A new disruptive platform called Blockchain has the potential to revolutionize business interactions and human society in general. The Blockchain data structure and computational algorithms facilitate both tracking and collaboration of a wide variety of transactions and interactions. Blockchain technology consists of a distributed database that maintains a continuously growing list of timestamped data blocks that build off of previously added blocks. Even though this technology has only been around since 2008, it has already powerfully morphed three times:
Blockchain 1.0 – Cryptocurrency – Provides the ability to securely digitize cash, conduct peer-to-peer value exchange and track price, quantity and location using a public ledger (i.e. – Bitcoin and Robocoin)
Blockchain 2.0 – Smart Contracts – Provides the ability to directly track and execute complex agreements between parties such as stocks, bonds, futures and loans.
Blockchain 3.0 – Applications – Provides the ability to streamline operations in areas such as Government, Logistics, Intellectual Property and Healthcare by acting as an actionable public ledger of all transactions. (a.k.a – the ledger of things)
One of the amazing elements of Blockchain is that it ensures honesty, accountability, consideration and transparency in a secure and highly efficient manner. As with most innovations, Blockchain lies at the convergence of multiple disciplines: Computer Science, Mathematics, Cryptography and Network Communications and is fostering a new era of digital innovation. This technology consists of an open-source distributed database, state-of-the-art cryptography and an internet-based network of trust. The platform enables mass collaboration through cryptography rather than through third-party institutions that currently provide authentication and settlement. The bottom-line is that this peer-to-peer technology holds tremendous potential to eliminate intermediaries, ensure transaction privacy and unify currency. Amazingly, since 2015, over $1 billion of venture capital has flowed into Blockchain start-ups and the technology is still in its infancy.
Blockchain technologies will impact both our economy and society and challenge many institutional controls. As coordination, registration, transactions, voting, record-keeping and value exchange increasingly moves to Blockchain technology, the corresponding disintermediation will mean massive societal and economic reorganization. In this manner, all types of assets, both tangible and intangible can be directly registered, transacted and made actionable without the need for a third-party. This technology has become even more profound as economic activity increasingly becomes digital and the Internet of Things (IoT) continues to explode. A good non-technical way to think about Blockchain is as a secure decentralized accountant that facilitates direct value exchange and enables actions to be taken based on outside trigger events.
Blockchain 1.0 – Cryptocurrency
Specifically, in the world of FinTech, Blockchain is having a disruptive impact on traditional currency transfer, remittance and digital payments as it has the potential to completely disintermediates many existing Financial Services players. One of the most prominent example of Blockchain technology deployment is Bitcoin. Bitcoin is a non-national-based digital currency (also known as cryptocurrency). Bitcoins represent one of the largest Blockchain distributed databases in the world and operates as a public financial ledger for the currency. Bitcoin users can buy, sell, transfer and loan the currency using the bitcoin protocol over the Internet. All this is accomplished without the need for a central authority, hierarchy or complex 3rd-party central coordination. Interestingly enough, Cryptocurrency such as Bitcoin also provide the potential for increased certainty over monetary supplies, can prevent currency manipulation and can also address financial inclusion among the poor.
Blockchain 2.0 – Smart Contracts
Blockchain 2.0 focuses on smart contracts that are more complex than cryptocurrency involving stocks, bonds, futures, loans, mortgages, titles, etc.). Smart contracts have the potential to significantly reconfigure much of human activity through further disintermediation. By registering and transacting both tangible and digital assets via the Blockchain, it keeps a permanent record of the complex transaction. Additional applications of Blockchain include digital notarization services, lotteries and the facilitation of tamper-proof elections.
Blockchain 3.0 – Applications
Programmable Blockchains represent a new level of sophistication that allow users to create more actionable smart contracts that automatically execute functionality based on external trigger events. An example of this is the ability to auto-invoice customers when materials arrives at the loading dock (via IoT sensors). This type of machine-to-machine (M2M) invoicing and micropayment can be configured between devices as part of an Internet of Things (IoT) network.
Smart Blockchain applications have the potential for significantly reconfiguring and streamlining a lot of human activity. While the impact of Blockchain technologies is not fully appreciated or foreseen, much like the Internet 20 years ago, Blockchain technology provides limitless possibilities.