Authors: Don Tapscott, Alex Tapscott
About the book Blockchain Revolution
Blockchain Revolution: Before writing the book “Blockchain Revolution”, the authors researched this phenomenon for 2.5 years. Here is the first fundamental statement of the essence of the blockchain with parallels from the history of technology development. Bitcoin and other digital currencies in the future will go far beyond their current use. Because their ingeniously simple protocol allows the user to simultaneously remain secure and not reveal anonymity. In this way, everything that is of value to humanity can be preserved: birth and death documents, property rights, insurance contracts, and even votes. Thanks to the blockchain, there has been a fundamental shift in the technological paradigm, and the first losers and winners will soon appear. The book sheds light on the future that we may come to in the next decade.
About the author
Don Tapscott is a Canadian business manager, speaker, CEO of the Tapscott Group, author of dozens of bestselling books on modern technology, business and society. In 1977, he ran for mayor of the city of Edmonton from the Revolutionary Labor League party. Chancellor of Trent University in Peterborough. In 2017, he founded the Blockchain Research Institute with his son Alex Tapscott. In the Thinkers 50 list of the most influential business thinkers in the world, he is ranked fourth.
Alex Tapscott is a Canadian investor and business consultant in the field of blockchain technology. Formerly CEO of Canaccord Genuity Bank, CEO of NextBlock Global investment company, CEO of Northwest Passage Ventures, a startup consultancy. Together with his father, Don Tapscott, he co-founded the Blockchain Research Institute. Member of the Blockchain World Economic Forum and Canadian Election Advisory Board.
imagin: you have a product, I have money. I want to buy your product by bank transfer. I will send a payment order to the bank, on the basis of which he will write off the required amount from my account, transfer it to your bank. The latter will credit the amount to your account. The banking system is an intermediary that is between us. It performs an important function – keeps track of funds in our accounts. But what if we keep such records?
Everyone will get himself a notebook and will enter all transactions into it, only it is important that at the same time. Let’s say I received a fee. You and I entered that my balance was replenished by such and such an amount. Would I like to buy something from you again? The transaction will take place if it does not contradict the previous entries, namely, if there are funds on my account for payment. It turns out that we do not need an intermediary.
However, in real life, the store makes a huge number of transactions, and a person, of course, buys in different stores. Then we need an algorithm that will allow everyone to keep a record of all transactions. Is this possible? I remember that the number of active Amazon users in 2015 exceeded 300 million people! It turned out that it was possible. The algorithm has already been created and is being successfully applied. Meet this “chain of transaction blocks”, in English blockchain, read “blockchain”.
The first practical application of the algorithm is the Bitcoin network. In it, participants can exchange the digital currency bitcoin. All transactions are recorded in the global ledger. It is distributed among all network members. If bitcoins have arrived in your wallet, everyone will know about it. And vice versa, if bitcoins are deducted from the account, everyone will also know. Thus, it is impossible to fake the state of accounts. There is no owner in the Bitcoin network, all computers in the network are equal, everyone can both receive and give information. Anyone can join the network.
Major banks and some governments are already implementing blockchain technology. However, their goal is not to create a digital currency at all. That’s what fascinates them: speed, low cost, security, fewer outages, and the absence of a main server – an attractive target for hackers.
The authors titled the book “Blockchain Revolution”. But what is revolutionary, breakthrough? Here we have touched only money. But there are other resources as well. People, documents, intellectual property, real estate, etc. In theory, blockchain can be applied to every resource. Tapscotta’s father and son are convinced that innovation will radically change our lives. But how in what way, we learn from the summary.
After reading the summary, you will also learn:
• How did the cryptocurrency.
• Why the author of bitcoin is considered worthy of the Nobel Prize.
• The essence of the “chain of transaction blocks” algorithm.
• Benefits of using blockchain.
• Names of companies targeting blockchain. You can subscribe to their news on social networks to stay in the know.
• Principles of creating a solution based on blockchain technology.
• Four innovative company models on the blockchain.
1. The genie of technology is out of the lamp again
The need to enter the program as a registered user will soon disappear. We will live and work, completely immersed in the Internet. This technology has already brought a lot of positives: email, e-commerce, social networks, mobile applications, big data, cloud computing and the emerging Internet of things.
