You’re reading the newspaper. Maybe checking the stock market. You see yet another article talking about “blockchain”, “bitcoin”, or “cryptocurrency”. Depending on what you’re reading, the article’s either telling you how you can make ridiculous money through bitcoin, or predicting the bubble bursting. You probably know someone who knows someone who once bought bitcoin for cheap back when it was just for fun and is now a millionaire. Somehow none of this really surprises you. After all, currency is itself a bit of a social invention, and so much of it is digital nowadays anyway. Lots of people live cashless lives, paying for everything through cards. If a digital number rising and falling in a digital account can noticeably change–even save–a person’s life, maybe the development of a new form of purely digital currency isn’t so out there. Yet what exactly is blockchain, and is it really going to be the New Internet?
All the Jargon in the World
Invented by someone (or someones) going by the name Satoshi Nakamoto, blockchain is a distributed database. A shared record book, if you will (via the afr), made up of thousands of copies stored in computers around the world. A decentralised system. Every time there’s a change made to the record, aka if someone sent someone money, it’s a new line (a “block”) that’s replicated across all the copies, an irreversible change that will exist as long as the Internet exists. The change is validated by known algorithms. As the record book is owned by anyone who has a copy, there is no middleman like a bank involved. Existing in a state of consensus, the blockchain checks itself every ten minutes, reconciling any transaction during that time.
As such, this system has the benefit of transparency–everyone has access to the copy of the record book–and virtual incorruptibility, since it would require a lot of computing power to override the blockchain. It also lacks centralised points of vulnerability that hackers can exploit. This decentralised system has been called Web 3.0, allowing users to create value and authenticate digital information safely and transparently. The system, if widely adopted, would have wide-ranging effects on how we currently use the Internet.
[I]n a world where anyone can edit a Wikipedia entry, blockchain is the answer to a question we’ve been asking since the dawn of the internet age: How can we collectively trust what happens online? –PCMag
Blockchain Outside Bitcoin
To date, the value of bitcoin is estimated at several billion USD. And the blockchain system is beginning to be used for things other than cryptocurrencies like bitcoin. Via PCMag:
[D]ozens of startups are using the technology for everything from global payments to music sharing, from tracking diamond sales to the legal marijuana industry. That’s why blockchain’s potential is so vast: When it comes to digital assets and transactions, you can put absolutely anything on a blockchain. A host of economic, legal, regulatory, and technological hurdles must be scaled before we see widespread adoption of blockchain technology, but first movers are making incredible strides. Within the next handful of years, large swathes of your digital life may begin to run atop a blockchain foundation—and you may not even realize it.
In Kenya, which has a problem with fraudsters and corrupt land officials changing records for “land grabs”, it’s hoped that blockchain will help build trust in and buffer a system otherwise rife with problems. From the BBC:
Caine Wanjau, the technology officer at Twiga Foods, a Kenya-based food distribution company, says: “In a relationship where two parties don’t trust each other, then blockchain makes sense.”
The company recently announced a partnership with IBM Research to create digital profiles of informal small-scale traders – to be stored in a blockchain – to help them access credit.
“Seventy percent of Kenyans work in the agriculture sector but only 2% get credit from banks. We want to create an immutable – trustworthy – database of the vendors and suppliers we deal with to help them, and banks to have access to information they can use to negotiate credit,” Mr Wanjau adds.
But I’m not in Kenya, you might say. And my business won’t touch cryptocurrency with a 100 foot pole. So what does blockchain have to do with me? It’s because, as Don Tapscott explained it in Blockchain Revolution and in his 2016 TED Talk:
Today, we rely entirely on big intermediaries; middlemen like banks, government, big social media companies, credit companies, and so on to establish trust in our economy. These intermediaries perform all the business and transaction logic of every kind of commerce, from identification and authentication of people through to clearing, settling, and record-keeping… they capture our data, which means we can’t monetize or use it to better manage our lives, and our privacy is being undermined…
[S]o what if there were not only an Internet of information, but an Internet of value. Some kind of vast, global, distributed ledger running on millions of computers and available to everybody, and where every kind of asset from money to music could be stored, moved, transacted, exchanged, and managed, all without powerful intermediaries.”
Some brands have also seen immediate returns by engaging directly with the blockchain system. We’re not talking about weirdly jokey forays like Burger King creating its own cryptocurrency (Yes, this actually happened in Russia, the Whoppercoin). Via Adnews:
The blockchain boost continued when Kodak revealed this week it too was jumping into blockchain and launching its own cryptocurrency: the KodakCoin.
Shares of the struggling 130-year-old company rose as much as 90% Wednesday, giving it a valuation of US $565 million.
That represented a gain of roughly US $431 million or 321% since the company said it would use the technology underlying cryptocurrencies, blockchain, to help photographers manage their image rights.
Blockchain systems provide what people want out of modern brands: transparency and authenticity. By integrating blockchain, brands could provide proof that certain practices that their target audience wants are being put in place–for example, that sustainable, ethical practices are being used in goods. Transparency can also lead to other benefits like operational efficiency. Looking for more ways to improve transparency and operational practices? Get in touch.