In 1903, the Wright brothers invented the airplane. It was hard to imagine then that today, there would be over 500,000 people traveling in the air at any point in time. In 2008, Satoshi Nakamoto invented bitcoin and the blockchain. “For the first time in history his invention made it possible to send money around the globe without banks, governments, or any other intermediaries.” Satoshi is a mystery character, and just like the Wright brothers, he solved an unsolvable problem. Whenever this happens, it inspires incredible innovation. The concept of the blockchain is not very intuitive, but many people see it as a game changer. Despite its mysterious beginnings, the blockchain may be the airplane of our time.
Learn the Basics about Blockchain Technology
The blockchain has two main technical ingredients. One ingredient is cryptography (asymmetric cryptography) and the other ingredient is so-called distributed systems. These are the two main elements of the blockchain, and if you understand them, you understand all technical details of blockchain or bitcoin.
With Blockchain, you have the ability to create records that are indelible. You can transfer value by making updates to those records, and you can automate updates to the records, through elements called smart contracts. Today, there are all sorts of institutions that exist to maintain sets of records, to be “trusted third-party” in industry parlance.
In fact, Bitcoin is different, because with Bitcoin, you do not owe anyone anything, and no one owes you anything. It’s a system based on ownership, and no one can control anything about it except you. Most blockchains are what you call permission-less systems. In Bitcoin, we can have a trust relationship without having ever met each other, or having done business at all with each other. (Credit: Andreas M. Antonopoulos)
Many ask, “Why does blockchain actually have value?” Here’s why.
The two-word answer is network effect. Networked products and services tend to have more value when more people use them. The most common example is the telephone. During its early days, when few people had access to telephones, their utility, and therefore their value, were so low. Today, practically everyone has a phone, so its utility and value is so high, as to be unquestionable. In this way, the value of Bitcoin is directly connected to the number of users and the frequency of the usage.
Blockchains are military-grade cryptology and they have never been cracked. When you hear about hackers stealing Bitcoin, they are not stealing from the blockchain itself. They are stealing at the point of entry – at the wallet or browser-level where they intercept messages – but the blockchain itself is very secure. You can digitally sign transactions, or other kinds of information, so you can prove to people that you actually signed off on the transaction. It is much more secure than the curvy, wiggly signatures we usually use in our everyday life. It will probably replace those signatures in the near future.
“Jameson’s startup started a hardware & software platform for cars formed on Ethereum. We put an Ethereum node on a Tesla, and whenever it would go through a toll bridge, the Ethereum node would interact with the toll bridge and autonomously pay the toll bridge,” Jameson said. “If you think about what a toll bridge does today, you go through the toll bridge and you have to pay a credit card transaction fee. There [are] these systems in the toll bridge that work with multiple companies, but with our system, it’s literally machine-to-machine.”
This machine-to-machine communication allows direct access to the cryptocurrency stored in digital wallet. Transactions are processed on the spot, without going outside of the network.
“Automakers are now starting to get interested in blockchain, they’re seeing what it can do for the future for autonomous cars and some data-sharing applications, and blockchain is going to be integral to that,” Jameson said.
I think it’s going to take a long time for it to weave its way into the system.It may take a normal technology upgrade cycle for it to fully weave its way into the system, but within 20 years, financial services will be just software and smart contracts technology is going to automate a lot of things that institutions and people handle today.
The Blockchain and Financial Inclusion
According to the World Bank, 70% of the world’s population does not have access to basic financial services. In the United States, one of the world’s wealthiest countries, about 50% of the population does not have access to basic financial services, including bank accounts. There is a huge amount of people around the world that do not get to experience, and be a part of, the global economy, because they don’t have access to the financial system for a variety of reasons. I do think the blockchain technology will lift a lot of people out of poverty, but will also be an inclusive technology that allows more people to engage in global commerce.
Pretty soon, smartphones may be had for less than five dollars each – this is basically right around the corner. Nearly every person living in poverty on earth will have access to a smartphone and be connected to a network. That is game changing in and of itself. When you have digital wallets on these phones, and the ability to trade assets, we are going to answer the question “What happens when everybody has money?” Capitalism itself has thrived in some areas by the natural exclusion of others from markets. It actually uses that scarcity principle as its driving basis. So, what happens when money is not scarce?
We do not have to have people living in squalor and fighting for a handful of rice every day. There is too many resources in the world to live like that anymore. I think that certain countries, and even corporations, are getting to understand that, and certainly, this blockchain movement is the technology underpinning this transformation – the technology part of that mindset which exists offline, too.
We had Commodore, Atari, and Apple, but at some point, the Windows operating system emerged, and everybody just started to use Windows without asking “What is the code behind it, what is the code behind moving the mouse?”
This is not something that is going to impact one or two industries – it will affect every industry in the same way the internal combustion engine affected almost every industry, or the same way the internet affected almost every industry, or created new industries.
Here are some industries that will be affected by Blockchain Technology:
- Banking and payments
- Cyber Security
- Supply chain management
- Networking and the Internet of Things
- Private Transport and Ride Sharing
- Cloud Storage
- Energy Management
- Music Industry
- Real Estate
Here’s how Blockchain is affecting the shipping and logistics industry:
- The Belgium-based Port of Antwerp has announced that it is looking to use the technology to automate and streamline the terminal’s container logistics operations. The test is being conducted in conjunction with a blockchain startup called T-Mining. According to the the port’s press release, the blockchain service permits safer and faster transfer of valuable objects. It does it fully digitally and without a middleman.
- The Port of Rotterdam, Europe’s largest shipping port, is taking part in a Blockchain consortium, which focuses on logistics. According to the terminal authority, moving containers from point to point often involves more than 30 different parties, including carriers, terminals, forwarders, haulers, drivers, shippers and more. This process results in hundreds of interactions between those parties, conducted through a mix of e-mail, phone and fax. “The paperwork accounts for up to half of the cost of container transport,” the authority noted.
- Shipping and logistics giant Maersk, along with IBM, have announced they are working together “to use blockchain technology to help transform the global, cross-border supply chain.”
- At the 2016 China Shenzhen Fintech Summit, held on December 20, 2016, the China Federation of Logistics and Purchasing (CFLP) announced the establishment of the Blockchain Application Sub-Committee in an effort to bring the logistics industry into the digital era by leveraging blockchain technology.
- Samsung SDS, the IT subsidiary and technology provider for electronics giant Samsung, will launch a pilot blockchain project for Korea’s shipping logistics industry to track imports, exports and the location of cargo shipments in real-time over a blockchain ledger. The pilot project signifies yet another major development in bringing blockchain technology solutions beyond testing in a lab to the real world, in a country that has some of the world’s largest shipping ports.
- The retail giant Walmart has started a major test of blockchain technology for supply chain management.
We have a whole lot of possibilities, and everything will change. It reminds me of the situation where suddenly, we have two or three huge inventions happening at one moment. I think we are exiting the industrial age, and entering an age we still have yet to name. We are at a crossroads.