But the internet is impersonal. In 1993, The New Yorker magazine published a cartoon by American artist Peter Steiner. In the picture, two dogs are talking in front of a computer. One says to the other, “On the Internet, nobody knows you’re a dog.” In 2011, the cartoon unexpectedly became the most cited cartoon published by the magazine, and the artist earned $50,000 from royalties.
The impersonality of the Internet has brought negative phenomena. Hackers, spammers, cyber scammers appeared. In addition, the problem of digital inequality has arisen. Economic and political benefits are becoming increasingly asymmetrical. Money brings much more money to those who have access to technology. But everything can change. As the authors of the book write, “the genie of technology has again come out of the lamp.” He fulfilled the desire of the people and gave …
1.1. trust protocol
The first attempt to solve the problem of security of payments on the Internet was made in 1981. The main challenges were that the user is forced to provide too much information about himself. Plus there was always a third party. This means that there was a threat of data leakage and the need to pay a commission.
It was only in 1993 that the first digital payment system was created, which was relatively safe and allowed anonymous payments to be made online – eCash. It was developed by mathematician David Chaum. Microsoft has included eCash in their products. However, after 5 years, Chaum’s company went bankrupt – then users did not care much about the security and privacy of online payments.
2008 The global financial industry is being stormed. Someone named Satoshi Nakamoto publishes an article describing a new protocol for an electronic payment system. It was created for the peer-to-peer network.
The peer-to-peer network is based on the equality of participants.
There are no dedicated servers in it, and each node (peer) acts as both a client and a server.
Active Internet users know what a torrent is. This is a protocol that allows network members to exchange files, and without any third-party server. Files are downloaded from each other from the computer. And the protocol ensures that the exchange process takes place efficiently. Nakamoto created a torrent with digital money instead of files. He called them “Bitcoin”.
Soon Nakamoto also released the first bitcoin exchange app. The network began to rapidly gain followers. After all, this has never happened before. People can exchange money safely, privately and without third parties!
“He solved all problems. Whoever he is, he deserves a Nobel Prize! He is a genius!” exclaimed Mark Andreessen, developer of the first commercial version of the Netscape web browser and active venture investor.
A year later, Satoshi Nakamoto completely removed himself from maintaining the network, transferring control over the source code of the application to other developers. Who is he? Where does he live? What does he do? Unknown. The identity of the author of the cryptocurrency has not yet been established. According to one version, the protocol was developed by a group of people who called themselves after Satoshi Nakamoto.
Nakamoto appeared like a genie from a lamp, gave the World a breakthrough technology and disappeared. Although some things are known. Today, there are about 1 million bitcoins in the accounts opened by Nakamoto, which is equivalent to $540 million.
Cryptocurrency is a virtual (digital) currency. It differs from traditional fiat money in that it is not created or controlled by the state.
Bitcoin has laid a powerful foundation on which blockchain technology is rapidly developing. The application code is in the public domain. Anyone can download it for free, run it, or use it to create new applications. Their number is not limited by anything. This opens up great prospects for the introduction of technology in various areas of life.
1.2. Leafing through the global ledger
Blockchain is a mathematical algorithm. It is difficult to understand, interesting to a narrow circle of specialists. Tapscotta’s father and son wrote a book to make the technology understandable to the masses. Let’s follow the authors, leave the mathematics behind the summary fields, but list the main characteristics of the algorithm. This will help to appreciate its beauty and power.
• Cryptocurrency is not stored in a separate file, it is presented in the form of transactions recorded as a sequence of blocks.
• When you hear “blockchain”, imagine a huge spreadsheet that keeps track of all transactions.
• The ledger is distributed among all participants in the peer-to-peer network.
• There is no central database that can be hacked.
• Transactions are encrypted with two keys, public and private, which guarantees security.
• Every 10 minutes, all ongoing transactions are verified and recorded in a block, which is attached to the previous block, forming a chain of blocks.
• The system fixes the time of transactions, which solves the problem of double spending.
• If someone wants to steal 1 bitcoin, they will have to rewrite the entire history of the blockchain, which is almost impossible.
Double spending is a situation where a user tries to re-spend something that has already been transferred.
1.3. World Book of Values
The Internet is entering its second round of development. In the beginning, the World Wide Web appeared. It made it possible to quickly exchange information. It can be called the “World Wide Web of Information”.
The second stage brought the blockchain – the World Wide Ledger. Technology enables the exchange of value. It can be called the “World Book of Values”.
