The innovation of blockchain technology and the advent of cryptocurrency – both of which are the brainchild of a person or perhaps group of persons who preferably go by the pseudonym Satoshi Nakamoto – have been groundbreaking and unprecedented.
Right before our eyes and under our very noses, it has revolutionized the global financial market and threatened to alter the manner in which we transact business forever.
But all that has only proven to be the tip of the iceberg because just when we thought we had seen it all and heard it all, and dismissed it as just another fad that would soon be blown away by the wave of time, we have now been awoken to the unexpected reality that there is more in the offing. The world, as we know it, is changing in every facet. And there isn’t going to be a better time to hop on the bandwagon than now.
Just a fad?
Blockchain technology has had more than its own fair share of naysayers and critics. Although some of the concerns coming from intelligent and thoughtful folks are anything but illegitimate and unfounded, it would be utterly out of place to brand the innovation as bad, not worth the fuss, or not good enough.
The current situation is kind of a paradox; while the technology has become something of a cash cow reminiscent of the ‘oil boom’ days for those businesses thriving in the blockchain sector, the general consensus is that the premium placed on digital assets and digital currencies, as well the outrageous value they have accrued in recent times, is hinged on speculations on future prospects and the Fear of Missing Out (FOMO) rather than real life applications.
Let’s say we shift grounds, meet halfway and give some credence to the assertion that the success blockchain has achieved and the value it has accrued so far is down to the current craze for its future prospects, it is still completely out of place to imply that blockchain currently has no real utility in the real world, or that the blockchain sector and all it stands for will prove a fad and a fiasco in the grandest scheme of things.
This piece seeks to provide insight as to why emerging technologies, such as blockchain technology, are often greeted with doubt and skepticism – as is often the case en route to becoming the world’s standard. “If it ain’t broke, don’t fix it!” How often do we hear that expresion?
Change may be an ever-present feature of mankind’s existence, but the concept of change also sparks intrigue and dismay in equal measure. People get accustomed to a certain way of doing things and consequently grow blind to the flaws in their current methods.
A defensive stance is what you will be met with if you try to fix what people do not necessarily classify as broken. But here’s a harsh dose of reality: like it or not, our current methods are flawed. And blockchain is going to fix all of it.
It is in this regard that parts of this work are dedicated to highlighting novel ways in which blockchain is already rocking the establishment, breaking the norm and becoming the new normal in at least three big money ventures: the gold industry, international wire transfers and crowdfunding.
In the latter parts of this work, rebuttals are offered to constructive criticisms and the curtain is drawn by x-raying areas where blockchain’s benefits could be leveraged and where the technology is tipped to provide more 10x advantages in the short-term.
As is often the case with most real life scenarios, there is no easy route the top. And with technology, there is always the danger of being cut out before even getting standard. For a fact, every technology that has now become commonplace, regardless of how essential or promising, was once the subject of skepticism and negativity. And blockchain technology is no exception.
High volatility and even higher expectations are often the products of the high growth recorded in any innovation with as much potential as the blockchain. Hype cycles are inevitable and there is always that odd period of overvaluation until all the elements are eventually evened-out and standardized. Only then does the new trend become the new normal, and all that previous doubts hinging on faddishness or dearth of real utility become a lamentation on inescapable monopoly. This cycle encapsulates the trend for all technologies that were labelled ‘emerging’ at one time but have now monopolized their respective fields.
What better way to illustrate this trend than by juxtaposing ‘IT Doesn’t Matter’ (published in the wake of the lowest point of the dot-com scramble in 2003), with ‘The Shallows’ (which was published in 2011, in the aftermath of the internet revolution that has come to be known as social media and web 2.0).
How fitting it is that the same author who opined in the former book that the software had ceased to be of competitive advantage and that the internet had been overrated, also asserted in the latter that software firms now enjoy too much success and and the internet revolution is doing more harm than good to society!
Well, on a lighter note, we shall let the author of both books off the hook on the grounds that opinions are like noses and everybody has one. But on a more serious note, even though both books may come across as contradictory, one feature that stands out and is common to both is the unyielding negativity towards technology of then and now.
The narrative is much the same with Facebook and social media. Having amassed an astonishing 500 million users in the first six years of its inception, people still branded the company a ‘bubble’ that was nowhere near its $33 billion valuation as recently 2010.
This much-vaunted narrative was still peddled in 2012, as it gathered even more momentum in the aftermath of the company’s stock dropping in the wake of the Initial Public Offering (IPO). The jury was out on the company, the skeptics and naysayers chomped at the bit and burst at the seams to call out the company on its proposed monetization on mobile. And the rest is history. It is no longer news that as at 2017, Facebook raked in a net income of $15 billion, and that happened in just one year.
