For the vast majority of us, the Internet has been the most revolutionary technological invention in our lifetimes. It’s weaved its way into the fabric of our very lives. We use it to meet up and connect with friends, pay our bills, move money around, look for places to eat, navigate the world, apply for jobs and scroll through endless hours of cat videos (if that’s your thing). Yes, it’s hard to imagine a technology that’s affected our day-to-day lives more than the Internet has and yet, I don’t believe the Internet of today is the finished product. Rather, I believe the Internet is constantly evolving and the Internet of 2030 or 2040 will be drastically different than the Internet of today. How will it be different, you may ask. Well, I believe the next major technological leap forward lies with blockchain technology.
What started out as a very niche idea behind the invention of Bitcoin, blockchain has become one of the biggest buzzwords of today and rightfully so, as it has the potential to revolutionize many if not most industries of today. Governments around the world are pouring billions of dollars into space. In fact, just the other day, Australia, one of the global leaders in blockchain innovation, signed a billion-dollar deal with IBM to help accelerate the adoption of blockchain technology in the public sector. And not just governments are getting in on the action, but everyone from well-known venture capital funds like Andreessen Horowitz’ $300 million crypto fund to your average, everyday retail investors. Investment into the space is pouring in from all over the globe, with higher concentrations in areas like Japan, South Korea, Singapore, Australia, Switzerland, Estonia, Malta and the US. It would be safe to say that the excitement in the space is very real. But what’s the reason for this excitement? Surely it can’t all be from the computer nerds having a digital currency that they can trade peer-to-peer between one another, can it? Well partially yes, but blockchain is so, so much bigger than that and it’s as much of a social innovation as it is a technological one. Blockchain will unchain the Internet from the shackles it’s been bound to and create a global economy of value exchange, unlike anything that’s ever happened before it. It’s both the most awesome innovation of our lifetimes as well as the most terrifying. In order to understand it better, I find it useful to look back at our history, specifically being the riveting area of ledgers and record-keeping.
Luca Pacioli. If you’re reading this and wondering who the hell this guy is, you’re not alone. I was right there with you until recently, but Luca Pacioli was a monk and inventor who worked alongside the likes of Leonardo Da’ Vinci in the 1400’s. He also had an affinity towards numbers and is widely credited as being the father and creator of double-entry bookkeeping. For those of you who don’t know what double-entry bookkeeping is, think of our modern-day financial system. All flows of money and data are kept track of through double-entry bookkeeping. Credits and debits, surpluses and deficits, assets and liabilities, profits and losses, I owe you’s and you owe me’s, our whole system of organizing and keeping track of things of value is due, in part, to Luca Pacioli. You may not think of this being a very big deal, but at the time this whole idea of debits and credits was revolutionary and represented a huge paradigm shift. Before double-entry bookkeeping was created, people would just take note of what they had, either mentally or in journals. People had no concept of “I owe you’s” or debts or profits. They simply had what they had or didn’t have what they didn’t have. Now as bizarre as this may seem to you and me, as we’ve gone our entire lives operating under the double-entry accounting standard since it first came about in 1494, this was a huge societal shift back in the day. Businesses could now calculate whether they were profitable or not and could likewise address the areas of their businesses that were thriving or suffering. This was a necessary invention as businesses were becoming infinitely more complex. People needed a system to better keep track of their assets and liabilities, their profits and losses and their loans and debts. Double-entry bookkeeping was the system that allowed people to do that and many would argue was the birth of modern-day capitalism.