Money is just one example of what we value. Now virtually everything that is important for a person can be taken into account. Birth and death certificates, prenuptial agreements, property rights, college degrees and scientific titles, financial accounts, medical procedures, insurance claims, voting results, food origins – everything that can be represented in digital format!
Note that the blockchain keeps records of values in real time. And now remember, soon billions of “smart” things will communicate with each other. The Internet of Things will need a Book of Accounts.
So what is blockchain? It is a secure and private way to exchange value through peer-to-peer networks.
1.4. I want to be part of the change
The success of the Bitcoin cryptocurrency, as well as the endless possibilities that the blockchain opens up, have stirred up unprecedented activity among entrepreneurs and investors. In 2014 and 2015, $1 billion of venture capital was invested in the blockchain ecosystem. The amount is expected to double every year. Inspired by the new information paradigm, people are radically changing their lives by betting on the blockchain.
Ben Lawsky has stepped down as New York State Treasurer to open a blockchain consulting company. “In 5-10 years the financial system will change beyond recognition. I want to be part of this change,” says Lovsky. For reference, Mr. Lovsky has gained fame as the most implacable bank regulator in the United States. During his first year in office alone, he sued the British bank Standard Chartered PLC for $340 million because the financial institution carried out transactions worth $250 million with Iran, which at that time was under US and EU sanctions.
Blythe Masters, formerly chief financial officer and division head of investment bank JP Morgan, launched a startup that is fully focused on blockchain.
There are more men in technology than women. However, there are women who believe in blockchain. Former BitGo business development lead Arianna Simpson and venture capitalist Jalak Jobanputra are already investing in the sector.
In June 2015, the Canadian Parliament recommended that the government embrace blockchain technology. The Committee on Banking, Trade and Commerce has published a report “Digital Currency: You Can’t Flip This Coin”. The document contains reports from investors in the blockchain ecosystem, as well as a detailed explanation of why the government should pay attention to the technology. “This will be the next Internet,” said Senator Doug Black, the main author of the document.
At the beginning, the genie of technology gave a person the Internet, now it is the blockchain. However, investor enthusiasm is reminiscent of the late 1990s. Back then, stocks soared in price at the mention that the company would use the Internet to generate income. In fact, the new business models proved to be ineffective. The investors’ money was spent, the expected income did not work out, and a wave of bankruptcies followed. On March 10, 2000, the NASDAQ fell more than 1.5 times during the day. The phenomenon has gone down in history as the “dot-com bubble”.
However, blockchain supporters are convinced that the trust that will be distributed among all network participants will change our lives.
1.5. Trust will do wonders
Today, there is a low level of trust in business and everyday life. The concept includes honesty, respect, responsibility and transparency. When the components of trust are missing, we have what we have. To keep a record of transactions and maintain the logic of operations, we resort to an intermediary represented by a bank, government, payment system, Uber, Google, Apple. They take a significant part of the value.
In the blockchain world, trust will emerge from the network, from the entities that created the network. Business will become transparent. Investors will see if the CEO really deserves such a high bonus. Shareholders of a public company will have peace of mind – the capital of the organization is implemented on blockchain technology. “Smart” contracts on the blockchain guarantee the fulfillment of their obligations by the parties. Voters will see if those they voted for are truly honest.
1.6. Power of the Worthy
The media will change. Today, the media are controlled by strong structures, and media users are inert. The new media will be distributed and neutral. Everyone will become an active participant.
The low cost and mass communication in a peer-to-peer network will destroy the foundation of hierarchies. Value and reputation will determine the quality of the contribution a network member has made, not their status. The world will become flatter, more flexible and mobile. Meritocracy is coming. This is a government in which people occupy leadership positions by ability, and not by social origin or wealth.
What about the digital divide? The world today is like a garden in which large companies offer their programs. It is surrounded by a fence, because it is intended only for the elite. In an open world, everyone will be able to contribute to the technological infrastructure.
Technology will improve the well-being of everyone, not just a select few. Today, billions of people are excluded from the economy because they do not have access to technology. Blockchain will provide an opportunity to participate in the economy. As a result, the way wealth is distributed will change because the way it is created will change.
2. Seven principles for building a blockchain economy
A new era of the digital economy has begun. The previous stage was marked by a combination of computing and communication technologies. The new one is based on computer systems engineering, mathematics, cryptography and behavioral economics. The authors of the book analyzed programs, services, business models, markets, organizations and even governments operating blockchain. We identified patterns and formulated 7 principles on which the followers of technology rely.
