Blockchain vs Everything
What do a bank, an e-mail provider, the social media and a cloud computing company have in common?
The word blockchain is certainly familiar to a large proportion of the readers of this post. It is reasonable, considering that since the 3rd of January of 2009 was created the bitcoin, a new currency based on the blockchain technology. But what exactly is the blockchain technology, and why it strongly differentiates the bitcoin currency from all the rest? I will try briefly (as much as possible) to describe the way the blockchain works so that later I can answer the question of the first paragraph.
First of all the blockchain is a decentralized database. Why decentralized? Because transactions are based on the peer to peer (P2P) protocol. The key words here are “database” and “trade.” Regarding transactions, they are executed encrypted between users without the interference of any type of intermediates, providing absolute anonymity. Regarding database, each transaction corresponds to a block which is the smallest unit of the system. Each subsequent block is a fragmentation of the precedent block, which makes each transaction irreversible. Thus blockchain takes the form of a tree diagram with a unique attribute: A snapshot of blockchain includes all transactions that have been executed until the time of the snapshot. In fact there are no “electronic coins” but only recorded transactions. The verification of each transaction is being checked extensively by the network to be true, so it is near impossible for a fraudulent transaction.
The answer to the initial question is that a bank, an e-mail provider, the social media and a cloud computing company have the blockchain as a common competitor.
The currency is an exchange agreement between people. Each person, based on his/her available information, define a value X which is willing to exchange in order to acquire a good. This value X includes the perceived by the person material and the intangible (or psychological) benefits. Any value less than, or equal to X motivates the person to buy the product (or the service). But what happens, when a group of consumers agree that X will be the bitcoin? In that case, banks as physical storage of money will be needless. Without customer deposits banks will no longer have at their disposal the most essential resource, called liquidity in order to offer services that generate revenue (e.g. loans). Are banks ready to diversify the way of doing business when facing a decentralized monetary network? (“Banking is essential, banks are not” – Bill Gates)
A less popular application of blockchain is the provision of e-mail called bitmessage. The way message exchange works is similar to that of bitcoin transactions. Based on the P2P protocol, it works decentralized without the help of an intermediate computer system provider. Each message is an encrypted transaction, i.e. a new block on the existing blockchain. Like bitcoin, bitmessage relies on the compute power of its users. How may the shift to such emails damage Google, Microsoft and the other giants of this sector? When Google’s chief scientist Peter Norvig was asked about the Google’s success secret, he answered: “We don’t have better algorithms, we just have more data”. Combining this answer with the fact that more than 95% of Google’s revenues come from the selling of these data to marketing companies, we can easily conclude that a Google’s data center is not the most private place to hide our data. And it makes perfect sense, if we consider that these companies do not ask for anything in return for the services they provide. Thus, the last thing they wish, is an internet powered by its users.
Blockchain is a powerful tool that can be applied to anything that can be translated into 0/1. The beginning was the bitcoin, bitmessage followed. What’s next? The replacement of Twitter is already here and it is called Twister. Like all the above applications, Twister is based on blockchain with messages instead of coin transactions. In this case, however, there is no company – provider ready to reap profit from the use of your personal information.
Last but not least, I choose the cloud computing industry for two reasons. The first is because the idea of blockchain has not been implemented regarding cloud, and the second is because if it finally finds application to this sector, it will completely transform internet and storage as we know them. The idea is that by using blockchain, everyone will be able to provide a “little corner” of his/her unnecessary storage space, in exchange for a few Bitcoin subdivisions. Thanks to its thousands of miners, the bitcoin currency became the largest computing network in the world. Likewise, P2P cloud have the potential to surpass in force any existing data center of hundreds of square acres. It is a complex idea in its infancy, but that means nothing. Sounds the best solution for people who seek privacy but they do not want to forsake the idea of an open web.
Many questions arise and you are encouraged to discuss. How governments can maintain the control of their economies? How startups can benefit from existing and new blockchain applications? What is your opinion for the impact of blockchain on these markets? Is it too early to jump to conclusions, or is it too late for those who have not already realized blockchain as a competitor?