Now one of the side effects of this new double-entry recordkeeping standard was people needing to trust this new system. People had to trust that these ledgers were correct and that their debits matched up with others’ credits and that businesses or people wouldn’t/ couldn’t manipulate them. This is when third-party mediators began to enter the picture. Institutions like governments and banks began to come into play to personally verify that yes, Gregory does indeed owe Helga $50 (of whatever currency was favored at the time) for the gallon of mead he and his boys drank the other night. Or yes, Lord Bartholomew does indeed have a $100 debt to the bank for the loan allowing him to buy that sweet new horse and carriage. In fact, this didn’t happen just with money. As businesses and life began to get more and more complex, people increasingly had to place trust in governments and institutions to personally verify any important information. Money is the easiest concept to grasp, however, people started to have to rely on their current government of the time to personally guarantee the value of their money, their property rights, their titles to their land and whatever else people held of value. It wasn’t so much that these institutions had any more right to guarantee the worth of something than the next guy did, however, what they did have was the ability to keep records of everything. They had the ability to create a ledger or database to effectively keep track or who owns what and who owes who. It’s in this manner that kingdoms and monarchs and governments gained their power. It was the collective agreement of the common people that these institutions could guarantee the validity of their property better than anyone else could. Essentially, they could keep track of people’s shit better than anybody else could, so people placed their trust in them and that’s what gave them power. It’s the same thing we see happening today with banks and companies all around the world. People place their trust in companies and banks and governments because they’re better record-keepers than you are. They have the ability to personally guarantee that you have a balance of $6.52 sitting in your savings account. Or that you own 3 shares of Netflix stock. Or that your property does indeed belong to you. Or even, that you are who you say you are. You see, none of these things are inherently owned by you. Rather governments, companies, and institutions vouch for them on your behalf and we collectively put our trust in these systems. But trusting these systems doesn’t work out all the time as history has shown us.
Look at Enron, for example. At one point one of the most successful companies in the world, people trusted that they were financially sound. They trusted that the companies and people auditing them were doing their due diligence and making sure everything was all hunky dory. Nobody outside of Enron knew that they were cooking the books and everyone knows what happens next. Enron went bankrupt and people lost fortunes. People lost trust in the system.
Or look at the 2008 financial crisis. People put their trust in banks. They trusted that banks would act responsibly with their money. They trusted that they would make wise investments with their money. They trusted these banks right up until the housing bubble burst putting the world into a global recession. People lost trust in the system.
Or even look at recently what’s been happening in Venezuela. The national currency of Venezuela, the Bolivar, has the highest currency inflation rate in the world at 13,864% in 2018 alone. Their currency has become so valueless that it takes barrel-fulls of money just to buy a loaf of bread. People placed trust in their government being able to guarantee the value of their money only to watch their life savings become valueless practically overnight. People lost trust in the system.
Time and time again this happens. People place their trust in companies, banks, institutions, and governments only for that trust to be eroded away, sometimes slowly over time and other times, overnight. People all over the world are actively looking for a better trust mechanism. They’re looking for a more incorruptible and transparent way to find trust between parties, and I believe we are on the precipice of a major global shift in trust. And I believe Bitcoin will be at the heart of it.
Born out of the ashes of the 2008 financial crisis, the first Bitcoin was created on January 3rd, 2009 attached with a link to an article from the UK Times Newspaper titled, “Chancellor on brink of second bailout for banks.” Aside from the fact that this was essentially Bitcoin holding up a giant middle finger to the banking industry, it also made people start to question the system. Why should we place our trust in a system that fails us? Why should we place our trust in institutions that need to be bailed out? Surely, we can do better.
Contrary to what the media would have you believe, people aren’t passionate about Bitcoin because of the crazy price fluctuations (at least most educated people in the space aren’t). Rather, people are passionate about these cryptocurrencies, like Bitcoin, because they represent a massive, global shift of trust. The technology behind them, called blockchain, is pretty much just one giant database. Much like the responsibilities of companies, banks and governments around the world its sole responsibility is to ensure the safekeeping of data and information. In a nutshell, it’s a guarantee of who owns what. For the Bitcoin blockchain, it’s a global database of who owns Bitcoin. Now that in of itself is not all that exciting. What’s truly exciting and revolutionary is the manner in which the blockchain guarantee’s this information. Every transaction done with Bitcoin is broadcast to nodes (computers) all around the world simultaneously where each one competes to verify that the latest batch of transactions are true. This is done using mass amounts of computing power in a process called mining, and the first to verify that this these transactions are proven correct are rewarded with Bitcoin. You can think of it kind of like solving a super complex math problem. Not a math problem that a human can solve but rather one that needs a really powerful computer to do so. And the first one to solve it wins.