2.1. Network integrity
Trust comes from within the system, it is not dictated from outside. Participants perceive 4 aspects of trust as a whole. They are honest in word and deed, respect the interests of others, are ready to answer for the consequences of their actions, their decisions are transparent. Integrity is encoded in every step of the process and shared among all participants rather than belonging to one. Participants exchange values, believing that others also share a holistic approach. It is either impossible to ignore this principle, or “it will become more expensive”.
2.2. Load distribution
Energy costs are distributed throughout the peer-to-peer network. There is not one switch. None of the participants can turn off the system. If the central authority blocks a person or group, the system will continue to work. If about half of the network tries to take control of the entire network, the rest will see what happens.
2.3. Value as incentive
The system aligns the incentives of all stakeholders. Satoshi programmed the application in such a way as to reward those who develop the program. In the 1990s, the Tamagotchi electronic toy was popular with girls. The device represented an alien egg. When activated, a baby of an unknown pet appeared from the egg. The task was to take care of him. According to Satoshi’s idea, the network looks like a global Tamagotchi. The task of the participants is to protect and develop it. In this case, they can count on a reward. An active network user receives 50 bitcoins for each completed block after 4 years. After the next 4 years – 25 bitcoins, then 12.5, etc.
Each member of the network must use encryption. Security measures are built into the network. They provide privacy and authenticity. The user has two keys: one for encryption, the other for decryption. The method is called “Public Key Infrastructure” (English acronym – PKI). Bitcoin today is the largest project in the world where the PKI methodology is implemented.
People need to be in control of their data. People should have the right to decide what information, when, how and how much to report about themselves. Since one of the principles of blockchain is trust, it is no longer necessary to identify others in order to interact with them. No name, email address or other personal information is required to download and use the bitcoin app.
2.6. Rights protection
The rights of owners are transparent and secured. Individual freedom is recognized and respected. Transaction time stamping and PKI not only eliminate double spending, but also lock in ownership of every bitcoin on the network. We can only trade what belongs to us. In addition to bitcoin, it can be any value, including intellectual property.
The economy works best when it works for everyone. This means lowering the entry barrier. What does it mean to create platforms for distributed capitalism, not redistributed capital. Satoshi created a system that runs on top of the Internet stack (TCP/IP). However, if required, it can work without the Internet. All you need is a mobile phone. You do not need a bank account, a passport, registration at the place of residence, a currency that is freely convertible. Anyone with a cell phone can participate in the market as a producer or consumer. Satoshi proposed a method of “simplified payment verification” (English acronym – SVP).
3. A new look at the world of finance
The global financial system operates with trillions of dollars every day, serving billions of people. This is the most powerful industry in the world, the basis of global capitalism. However, it works on outdated technologies and is guided by the provisions of the XIX century. The bank offers to install a mobile application for making transactions on the account, but continues to print checkbooks. When you swipe a card through a modern terminal to pay for a cup of coffee at Starbucks, confirmation comes in a couple of seconds, but the money in the Starbucks account will appear in a few days – at least five intermediaries will be involved in the process of transferring money.
Financial systems hinder innovation. This is a monopoly business. Of course, financial structures hold on to their position. Improving services, increasing efficiency, improving user experience – this does not motivate representatives of the financial sector. As a result, the system becomes slow and unreliable. Plus, it’s exclusive. Billions of people do not have access to basic financial instruments. It is centralized, which means it is open to hacker attacks, data leakage, and theft of funds. But this will not always be the case. Blockchain technology says…
3.1. Bank is not needed
The distributed ledger will provide access to financial services that were not available to certain groups of people because they were considered risky and unprofitable clients. Now people will be able to buy, borrow, sell, and as a result, improve their financial condition.
Companies have already emerged that offer financial services based on blockchain technology. One of them is the Abra peer-to-peer network for transferring digital currency. Today, on average, transferring money from one country to another takes a week, and the commission is 7%. Abra solves the problem in an hour with a commission of 2%. It took Western Union 150 years to build a network of 500,000 agents worldwide. Abra intends to create a similar network in one year. Each Abra user will become an agent.
3.2. How the financial sector will change
Tapscotta’s father and son propose eight financial sector breakthroughs as a result of blockchain adoption. Let’s take a look at their forecast. Let’s look at five aspects.
