Note: The original article was published on my personal blog in November 2017.
Do you know what blockchain is? (Hint: not just bitcoins & cryptocurrencies). If you don’t know this technology today, then you’re just like someone who didn’t know what the internet was back in 1992. The technology most likely to change the next decade of business is not the social web, big data, the cloud, robotics, or even artificial intelligence. It’s the blockchain, the technology behind digital currencies like Bitcoin.
When Bitcoin was unleashed to the world in a white paper by an anonymous person eight years ago, it filled a specific need for a digital currency that wasn’t under anybody’s control. But it wasn’t long before people realized the technology behind Bitcoin — the blockchain — could do much more than record monetary transactions. Blockchain technology is complex, but the idea is simple. At its most basic, blockchain is a vast, global distributed ledger or database running on millions of devices and open to anyone, where not just information but anything of value — money, titles, deeds, music, art, scientific discoveries, intellectual property, and even votes — can be moved and stored securely and privately. On the blockchain, trust is established, not by powerful intermediaries like banks, governments, and technology companies, but through mass collaboration and clever code. Blockchains ensure integrity and trust between strangers. They make it difficult to cheat.
In other words, it’s the first native digital medium for value, just as the internet was the first native digital medium for information. And this has big implications for business and the corporation. Much of the hype around blockchains has focused on their potential to fundamentally change the financial services industry — by dropping the cost and complexity of financial transactions, making the world’s unbanked a viable new market, and improving transparency and regulation. Indeed, it is already having a big impact on that sector and others. That relaxation has lately blossomed into a dazzling and often bewildering array of startup companies, initiatives, corporate alliances, and research projects. Collectively, they are facing a question that will have an enormous impact: What can the blockchain do better than conventional databases? Billions of dollars will hinge on the answer in the next several years. Can the technology link neighborhood buyers and sellers of rooftops-generated solar electricity? Can it keep track of property titles, academic transcripts, energy market credits, and state licenses for healthcare providers? Can it check the status of airline flights and make reparations to weary travelers if their flights are delayed? These are the serious questions this technology has.
The future may belong to companies and startups that are blossoming every day in different domains, but for now, Bitcoin is still the biggest user of blockchain technology, and it’s a major driver of innovation in computing hardware. Most of that computing is dedicated to mining the process that runs the network and rewards those who do the work with newly minted bitcoins. That computing is done on purpose-built machines packed with custom chips. These mines have been built in the parched sands of Mongolia for one reason: cheap electricity. Each day, bitcoin slurps a city’s work of energy to perform a small fraction of transactions that major credit card networks accomplish. But there are other ways to run a cryptocurrency, and Intel thinks it’s found one. Not coincidentally, the technique hinges on the proprietary working of its own processors.
Enthusiasts are sure that blockchain tech is going to take over the world. To realists, it could be the solution to a few important problems. Regardless of who’s right, there are going to be blockchains in our lives. Whether they’re in the background or the foreground, we should understand how they’ll work, and what could happen if they don’t.
Resources:
[1] Morgen E. Paeck & Samuel K. Moore, The blossoming of the Blockchain, IEEE Spectrum, Oct 2017
[2] Don Tapscott & Alex Tapscott, The Impact of the Blockchain Goes Beyond Financial Services, May 10, 2016, https://hbr.org/2016/05/the-impact-of-the-blockchain-goes-beyond-financial-services
