Inc.: Bitcoin Is Only the Tip of the Iceberg: the Amazing Potential of Blockchain Technology
In 2018, you will see the emergence of blockchain 3.0, in which the technologies that fueled the rise of bitcoin are applied to numerous real-world applications.
If you haven't heard about Bitcoin in the past year, you have been living with your head in the ground. Bitcoin, the best known and most popular of a new generation of cryptocurrencies, is powered by blockchain technologies. Its popularity and power sent the value of a single Bitcoin at $20,000 at its peak. While the value has gone down significantly, it still carries a five-figure valuation.
Blockchain technologies, in its first two stages (blockchain 1.0 and 2.0) focused primarily on fueling Bitcoin and other cryptocurrencies. In 2018, you will see the emergence of blockchain 3.0, where blockchain technologies are applied to numerous "real world" applications.
At the forefront of the blockchain 3.0 revolution is a company called Arcblock. Arcblock bills itself as the world's first blockchain ecosystem for building and deploying decentralized applications.
Combining blockchain technologies with cloud applications, Arcblock is nearing completion of a platform that will allow easy access to blockchain technology for developers in a variety of fields. It is already in discussions with many businesses, platforms, and institutions in the fields of IT, education, publishing, culture and tourism, health, and smart cities.
"We are extremely excited about the bright future of blockchain," said Arcblock's CEO, Robert Mao. "When people talk about blockchain today, they only see crypto currencies represented by Bitcoin. Now blockchain is evolving to a stage with decentralized applications at the core. In the future, the value decentralized apps create will exceed what cryptocurrencies create today."
Before delving into the possibilities of blockchain in the future, it's important to look at what blockchain is, how it works and why it will be at the heart of a revolution in commerce and in life itself.
- Blockchain makes sense for business. While there are many who call Bitcoin and other cryptocurrencies dangerous or even frivolous investments, the technology behind them - blockchain - is even more reliable than the technology and processes behind tradition bank transactions.
So what's blockchain, anyway? It's quite simple, actually:
- It is a shared public ledger (a "distributed database" in blockchain terminology)
- It tracks all transactions that access its database
- And has built-in mechanisms which ensure the record of all transactions is tamper-proof and all aspects of the transaction are transparent.
Each transaction is called a block and is forever recorded on the database. All transactions are time stamped and reviewed by multiple parties (all of whom must agree the transaction is legitimate). Once that transaction is completed, each subsequent transaction involving that "currency" is added to the ledger, creating a blockchain.
In the case of Bitcoin (by far the biggest application of blockchain technology), when you own bitcoins, you get a private cryptographically created key (a personal and unique identifier) to access the value of what you own. If you make a bitcoin transaction to purchase goods or services, that unique key becomes the property of the seller. This simple, person-to-person, transaction eliminates the need for a middleman (in most cases, a bank). What does this mean for the future of financial transactions? For one, removing the middleman from the equation and working around the traditional banking system should allow for smaller transaction fees.
- Bitcoins are easier to acquire (and a less expensive investment) than you think: While you can earn bitcoins through developing a series of sophisticated mathematical formulas (called "mining"), the easy way to acquire bitcoins is just to purchase them.
Though Bitcoin and other blockchain-based cryptocurrencies are still perceived to be exotic investments, it doesn't mean there aren't established ways to purchase. Perhaps the easiest way is to use the app Coinbase. While the price for a bitcoin peaked at around $19,000 and remains at the five-figure level, you can buy tiny fractions of a bitcoin, allowing anyone to be an investor.
- There are good reasons why people put an actual value on bitcoins and other cryptocurrencies. Many people are confused as to why a "made-up" currency is deemed to have real value. When you think about, though, all currencies require faith in their inherent value.
Bitcoin and other cryptocurrencies' value comes in part from their "newness" and their popularity. It also comes from scarcity. Once 21 million bitcoins have been "mined," there will be no more.
Another obvious reason for its value is that bitcoin transactions are much harder to trace and often avoid being taxed.
- Blockchain is here to stay. According to research from Gartner, blockchain technologies delivered $4 billion in value for businesses in 2017, with $21 billion expected by 2020 and an incredible $3.1 trillion by 2030!
Don't believe Gartner? Companies investing in blockchain startups include Goldman Sachs, Citigroup, Google, and Cisco Systems. IBM and Oracle have each announced commercial offerings of blockchain-related services this year, with more certain to join them soon.
But bitcoins and other cryptocurrencies don't begin to unlock the true potential of blockchain technology. Mao, who spent much of his career at Microsoft, sees blockchain technologies changing virtually every aspect of our lives.
Think of its application in business contracts. Parties can create the terms of a contract and, by entering these terms into a blockchain database can create and execute a binding contract without the cost and time involved in hiring a lawyer.
In simplest terms, imagine a bet on a football game. Think of the bet as a binding contract: I bet $100 that New England is going to beat Minnesota, while you take the Vikings. We each put $100 worth of Bitcoin into a safe account. As soon as the game ends, blockchain will release $200 to the winner's account. Obviously this process can be applied to most any other kind of contract.
While blockchain is clearly here to stay, it is still very much a work in progress. Much of that work is already being done by Mao and his team at Arcblock.
"ArcBlock is a comprehensive solution that combines blockchain technology with cloud computing, rather than a standalone software package or set of APIs," Mao says. "Essentially, we've created a platform that eliminates most, if not all of the current obstacles to blockchain adoption. Just as Bitcoin is revolutionizing currency, we see the possibility of similar revolutions across multiple industries and endeavors."