1. Identity verification. Today, the identity verification function for granting access to accounts lies with the bank. Blockchain technology allows transactions without personal identification. However, network members can enter identity authentication.
2. Transportation of valuables. The financial system moves money around the world, making sure not a single dollar is spent twice. Now imagine you have a container in which you can transport goods. Blockchain is a container in which you can transport any value: money, stocks, bonds, the right to own. It can become the standard for conveying values. You will seek to reduce costs, reduce the price of services, increase the speed of delivery.
3. Storage of valuables. A financial institution is a repository of what is valuable for a person, organizations, government. The bank offers deposit boxes, current and savings accounts. A person now does not have to contact the bank in order to use these services.
4. Lending. Financial institutions actively issue loans. For car purchases, repairs, education, mortgages, corporate, municipal and government bonds. The lending business has spawned additional services, such as borrower scoring, corporate credit ratings, and collection agencies. Blockchain network participants can borrow money from other participants directly. This will increase the speed of obtaining a loan and the transparency of the transaction.
5. Investment. Usually attracting investments requires intermediaries – investment bankers, venture capitalists, lawyers. Blockchain automates many of the functions of intermediaries. New peer-to-peer funding models will emerge. Accounting and payment of dividends will become more efficient, transparent and safe. In the case of charitable projects, the technology will help control the targeted spending of the funds raised.
In 2010, Haiti was hit by a massive earthquake. Ground tremors of magnitude 7 have claimed the lives of 300,000 people. Haiti is one of the poorest countries. The global community donated $500 million to the Red Cross to help the victims. However, later it turned out that the money was never spent on the needs of the islanders. Blockchain technology will help provide assistance directly to those who need it, bypassing third-party organizations. The blockchain will also make it possible to track every dollar donated.
4. New business models
Millions of people can unite and create a company based on blockchain technology. At the same time, the wealth that the company will bring will be distributed, not redistributed. We will find out what is the difference between concepts, and get acquainted with business models.
4.1. Why are Airbnb, Uber, Lyft, TaskRabbit “not ice”?
The platforms mentioned in the title are sometimes referred to as the sharing economy. Say, they are built on the joint use of services, barter, rent, and not on their ownership. But in reality, these services do not share anything, they aggregate.
The $65 billion Uber Corporation aggregates taxi services. Airbnb worth $25 billion aggregates vacant apartments and rooms. They collect information on a central platform and resell it. This became possible thanks to smartphones with GPS and payment systems. Technologies are disruptive, but the blockchain will cause their rebirth.
“Instead of leaving taxi drivers out of work, blockchain will leave Uber without contractors, because drivers will work directly with passengers,” says Vitaly Buterin, co-founder of the Ethereum blockchain platform.
Ethereum is a constructor for creating blockchain solutions. Allows you to build any application with verification on the blockchain. The platform was founded in 2013 by programmer Vitaly Buterin at the age of 19. He was born in Russia, but then emigrated to Canada with his parents. Ethereum is currently valued at $1 billion.
4.2. Service for renting housing on the blockchain
Imagine a travel rental network similar to Airbnb. It runs on a distributed application – it belongs to all participants. The network includes a set of “smart” contracts that store housing offers in the form of a blockchain. The employer looks through the offers, chooses what suits. From the user’s point of view, everything is the same as on the Airbnb service, except that the tenant communicates directly with the landlord.
Did you like the apartment? Paid with cryptocurrency. Positive feedback improves the reputation of network members. It affects the conditions of home insurance. The income from the activities of the network is shared among the participants who control the platform and make decisions. Reminds me of a co-op.
A distributed application is a program that runs on multiple computers on a network at the same time.
4.3. Distributed business entities
The possibilities for distributed blockchain applications are becoming limitless. Technology takes them to the next level. Startup Storj offers cloud storage distributed among all network members. Only the owner of the data has access to the data in the cloud. Each file is cut into pieces, encrypted and distributed to the rest of the network. How much space you have provided on your hard drive, you have received so much space in the cloud. Those who wish can count on more space in the cloud. However, you will have to pay extra for it. Potentially, Storj can become the largest, cheapest and most secure “cloud” in the World.