Now once the latest group of Bitcoin transactions are verified and proven correct they are placed inside a block and published on the Bitcoin blockchain. This is then broadcast to everyone participating in the Bitcoin blockchain all around the world, simultaneously in a transparent and readily accessible way. Not only that, but each block is time-stamped and linked to the block before that and the block before that and the block before that all the way to the first block where the chancellor is on the brink of the second banking bailout. This means that every bitcoin transaction ever done since January 3rd, 2009 is published on the network and is a permanent imprint on the blockchain. A continuous chain of, as of this writing, of 531,840 blocks, published at an average rate of 1 block every 10 minutes. No matter what’s going on in the world at the time, geographically, politically or economically, the blockchain just keeps on plodding along, one block at a time. It’s virtually unhackable, immutable and unchangeable. You can think of it kind of like building a super cool Lego tower. Imagine you’re alternating the color of your blocks between red, blue and green. You’re building this thing up and up and it’s starting to look epic. It’s getting so big that you have to go get your dad’s ladder from the garage just to reach the top. You finally decide that it’s finished and look back at your accomplishment. You are just so damn proud of yourself and think you might possibly be the greatest builder in the world, that is until you notice on the 7th row that instead of a red, blue, green pattern you accidentally did red, green, blue. Apart from being really pissed off at yourself for making such a newb mistake, you would know that in order to fix it you would have to deconstruct the entire tower piece by piece, lego by lego from the very top until you reached that 7th row. Blockchain is kind of like this, multiplied by 10. In order to change a transaction on the blockchain you would have to somehow manage to gain 51% control of the network, consistently maintain that control against a powerful network of computers spread all across the globe and take apart your tower block by block and piece by piece spending millions if not billions of dollars in the meantime. And the farther back the transaction is, the harder and more expensive it is to change it. Yeah, not going to happen.
So why should you care? Well, let’s look at this blockchain concept for a second. I’ve shown you how it works but what possible use cases could there be for it? Who could benefit from using a completely transparent, publicly accessible and virtually unhackable database? I would argue, who couldn’t?
You see, our entire lives we’ve had to place trust in our governments, we’ve had to place trust in our banks and we’ve had to place trust in the companies we buy from. That’s all we’ve ever known and by and large, this system has worked out for us, for the most part. The economy keeps ticking, the world keeps spinning and Taylor Swift keeps singing songs about her ex’s. The system works for us right up until it doesn’t anymore. It works right up until Enron is found to be cooking the books and people lose fortunes. It works right up until 145 million people trust Equifax to protect their personal data only for them to suffer one of the biggest data breaches in history. It works right up until Lehman Brothers files for bankruptcy after the housing crisis of 2008. And it works right up until the Venezuelan, Greek and South Sudan governments inflate their national currencies so much it renders their citizens’ life savings worthless.
Blockchain is every bit as much of a social movement as it is a technological one. What started out as a digital currency for computer nerds has snowballed into something so very much bigger than that. For the first time in human existence, people can choose who they want to place their trust in. People can choose to place their trust in companies, in institutions, and in governments. That’s perfectly fine and people have that right. But people can also choose to place their trust in the blockchain. They can choose to place their trust in a system totally free from political or economic bias. A system without racial bias, gender bias or any sort of biases at all. A system with a currency above government manipulation and control. The blockchain isn’t an invention for the wealthy few. It’s an invention for the poor and forgotten. The beat up and fed up. The day-dreamers and the eternal optimists. The beauty in blockchain isn’t in the fact that it will solve all world problems. Its beauty is in the fact that it serves as a blank canvas. An incorruptible, blank slate that will allow the brave and the daring to create a whole new world on top of.
At the end of the day, I see a world where governments are held accountable for their actions through a public blockchain where citizens can see where every single penny of their budget is being a spent. A world with transparent supply chains so you can personally guarantee that the tuna you purchased from the grocery store was sustainably fished by a small fishing boat off the coast of Fiji. A world where you can safely and securely store your money online without having to trust your bank or government. Or a world where a small farmer in Africa can raise money for his exciting new business idea using the shared village smartphone and global crowd-sourcing. And I see a world where everyone has a personalized and uniquely verifiable digital identity that they control, effectively streamlining all the issues surrounding refugee crises.’
The Internet is and probably will always be the most revolutionary invention in our lifetimes. It’s readily available to all with the right means to access it and has created opportunities and new business models in every corner of the globe. It’s allowed information to flow freely to anyone with a computer, tablet or smartphone. And yet, it’s remained shackled to old infrastructure. We still have to rely on intermediaries like banks, institutions, governments, and companies to verify our information and data. The Internet may have made our networks global, but we’ve still had to trust the same old institutions as before. The Internet wants to be free. Blockchain will unchain the Internet from its current shackles and allow for a truly global economy of peer-to-peer value exchange. Bitcoin may very well fail as a currency, but bitcoin as a blockchain could very well be the most revolutionary and unstoppable force in our lifetimes.