Blockchain...

Over the many years, I have written about many disruptive innovations ranging from the LED’s and how they will reduce the workforce (which they have) to the rise of the self-driving car which has arrived thanks to Elon Musk. However, this one is different and even larger than the others as “Blockchain” will rattle mankind’s entire socioeconomic foundation sending earthquake sized shock waves both deep as well as far afield. However, you like many others may be asking yourself what exactly is “Blockchain” and why is it more important than my fantasy football picks? 

Well, most likely the reason for its somewhat anonymity from the public eye is that Blockchain itself is a mathematical “hash” developed by Satoshi Nakamoto (likely not a real person) in 2008 and formed the basis of the cryptocurrency “BitCoin”. Ok so don’t let your eye’s glaze over just yet because I said “mathematical hash” as I will keep it interesting. Look at it this way we already have a mystery person at the center of this story as well as a secret currency so it could easily become the basis of a James Bond plot or Dan Brown book right? So back on track what is interesting is BitCoin is a currency which is backed by no government, bank or other entity but only the people who agree to transact in it. In short, we are entering a time where “value” and “denomination” (i.e. count) will become separated from each other.

In other words, in the past, if you owned one dollar you had one dollar’s worth of buying power. However today you have one dollar in "count" but because of globalization the value of that dollar is no longer fixed but variable as that “dollar” will likely buy more “value” in Mexico and less in Europe but yet it is only “one” by count. So what is becoming more important is the “counting” and think of it this way, “what does a bank do for you”?

In the days of old your assets were hidden behind a large steel door locked away for safe keeping yet today that is the furthest thing from being the case. Instead they now only provide a database with a number in it along with your transaction history. So their only value now is one of fiduciary stewardship of this data and the ability to convince others of their solvency on your behalf. Sort of an interesting thought if you think about it, your worth is only defined by some digitalized number stored in a database and backed up by the “perceived” solvency of the institution which is storing that number as its only a “count” and not a “value”.

However, this is where Blockchain comes in as if you had a means to store this “number” in a community database along with all of your associated transactions. Why would you need to rely on a third party to store this number? Well lets not just stop there too, since all of the transactions are “hashed” into this number why would you need a third party to clear any transactions such as checks or credit cards? In short, this would mean friction free financial transactions could take place and again you might be scratching your head asking why is this important to me when I still have to make dinner for the kids? 

Well, lets create a very simple example since your in a hurry. Say you stop at a convenience store on the way home to make dinner and purchase a gallon of milk for the mashed potatoes, you swipe your “Blockchain Card” with your crypto identifier on the store Point of Sale (PoS) device and instead of some bank or credit card company clearing the transaction, it instead was cleared by the Blockchain itself with a "debit" coming from your “chain” and a "credit" going to the stores [block]chain. The transaction would be “financially friction free” which is the component which is the most interesting as the “financial chain” can become very expensive especially when we add in the issue of fraud. So let's take a few seconds to explore the idea, of what if there was no fraud?

Because the Blockchain is “public” and each number is a “hash” of a prior set of numbers (i.e. a sum of all the transactions). It would not be possible to go back in to change them as it would invalidate the future hash. In addition, because the chain is public you will be able to see all transactions and where they originated from and to. But wait I see the hair standing up on the back of your neck as you say in fear “well everyone can then see my bank account”! Well yes and no, as the yes portion of the answer is the “hashed number” is public yet it’s (i.e. no portion) association to either you or I as it is impossible to tell as only with our “private key” (remember the crypto-card in the store example) does that connection take place which is one of the beauties of Blockchain as you can hide in plain sight but still maintain your anonymity.

Yet with all of this said, Blockchain can provide for simplified friction-free transactions which is what will shake the bedrock of mankind. Why, well Sir Isaac Newton was fond of saying, “that for every action there is an equal and opposite reaction” and this is the case here too as with friction free financial transactions what will happen to the financial industry, bank branches and the people who work for them? What about the Western Union clerks (as a generic example of financial service work) or the Russian scam artists as their activities will be viewed in the public light? 

While many will jokingly say prostitution may be the world's oldest profession, what they miss in that it is not the sex component but the “exchange of value for a service”. As the sociological underpinnings of man success as a species has been based on our ability to cooperatively exchange value (be it food or coin). Even the Christian bible speaks of Money Changers and the implied implications of the frictions created by the role.    

While I spend a lot of time pondering “what if’s” and this one while not as sexy as a self-driving Tesla Model S, however it will shake the very foundation of man as at the end of today reaching back into a prehistoric time where our ancestors traded bones and stones as a representation of value, Blockchain will democratize the ability to exchange value which in turn will affect the way in which wealth will be accumulated which is only at the cusp of our ability to conceive today. 

Yet it will sneak up on all of us very quickly without us even realizing it just as when Tesla downloaded AutoPilot overnight to all of its cars… 

Joseph ("Joe") Campbell is a Technology Architect, Futurist, and Sociologist having authored several books on related topics including:

The Quincy Effect: How business is wasting its most valuable resource. You!

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