Similar to the TCP/IP technology adoption over a 30 year span, blockchain, which got its roots in 2009 with the introduction of Bitcoin, feels like it is in its early stages of its technological life. Blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way (Lakhani, 2017) Blockchain was used as a foundational element to Bitcoin as it could issue the currency, transfer ownership, and confirm the transaction. All while making a digital version of all the transactions that take place during the Bitcoin exchange.
Blockchain got its start as a foundational element in the exchange of Bitcoins, as discussed in the Harvard Business Review (HBR) article, blockchain has the potential to change the way many businesses function. At the time this article was written blockchain was already taking hold in financial industries. Financial giant NASDAQ is currently working with the blockchain infrastructure provider, Chain.com, to process and validate its financial transactions. “Bank of America, JPMorgan, the New York Stock Exchange, Fidelity Investments, and Standard Chartered are testing blockchain technology as a replacement for paper-based and manual transaction processing in such areas as trade finance, foreign exchange, cross-border settlement, and securities settlement. The Bank of Canada is testing a digital currency called CAD-coin for interbank transfers.” (Lakhani, 2017)
While these are just a few examples of early adopters in blockchain, the majority of what is covered in the media as it relates to blockchain is crypto-currency. More specifically, Bitcoin. According to Wikipedia, cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. As a crypto-currency, Bitcoin was first introduced in 2009, and has since had plenty of highs and lows. Recently the value of Bitcoin has elevated to over $11,000 per coin, which is extremely interesting as Bitcoin does not have value like a physical commodity like gold or silver. Bitcoins value appears to have value because it is popular (Why do bitcoins have value, 2017).
As the Bitcoin has grown in popularity it has also exposed some weaknesses in the infrastructure of some of the companies that operate Bitcoin exchanges. Youbit, which is a company based in South Korea had to file for bankruptcy in 2017 after hackers stole nearly a fifth of its clients’ cryptocurrencies (Shane, 2017). Another bitcoin marketplace company based in Slovenian was also hacked in 2017, which lead to nearly $64mm in Bitcoin being stolen (Gibbs, 2017). These two hacks have lead to many doubting the safety and security of trading bitcoin.
According to Grant Sabatier, CNBC contributor and early bitcoin investor, people should not invest in Bitcoin as it is today (Sabatier, 2017). Although Sabatier has made over $1mm investing in Bitcoin it is his belief that Bitcoin is not very secure.
“You might think that digital wallets are secure, but cryptocurrency exchanges and wallets continue to get hacked regularly. More than $70 million in bitcoin was hacked from NiceHash, a bitcoin mining marketplace, last week. Just because exchanges like Coinbase have $200 million in venture funding and a nice shiny marketplace doesn’t mean that they can’t get hacked either. Because there is no central governing body guaranteeing your bitcoin, if you lose it, it can be difficult to get back. If it gets stolen, then you are out of luck. Hacks will continue to happen.” (Sabatier, 2017).
These are just a few examples of why people are hesitant to invest in Bitcoin or other crypto-currencies, it is fascinating to think about how all of these transactions take place using blockchain technology.
While I won’t be investing in crypto-currency anytime soon as I do not understand it fully and think it is pretty risky, I do think the blockchain technology that crypto-currencies use for their transactions will be a technology that will be utilized, adopted and made better over the course of the next 20+ years. The same way TCP/IP technology evolved.
Overall the technology of blockchain is new and being adopted through the financial industry there are many future applications that blockchain could revolutionize. For example, voting. All elections in the United States “require authentication of voters’ identity, secure record keeping to track votes, and trusted tallies to determine the winner. In the future, blockchain tools could serve as a foundational infrastructure for casting, tracking, and counting votes — potentially eliminating the need for recounts by taking voter fraud and foul play off the table” (Banking Is Only The Beginning: 30 Big Industries Blockchain Could Transform, 2017).
If voting was tracked and logged using blockchain technology the governments holding the elections would have a trail of all of the votes that have cast and can ensure that votes are not changed or modified after they have been cast. This would be great, and something our President would likely get behind to cut out voter fraud.
Voting is not the only place blockchain could add value. Healthcare is another industry that could benefit from blockchain. Most healthcare businesses rely on legacy systems to store and share data (Futurethinkers.com, 2017). Blockchain technology can allow hospitals to safely store records and ensure the data is only shared those who it is intended to share with. Given the recent hacks that have taken place over the last decade in the healthcare industry, blockchain could help minimize this threat.
Blockchain is a new and exciting technology that can help shape how many businesses function, and is something I think will get more widely adopted over the coming years and decades. There are improvements that can and should be made in the coming years. For example, the amount of energy used in the Bitcoin/blockchain exchange process is massive. “It’s been estimated that Bitcoin guzzles about as much electricity annually as all of Nigeria” (Orcutt, 2017). Many believe this will get better over time.
Based on the research I’ve done, it is my belief that having a blockchain system that enables a digital recording of each version or a document, and each transaction that has taken place for voting, financial service, healthcare and many other industries is a must. Although there are some drawbacks at present I am confident Blockchain technology will improve, and will be something we look back 20 years from now and talk in the same way we do about TCP/IP technology.