But the jury is still out the company. Concerns have now metamorphosed from whether social media was just another fad that will eventually be relegated to the archives of our consciousness or if Facebook was overpriced and will eventually bite the dust, to whether Mark Zuckerberg’s company had become something of a unstoppable behemoth or juggernaut that needed to kept in check with government regulations. Albeit not an entirely illegitimate concern, it further buttresses the notion that the questions have come a long way from the contention that social media was just a passing phase for society.
There’s a lot of truth in the assertion that blockchain has somewhat gone halfway through an identical cycle. Bitcoin’s dismissal as an unnecessary complication that could never work due to its apparently tedious and deflationary mining schedule is still very fresh in memory.
Like holy scriptures, various age-old texts and tricks from macroeconomics were quoted as reasons why Satoshi Nakatomo’s ‘crazy’ idea was doomed to fail from the off – as if they were relevant to Nakatomo’s proposal and the solution of all the economic problems of the Ottoman Empire.
Fast-forward a few years to today’s world and the initially laughable idea that is Bitcoin is now worth a fortune. After hundreds of ‘obituaries’ and dozens of ‘bans’, the cryptocurrency has done much more than survive, which is the barest minimum these days – it has thrived and inspired the creation of Ethereum and a dozen other cryptocurrencies and blockchain applications. But the victory lap is not happening yet.
From a craze that was initially brushed aside as fad and straight into the reckoning of our daily consciousness, blockchain’s transition has been somewhat meteoric despite the bumps on the road. Having established itself as more than just a fad and yet unattacked as a dominant monopoly, most of the negative vibes around blockchain today revolves around whether it has been of any real, practical use in the real world or whether it solves any problems better – after all, a clamour for change must be an offer of better.
As a whole, the blockchain universe can lay claim to hundreds of billions of dollars but how useful is it? Is it any better? Where is the utility? Is it worth the hype and fuss? How does it justify all that value? Are there even any daily use cases? These questions and more will be answered in the succeeding parts of this work.
It’s not exactly a bad idea to blow one’s trumpet or toot one’s horn every once in a while and due to popular demand, we shall now place the spotlight on the successes and triumphs that blockchain has recorded to date.
Digital gold, international wire transfers and crowdfunding are just three mentions out of a plethora of multibillion dollar sectors that have fully leveraged the blockchain.
Perhaps the most glaring of all these is the fact that Bitcoin is easily a better gold. The inherently-digital nature of the cryptocurrency is such that it is infinitely lighter than gold of identical value. This makes it possible for huge amounts of monetary value to be rapidly transferred across borders, many times faster than it takes to move an equivalent amount of the precious metal. And it also comes as a plus that Bitcoin is more fluid and divisible than a bar of gold.
In spite of Bitcoin’s recent drawbacks as a result of transaction fees and wait times, a problem that has been partly neutralized through the Lightning network, the technical advantages that the cryptocurrency has over gold are not far-fetched and at this point, simply undebatable. It is now only a matter of time before Bitcoin usurps gold on many a balance sheet and in a broad array of financial contexts.
Throw that in with the fact that gold’s total value is estimated to be in trillions threshold and you get why trumping the digital gold application alone is enough to justify the total market cap of the blockchain sector.
International Wire Transfers
Secondly, what comes to mind when you think of international wire transfers?
Ethereum is increasingly becoming the go-to guy in such scenarios where two startups or contractors on either side of the world want to do business, and for good reasons too. Ethereum is home and dry in roughly 14 seconds, works round-the-clock everyday of the week, and generates receiving addresses instantly.
What used to be a low-profile revolution in global money transfer is now well-known in the tech world. It’s a coup for global money transfers that you can send as much as $50,000 in Ethereum just as quickly as you can have an email attachment sent.
This creates an atmosphere for real time closure of medium-scale international deals without the hitches and glitches of regular transfers. The Ethereum address is emailed by the vendor, while the customer Docusigns a smart contract and Ethereum is automatically transferred. Confirmation of the transaction can be done by refreshing Etherscan – even faster than putting a phone call through.
The sheer speed of transactions on Ethereum puts in better stead to facilitate and hasten business transactions whilst building trust between partners separated by different geographical zones. Why bank on same-day transfers when same-minute is possible? This exact use case is now commonplace, and while it remains to be known exactly how many people are using Ethereum for this purpose, it is undoubtedly ideal for those that are.