Conventionally, all innovations in this area can be attributed to one of four types. They are formed by the intersection of two axes: the degree of automation and the complexity of the model functionality. Automation reflects the extent to which human participation is required: low – human participation is necessary, high – the model works without people. Complexity indicates the number of functions of the model: low – one function, high – a variety of functions.
|low||high||open grid enterprises (OSP)|
|high||high||distributed automatic enterprises (RAP)|
Smart contracts are the basic form of a company built on the blockchain. This is a special code that contains a set of instructions for the blockchain. Human participation is required, usually for multilateral contract signing.
A conventional contract is an agreement between the parties to a transaction, written down on paper. Coordination of the terms of the transaction, settlement of disputes, if there are discrepancies, requires effort. “Smart” contracts remove all preparatory steps for signing a contract and fulfilling its conditions. Doing business is simplified.
Open Grid Enterprises are the unification of “smart” contracts, the next step towards the complication of their functionality. Companies become part of the network. As a result, the cost of coordinating activities is reduced, and suppliers and partners appear that previously seemed unbelievable. Need steel from China, rubber from Malaysia, glass from America? No problems! Using a distributed application for each product, you will buy (based on price, quality, delivery dates) with a few mouse clicks. You will have a detailed record of past transactions, from which you will learn how well the supplier fulfilled its obligations. Each delivery can be tracked on a virtual map.
An autonomous agent is a device or program that collects information and can make independent choices. The ability to determine how to achieve a goal distinguishes an agent from a regular application. The agent responds to a change in the environment. An example of an autonomous agent is a computer virus. Incidentally, launching a computer virus on a blockchain is difficult and costs money, as the hacker would have to pay the other party to interact. The system will quickly determine the attacker’s public key, lower his reputation, or stop approving transactions.
Positive examples of an autonomous agent. For example, a cloud computing service. The program leases computing power from resources with excess capacity. Theoretically, such a service is capable of accumulating computing resources similar to similar Amazon services. Or an unmanned vehicle that belongs to a person or a group of people, and possibly moves around the city on its own, provides transportation services, that is, it picks up passengers, drives them, and accepts payments.
In general, we are interested in programs that can make transactions, buy resources, make payments, in other words, create value for users as an agent creator.
Distributed automated enterprises are combinations of SCEs and autonomous agents. The system makes decisions and functions without human intervention – most daily routine operations can be programmed. Everything and everyone operates according to the procedures of “smart” contracts. Tasks for personnel, performance indicators of their work will become simple and understandable. As a result, the corporate bureaucracy will decrease, and the payment of top managers will become transparent.
Customers provide feedback. The company constantly takes it into account, improving services and products. Shareholders receive dividends more than once a year, as the company’s financial accounting takes place in real time. Utopia?
ConsenSys has already issued shares in the form of tokens. The firm went public without regulatory oversight. You can legally fix the right to a private corporation and transfer the shares of the company using the blockchain. Shared certificates will pay dividends and guarantee voting rights. The company is distributed. Yes, it cannot exist without a legal address, but the owners of the company can be located anywhere.
5. Additional benefits of blockchain
5.1. Easier and cheaper to search
How do we find the right information and people? We use Google, Yandex. How do we determine that people, products, services meet our needs? Read reviews, watch videos. Now imagine searching the global ledger. Who sold what discovery to whom and at what price? What are the qualifications of doctors in this hospital? Who is the most reliable supplier in China? The answers to these questions are no longer summaries and sponsored links. This is a history of transactions, a proven chronicle of real transactions between network members, supplemented by a reputation rating.
5.2. Product quality under control
Tell me, when you buy meat, are you sure that the animal was fed the right food, and the medicines were used in the right dosage? We have very little control over what we eat in our lives. Blockchain will show itself here too. Information about the origin of food products and their movement through the supply chain will become available to the buyer. A distributed network will store information not only about every bull, but potentially about every piece of meat, and even with information about the animal’s DNA. With the help of 3D search, the buyer will see the whole history of the steak on the plate. Blockchain will help you choose high-quality and safe products.
6. What is holding back blockchain development
Blockchain innovators face significant challenges. There is a fear that criminal structures will actively use the technology. In 2013, the FBI shut down a website that had posted 14,000 drug offers for bitcoin. Technology critics say, “Big Brother is watching you.” Large corporations or the government will still control blockchain networks. There is also a philosophical dilemma. The Bitcoin network has no governing body. Who will decide how to develop the technology? If such a body is established, then the concept of blockchain will be lost.
