator(s), there were a few major problems to solve. The idea was to provide a feasible alternative to the perceived deficiencies in the fiat monetary system. The two big problems Nakamoto saw in the fiat system were:
- Government-controlled central banks can print fiat currencies at will
- Banks and other financial institutions are required to provide central control - verifying ownership and facilitating transactions.
These two qualities were considered to be responsible for maintaining historical wealth inequality at both an international and societal level. Money printing gradually erodes the buying power of fiat currency over time.
Releasing cash into the system this way benefits those at the top to the increasing detriment of those further down the chain, with the mass of salaried workers at the bottom. With global trade and wealth dominated by a handful of historically strong currencies, this ability to manipulate their value through supply also facilitates the status quo when it comes to inequalities in wealth between nations.
Secondly, the role of big financial institutions as the central authorities managing the fiat system gives them too much power. This is open to abuse and the system being subtly manipulated. Additionally, transferring fiat money via the systems these authorities use is inefficient from both a cost and time perspective.
For Bitcoin to negate these deficiencies, a decentralized system that required no central authority with a vested interest was necessary. This created a number of problems that the technology the cryptocurrency would run on needed to solve. The decentralized system needed to be secure, to efficiently facilitate transfers of ownership, and provide an immutable record of these transfers. Blockchain achieved this through cryptography and a peer-to-peer system that meant the whole network secured and facilitated ownership and transactions.
Why Blockchain will change Everything
The excitement that surrounds Blockchain technology is succinctly put by Marc Andreessen, one of the co-founders of Netscape, the first web browser:
“This is the distributed trust network that the Internet always needed and never had.”
Blockchain facilitates trusted transactions between parties, without the requirement of a controlling authority. It does this by mass collaboration authenticating these transactions. This mass collaboration is powered by collective self-interest and not corporations motivated by profit.
If the worldwide web is the internet of information, Blockchain is the internet of value. It also provides a ‘Protocol of Trust’ for structured, recorded data. This has the power to profoundly affect the way information exists in society.
With Blockchain as a bedrock:
- Consumers could know the exact origins and history of the ingredients in the food they are eating
- Money could be sent around the world immediately and cheaply
- Land titles could be easily found after a natural disaster such as an earthquake
- Politics could become far more transparent as potential vested interests would be laid bare
These examples of potential applications, among many others, are why Blockchain is so revolutionary. There are some concerns about the ecological footprint of Bitcoin and other cryptocurrencies, but the potential growth in the popularity of green blockchain could solve this issue.
