Bitcoin may be dying, but the blockchain is thriving
There was a time when ‘Lotus 123’ was synonymous with ‘spreadsheet’. But you would be hard-pressed to find anyone in the current generation who could name the predecessor to the ubiquitous Microsoft Excel. Fewer again would know that something called VisiCalc ever existed let alone know it was responsible for creating the opportunity later exploited by Excel.
The same might one day be said for Bitcoin. Many think it is the first of its kind, but the cryptocurrency was preceded by Bit Gold, an earlier version that has since been dwarfed by its successor. Bit Gold has been relegated to a single line in history, much like VisiCalc.
Analysts have been predicting the death of Bitcoin since its inception, and indeed it appears to be in crisis. “Bitcoin is dead” proclaim articles in the technology press. There’s a civil war among developers, with accusations of sabotage and censorship flying on both sides. The features that made Bitcoin so attractive – its decentralisation, lack of interference from a regulator and fee-free international transactions – are being eroded as more than half of the world’s Bitcoin creation (also know as mining) takes place in China.
But whether or not Bitcoin is dead is irrelevant. What really matters for Australian executives and boards is the technology behind it – the blockchain.
Beyond Bitcoin to the blockchain
Silicon Valley venture capitalist and entrepreneur Marc Andreessen is on record as saying that blockchain technology is the most significant development in the internet since the internet itself. A lofty claim, sure, but when Andreessen talks tech only a fool would fail to listen.
What Lotus123 was to spreadsheets, Bitcoin could be to blockchain technology. Revolutionary, brilliant and useful, it showed us what the blockchain is capable of. All four major Australian banks and our two largest insurance companies have invested in significant blockchain research projects. PwC recently announced it has recruited 15 leading technology specialists to ‘exploit and commercialise blockchain’, and has plans to more than double that number.
Blockchain technology has implications far beyond cryptocurrencies and finance. Boards who don’t ask questions about the application of the blockchain to their industry may find their company going the way of those who thought the internet was a passing fad.
Trust doesn’t have to be expensive
Although the technology behind the blockchain may seem complex, at its heart is what is central to all businesses – building trust. That’s a pretty simple concept.
Trust doesn’t come cheap. It takes time and effort for an organisation to painstakingly build the relationships necessary for a business to run smoothly. It requires ongoing human interaction, making it an expensive system to create and an expensive system to maintain.
The blockchain changes that, because trust is inherent in the product itself. Anyone can verify any transaction that has been added to the chain. It is both completely transparent and – for the individual – anonymous and private if they choose.
A system in which the proof that something has happened is in the mathematics becomes an inexpensive system to build and run.
Where to next for the blockchain?
Across the globe, innovators and entrepreneurs are examining the broader applications of the technology behind Bitcoin. The blockchain is already used in some sectors for identity verification and provenance. Some forward-thinking governments are investigating its viability for running public services like tax collection, land titles, welfare benefits, or the issuing of passports. The technology has the potential to change the way recording artists get paid, with micropayments being immediately distributed proportionately to those involved the moment their song or film is downloaded.
If we were to view blockchain technology in terms of the Gartner hype cycle, we’re only just reaching the early hype stages. But as the blockchain navigates the chasm between early adopters and the mainstream, its broader potential will start to be realised. That means big disruption for any industry built on a foundation of trust.
Bitcoin has made the business world sit up and take notice, but we’re only just starting to see the true potential of the blockchain. This is why the blockchain is a topic that should be on every board’s agenda in 2016.