The authors of the book invite readers to draw their own conclusions. What is it? Arguments that blockchain is a bad idea, or implementation challenges worth overcoming? One thing is clear – the task of introducing blockchain is multifaceted. Let’s take a closer look at three of its aspects.
6.1. The time has not come
So far, few people know about cryptocurrency, and even fewer know about blockchain. The application interface is unfriendly, so the audience is limited to geeks. The bitcoin wallet address is a 26-35 character string. For each new payment transaction, it is recommended to create a new public address. Bitcoin is illiquid in the long run. The emission of new bitcoins is limited to 21 million. Today there are about 11 million of them in the system. Verification and confirmation of the transaction takes place every 10 minutes. This is much faster than most payment systems for end-user-to-end-user transfers. However, it is not acceptable to pay for purchases in retail. Technology is associated with a financial pyramid. The introduction of cryptocurrency in some countries is constrained by problems in the economy.
6.2. High energy consumption
Pending transactions are validated and triggered through a secure hash algorithm (SHA-256). Hashing consumes a lot of electricity. The Bitcoin network consumes electricity equal to the consumption of Cyprus, which is more than 4409 billion kilowatt-hours. The more bitcoins in the system, the more computing power will be required. All forms of money are associated with energy. Gold is scattered all over the Earth, so it takes energy to mine it. High energy consumption is the price to pay for not having a centralized authority in blockchain technology.
6.3. Fear of losing your job
Any automation changes the labor market – nothing new here. But what is extraordinary about blockchain? This is the level of automation. A blockchain platform for financial services will eliminate tens of thousands of jobs for people involved in maintaining accounts and managing IT systems. The digital currency will make 5,000 Western Union points of sale redundant. And what happens when self-driving cars replace Uber drivers? Low-skilled professionals performing routine operations will suffer the most.
Blockchain is a new paradigm of the information world. She knocked on the door in 2008 when someone named Satoshi Nakamoto described a peer-to-peer electronic payment protocol. This is how the foundation for blockchain technology was laid. This is a mathematical algorithm that allows you to securely and privately exchange value through peer-to-peer networks. The first practical implementation of the blockchain was the Bitcoin network.
The protocol created by Nakamoto is called the “trust protocol”. In 2015, The Economist published an article called “The Trust Machine”, which suggested that the technology behind Bitcoin could change the way the economy works. “This is the great chain of confidence in everything,” wrote a popular American publication.
So far, only specialists show a keen interest in technology: developers, entrepreneurs, investors, bankers, university representatives, and the government. End user awareness is low. The transition to the second era of the Internet (as the authors of the book call the blockchain) throws up a number of challenges, the key of which is the willingness of society to accept a new information paradigm. But who will lead the blockchain revolution?
Why do you think AT&T didn’t create Skype at the time? And Visa could have launched PayPal, CNN could have built Twitter, and GM or Hertz could have created Uber, Marriott, Airbnb. Yes, and Microsoft had all the resources to create Google and other business models based on the Internet, and not on personal computers. But that did not happen. Leaders of current established technologies have a hard time accepting innovations. Now look who is the leader of the blockchain.
A striking example of the implementation of the blockchain ideology is the Ethereum company. It was co-founded by 19-year-old Canadian programmer Vitaly Buterin, who was born in Kolomna, near Moscow. The platform is a constructor for creating applications on the blockchain. The company has already attracted the attention of IBM, Samsung, UBS, Microsoft and the Chinese giant Wanxiang.
Vitaly earned his first 20 bitcoins by writing four articles for the Bitcoin Weekly blog. Today, the company he created is valued at $1 billion. Surprisingly, the Ethereum service is completely free.
In 2016, Vitaly presented the platform to Russian programmers and investors. As a result, the Russian Acronis has started creating an application on the blockchain in the field of insurance, and the Skolkovo Foundation is exploring the possibility of using the platform by government agencies. In an interview with Russian media, Vitaly Buterin said that the blockchain will “shoot” in 2 years.
Everything that is of value to a person and can be recorded in digital form can now be safely stored and transferred directly to each other, bypassing intermediaries. As a result, transaction costs are reduced, and trust in transactions arises from within the system. Blockchain is leading people into a new era where everything will be based on openness, merit, decentralization and global participation. It’s time to think about how technology will affect me personally and what can I do today to be part of the change?