Okay, most people have heard of
Bitcoin
and
Ethereum, but what about the rest?
First, let us start somewhere else. What is going on here?
Unless we understand that we won't be able to get a handle on
anything else.
In trying to continue from this point I have realised that it
is impossible for me to explain a whole new technology in a
couple, or even several, blogs. It just can't be done. I'd
first have to explain how
blockchains work. That is a
big subject in itself. I would then have to explain
smart
contracts. That also is a big subject. I would then need
to explain how certain tokens serve a need while others really
have no real use.
What I will do is give a couple of examples of
smart
contracts and show how they will affect business over
the course of the next ten years. I will then mention two or
three tokens that are serving an important function. There are
others, but I have already written a book on the subject (you
can
get it here), together with an update.
Let's start with something simple: A
blockchain is a
publicly maintained database of actions and/or events whereby
the network is responsible for the accuracy of the data and
its immutability. That is what makes it able to be trusted.
Because it is a network it is not owned by anybody, and the
nodes (computers) on the network are responsible for
maintaining it.
That doesn't tell you much because I can't possibly go into
minute details here and now. What this does mean is that a
blockchain
linked to
smart contracts can become an intermediary.
It's probably best if I give a couple of examples.
When people buy a house, their conveyancing lawyers race to
the titles office to confirm the transaction. If the seller
were to sell the house to two people at the same time, they
could theoretically take off with the money. For the buyers,
whoever’s lawyer gets to the Land Registry first owns the
house. The other is left at the mercy of the legal system.
A
cryptocurrency could rejig all this to complete a
transaction only when both parties have given up ownership of
what they’re exchanging. That gets rid of all sorts of risks.
You can only sell what you own, and you both only receive once
you’ve given up whatever you’re exchanging in return. It acts
like an automated middleman, with a fraction of the cost. And
it is all done by a smart contract.
Once the
Land Registry is geared up for
smart
contracts transferring real estate will be done in
minutes rather than months with a smart contract which will be
purchasable in template format. The parties involved can
jointly fill in the form, and sign it. It will then be sent to
the registry where it can be actioned by a computer. Most of
the registry staff will be out of work, and legal conveyancers
will be a thing of the past.
An aside here. If you are thinking of training to be a real
estate conveyancer I would suggest you think again. In ten
years time you will be out of work, probably a lot sooner.
Virtually any business that requires a string of
intermediaries can be rationalised using a blockchain. Here's
another example. Blockchain can be used to solve real-world
supply chain problems. The traditional supply (or value) chain
is owned by intermediaries. This is the process the average
supply chain takes: Production > distribution >
processing > regulations and compliance > manufacturing
> point of sale.
At every step of the way there is an intermediary taking a
cut. IBM’s vision is that the blockchain will eliminate these
intermediaries. That does several things. It cuts the costs
considerably. It puts rather a lot of people out of work. It
speeds up processes, and is more efficient.
Another important use concerns identity. Currently our
identity
online is controlled by the big corporations. They have
access to our data, and we trust them to prove who we are to
other companies. For instance, you can sign in to a lot of
services using your Google or Facebook account.
These third parties (Google, Facebook, etc) solve the problem
of trust. They are trusted. So when they say we are who we say
we are, other parties trust them and in turn trust us.
The issue with this is twofold:
First: they have all our data and sell it on. This is how
their business models work. This is why you get targeted
adverts and popups.
Seond; they can revoke our identity at any time. If they don’t
like what we’re saying of doing they can stop us saying or
doing it very easily.
These are big problems that affect millions of people
worldwide. One of the biggest potential uses of crypto is to
solve this problem.
Through
blockchain technology we will be able to take
control of our own identity. There will be no need for third
parties to say who we say we are because it will be provable
on the blockchain.
We will also control who we give our data to and when. We
could even emulate Facebook’s business model and sell our own
data to make money.
There are a number of cryptos aiming to be the main player in
identity already. But it’s anyone’s guess which ones will come
out on top.
What is clear is that change is coming, and this change is
going to be drastic. What is not so clear just yet is which
businesses will come out on top and be the next Google or
Amazon.
Next week I will expand on this, and talk a little about
first, second, and
third generation cryptos, and the
internet of things. See you then.
<<<<<
Part 1