Over the last several months consumers have watched as bitcoin exploded in value, only to take a sharp drop in a standard destabilized bubble. For those of us old enough, the rise and fall is reminiscent of the dotcom internet era of the 1990’s. Although bitcoin appears to be recovering from the recent selloff, the volatility of interest in cryptocurrencies is hiding a more disruptive technology.
We’ve discussed blockchain in basic terms. And we’ve introduced how businesses are beginning to view blockchain as a secure and verifiable method for transactions. But the depth of blockchain’s disruption is in infancy.
Proponents of blockchain are ready to take on the internet.
While most consumers experienced the internet as a slow growing technology, development of the internet as we know it came about in two phases.
The first phase, what Steven Johnson in his NY Times article calls InternetOne, was developed by scientists and hobbyists. The internet was a plaything on the sideline of interest, not picking up monetary support as people played with the idea of a shared system.
Thus, the foundations were decentralized. Anyone has access to the protocols that make up the internet (e.g. HTTP, TCP/IP, etc). No money needs to change hands to use these open protocols. In the 90’s this system flourished, allowing shared media files and an open community via computer. Thus, began the era of Wikipedia and shared information.
Certainly, the system had its weaknesses as well, as piracy flourished by way of shared media.
However, what scientists and hobbyists did not account for was the need for online identity. Whether it’s our name, our financials, or any other aspect of being human, IP and other open access protocols cannot signify human identity. The inventors failed to see far enough ahead, and they did not build layer one to hold humanity and its relationships.
The second round of development was to decide human identity. Which meant the private sector.
Once business realized money could be made, startups and hobbyists raised capital at astounding speeds. On one hand it was good for creation. However, it created a closed system in the second layer. Private money was funding the research and creation, and private money is responsible for maintaining their returns to stakeholders.
Seemingly overnight the internet could hold a human and all their identity, identity owned by a few private businesses.
Current existence of internet
Most people take for granted the system currently in place. The system, as it exists, has private servers all around the world that maintain and hold human identity.
Facebook maintains personal relationships. Amazon maintains purchasing power. Google maintains interests and consumer patterns. Not to mention any institute that would require personal information to verify identity. Examples would be in the case of mortgages, bank accounts, car purchases, or education.
There could be hundreds of private servers maintaining a small piece of a person’s identity.
While most trust Facebook, Amazon, and Google with their private information, these companies do have bills to pay and stakeholders. Businesses sell advertisements and marketing in order to maintain their very expensive equipment. Mass amounts of information on most first world and second world inhabitants sits in control of very few companies.
Application of blockchain
This is where blockchain, which next to IoT is one of the most disruptive technologies since the creation of the internet, can return the system back to layer one. The founders built the internet on open protocol. We should be able to return to layer one.
But what does that look like for the average internet user?
Each person would have their own personal blockchain, containing all necessary identity information. If a person wanted to purchase an item, they would issue a one-time password to the individual or institution to remove the exact amount designated. An individual can give permission to someone in order for them to see friends, family, and social networks, all contained within the personal blockchain.
Applying blockchain would sidestep credit bureaus, banks, and social media. