When I saw the title of this Japanese article below, I was shocked by how misunderstood bitcoin is. It says,
“Bitcoin re-arrested. CEO is arrested on charges of embezzlement.”
Yes, this is entirely wrong because there is no such thing as a Bitcoin CEO. For those of you who understand, you can just say that the reporter is stupid, which many people did. However, at the same time, don’t you think this might be representing how people feel about bitcoin in general?
Bitcoin, I assume, may look unreliable. It was used in a notorious online drug marketplace, Silk Road. Mt.Gox, a bitcoin exchange company collapsed into bankruptcy, at least $460 million disappeared and the CEO was arrested on charges of embezzlement. Its price is so volatile that you could lose a large amount of money in a short period.
The Nature of Disruptive Technology
All those things are true and I understand how people feel.
However, if you think about it, disruptive technologies have almost always both good and bad aspects. Fire making technology allows us to cook or stay warm, but it can destroy nature. Automobile technology allows us to move things rapidly, but it kills a lot of people. Everybody knows how risky it is to use fire or automobile technology, but they don’t stop using them because they can benefit from such technologies in their everyday life. Instead of halting their usage, what people have been trying is to minimize the drawbacks of the technology and maximize the benefits gained from them. To this end, governments around the world have developed laws on automobile usage and companies have introduced safety systems to prevent casualties.
Bitcoin technology is no different. In the same way as the above, we will maximize the benefits of it while addressing the problems of the internet dark market, vulnerabilities in its exchange service, the volatility in its exchange rate and such.
Do People Benefit from Bitcoin Technology?
Sure, most of people do not benefit from bitcoin technology right now but this is just like how most people did not have benefits from Internet before. However, in my humble opinion, bitcoin technology is going to bring a huge benefits.
I would like to articulate why by showing the similarities between bitcoin technology and the Internet.
Let me start from explaining bitcoin technology so that I can compare it with the Internet.
Blockchain: The Technology Behind Bitcoin
To be honest, you need a few months to fully comprehend bitcoin technology. Therefore, I won’t talk about the intricacies of what is a very arcane system, but just enough for you to be able to understand its potential.
So, what is bitcoin technology?
The core technology of bitcoin is called the blockchain.
Blockchain enables a piece of digital property to transfer from one person to another or from one machine to another without a middleman. In other words, blockchain is a transportation infrastructure of a property without intermediaries.
Don’t get it? It is OK. Let’s compare it with the current system.
If you think about how we transfer our digital property right now, there is always someone in the middle who manages the transaction, right? The reason is because it is impossible to validate that transaction without a central entity.
Those intermediaries manage the transaction by recording everything in their ledgers. For example, in a case of money transfer, bank owns their ledger and record all the transaction on it to make sure everything is done right.
The point is that blockchain is a purely P2P system, and it introduced a public ledger that everybody can use and nobody owns for the first time in history of humankind.
Also, now you know that bitcoin is just one of blockchain applications that have applied this technology to money. Therefore, I am captivated by blockchain not just bitcoin.
But why is this so profound? Do you see the similarity with the Internet?
Why the Internet Won and The Blockchain As a Creative Platform
At the dawn of the Internet, nobody precisely knew where this new technology would take us. Some people believed that it was going to be huge, others did not. Now, we are still at the early stage of blockchain, and nobody precisely knows where this technology will take us.
There was a lot of criticism about the security and all that about the Internet, but it has become the most functional network in comparison to other networks.
Why is that?
That is because nobody owns the network and everybody can develop their applications on top of it.
That is why I believe that blockchain is going to be huge. There will be a lot of applications that you cannot even imagine in the future. Just like we could not imagine Amazon, Google, Facebook or AirBnB.
With blockchain, the world’s smartest and most creative software developers have an open platform on which to build products that will allow individuals, organisations and even machines to do business with each other more flexibly, more efficiently and more effectively.
Industries That Blockchain Could Disrupt
Let me give you some examples in order to encourage your imagination about what blockchain could do. I picked up 3 projects that fascinated me.
- Coinbase makes it easy for people, businesses, and developers to use Bitcoin. They are trying to make payments more open and efficient for the world. Their service can allow people to transfer money, merchants to accept payment and developers to build the bitcoin apps. They have raised $106.71M in total from Y Combinator, SV Angel, Union Square Ventures, Andreessen Horowitz and such. This is the number of daily bitcoin transactions made on Coinbase below. You can see it’s rapidly accelerating.
We can already see a tangible result in bitcoin. In 10 years, people will look back and say that bitcoin was the first killer application of blockchain. The killer application of Internet was the email. Bitcoin is the email for blockchain.
OpenBazaar is an open-source decentralized e-commerce platform that has no fees and restrictions. They are trying to bring a free trade to the world in a way that corporation is not controlling anything. As you can see, this could alter the Amazon.com. They have already received $1 million in seed funding from Union Square Ventures, Andreessen Horowitz, and angel investor William Mougayar.
Mirror is a peer-to-peer trading platform that provides hedging instruments to OTC markets. It can democratize access to the OTC derivatives market, and enables efficient ways to hedge economic and business risks at a fraction of today’s costs. They have raised $12.8M in total from Boost VC, Ripple, Tim Draper and such.
OpenBazaar and Mirror do not have a tangible result yet, but we can see how it could alter the existing business and how famous investors see a massive potential in these projects.
Those were just 3 examples among many. Everything that manages a property could change with blockchain. Think about digital signatures, digital contracts, digital keys, digital ownership of physical assets such as cars and houses, digital stocks and bonds, storage, WiFi data and many more.
As I mentioned before, I cannot even imagine the future of the blockchain. What blockchain can do is unimaginable, and that’s the fun part.
The blockchain innovation has just began.