This edge Ethereum has over regular regular money transfers is expected to face stiff competition from banks and other financial institutions who are looking to incorporate SWIFT gpi and cut down on settlement downtimes, but in practice, international wires still need several businesses to clear while Ethereum does the same thing within seconds, and reliably too as it has for years now.
ETH transactions can be executed between any pair of devices at any time of the day, which eliminates any need to rush to the bank during business hours and be potentially delayed. This is actually one case where the real world utility of a blockchain-based technology has been ‘underhyped’ – international wires on Ethereum are 10x faster than SWIFT, and that has been the case for some time now.
Blockchain’s third real life application is best illustrated with crowdfunding. In tech circles, such names as GoFundMe, KIckstarter and Indiegogo will pop up when looked at from an international angle, the sector is even bigger than it receives credit for.
Even before the previous year, it was estimated to be amongst the billions annually and growing fast, with no threat of a decline. And then came token sales and Initial Coin offerings (ICOs).
With the advent of blockchain, token sales and ICOs worth a staggering $9 billion which were recorded in just one year, have ushered in a game changer for the concept of crowdfunding. This is further highlighted by the fact that Ethereum itself garnered about $15 million just three years ago in what was a coup at the time. But token sales and ICOs have completely obliterated all the entries in the record books.
As is the case with gold and international wire transfers, the introduction of blockchain technology brought ten-fold improvements, allowing for crowdfunders amounting to hundreds of millions of dollars – something that was unthinkable in the not-so-distant past.
And who gets the accolades for making it possible for several hundreds of millions of dollars sent from every part of the globe to be sent and settle in within seconds? You guessed right: blockchain!
Highlighting these instances is with no intention to praise or defame the specific projects that have raised these funds. It is all in a bid to point out that crowdfunding technology have been done a huge solid by blockchain-driven improvements.
Financing has risen to astronomic scales and speeds; many times faster and larger than what was the norm. While a few details still need to be thrashed out to make token sales and ICOs fully regular, there is a growing conviction that blockchain will go all the way to revolutionize not just crowdfunding, but even venture capital as we know it.
Shortcomings can be Fixed
The three areas identified as blockchain’s real life use-case scenarios, as well as the efficiency and speed it brings in those instances, are a given. Question marks now hinge on execution and distribution, as it now evident that the basic skepticism that greets all forms of innovations is no longer a case in point.
There is the argument that all the clamor about the 10x improvements may indeed exist but is inconsequential since not everyone has the means and will to leverage on them. This minor setback is in many ways a significant step back from the much-vaunted assertion that “nobody has come up with a use case for blockchain after 10 years”.
Every entity with gold on the balance sheet, every business with transactional trade and every organisation raising money online are just a few mentions of the number of parties that can benefit from the three use cases highlighted above.
And that’s just for starters. Extrapolating the blockchain-driven advantages to all these entities may undoubtedly require some work but it will also amass value in the range of billions.
There is also the notion that the new technologies are not superior in all respects. Concerns about Bitcoin’s volatility, the fact that Ethereum is not accepted by everyone, and regulatory issues bedeviling crypto crowdfunding are well-documented. However legitimate the concerns are, there are answers that can effectively put them to rest.
The problem of volatility can be dealt with through the sales of traditional instruments for managing volatility. More people can be lured into adopting crypto as an international wire transfer means by getting more users for exchanges on both sides. And as for the regulatory bottlenecks that enshrouds ICOs and crypto-crowdfunding, just like every other financial policy, it is nothing negotiations with policy makers and heads of state can’t fix.
But these concerns come across as myopic at best. Typically, novel technologies are not mildly superior to an existing technology in every respect. A significant improvement, however, is cause to have a rethink of the old ways. The improvements blockchain offers are the rationale and capital for making other defects a relic of a distant past.
Think about early iPhone camera and you will get the hang of it. The first iPhone camera may have been worse than a dedicated digital camera in most respects, but what it gave it the edge was its 10x advantage which was its omnipresence as a bundled piece of a network-connected smartphone. This endeared it to many users and brought about a rapid rise in use. This subsequently oversaw a rapid investment in the feature set of network-connected, phone-based cameras.
This occurrence is identical to the blockchain phenomenon, where its unique, 10x advantages has given it unprecedented traction amidst flaws that highly-fixable.
Popular opinion has it that blockchain will eventually change everything. I am actually very optimistic that with time, all of its envisioned use cases will see the light of day and become commonplace. It may require years or decades to fully take shape and probably require multiple iterations too, but I am pretty confident on such blockchain-powered implementations as ethereum games and blockchain-based social networks and marketplaces.
That confidence follows from the precedence and successes that blockchain technology has recorded in such a short time. It has done so much already and I have not even a shred of doubt in its ability to do much more.