Its better than AI, IOT and even Machine Learning. It’s hot! Everyone has it or is busy getting it! I’m taking about?
So why is this important?
Its not the currency aspect but more then ever this is about the concept behind it. The blockchain!
The blockchain is so special that it’s probably the next generation of the Internet we have known so far.
Until today the Internet has always been an Internet of data or an Internet of things. With the arrival of the blockchain we can forget everything we know about (what we thought) about the Internet. Forget everything! With the arrival of the blockchain everything has changed! The Internet is now a network of trust!
Imagine what this implies! The things that we used to have a third party (Notary, Bank or Patent Office) are now controlled by the blockchain!
Does this mean that the Notaries, Banks and Patent Offices will soon be passed?
Not yet. These organizations have an interest in continuing to exist and will therefore stay for some time but think of the (old) video stores.
When someone told us a decade ago that they were going to disappear because of the Internet we wouldn’t have believed it and yet theire gone. Netflix, YouTube, Amazon Prime Video, Hulu, Sling TV, HBO Now, Feeln, CBS All Access, MUBI and SelectTV have taken over. Why? Because it’s technically possible and cheaper. So the next time you’re inside a Bank office, take a good look around because in 10 years from now they won’t exist anymore. Why? Because it’s technically possible and a lot cheaper! Same thing as with the Video stores of 10 years ago.
What makes this tecnically possible?
The answer: Blockchain!
Blockchain in short is a cryptography technology which makes it possible to establish a Single Source of Truth where we can capture things which are true, for example we can capture that a certain person is the owner of a house or Intellectual property; Like: Person X has invented something new and is therefore the intellectual owner.
Blockchain is only a technique. The data inside the blockchain is an electronic Ledger. Which keeps records of all transactions worldwide. A unique feature of cryptocurrency is that it’s not owned by any government or institution. Actually it is Open Source and therefore only owned by the community.
We can even create ‘digital money’ and say that person X has a digital wallet with y digital coins in it! (This doesn’t need to be a Bitcoin but any crypto currency you can think of). When person X buys something from person Y the transaction is stored in the Ledger and the blockchain takes care that changes in the ledger are immediately reported to all replica’s of the Ledger.
It’s an amazing technology!
There is not one single blockchain, there are many, spread over the world and cryptography takes care that all instances of the ledger behave as one.
What is a cryptocurrency anyway?
It’s a number somewhere on the Internet and if our Single Source of Truth (Blockchain) says it’s yours it IS yours (Blockchain doesn’t ly per definition).
One important feature of payment means is that they are scarce. Gold (the primal currency) is scarce by nature. Money (which is created by governments) is made scarce by the government which makes it. Most governments make to much of it every year, which makes money to become cheaper. This is inflation.
Cryptocurrencies are created by an Computer Algorithm which is pretty much comparable to gold. Everyone can create it but it requires lots of processing power. The process of making it is called mining, analogous to gold-mining.
Which problems are solved by blockchain?
- At present only a small fraction of the world population have bank accounts. With the blockchain and cryptocurrency bank accounts become obsolete and transferring cryptocurrency is much faster and cheaper than the banks can work for.
- Because cryptocurrency is not owned by anyone it gives us much more freedom then what’s possible with money deposited on some bank.
- Think of the banking crisis of 2008. This was caused by humans (banking employees who tampered with the figures to get higher bonuses). With cryptocurrency this would never have happened since nobody is profiting from the system.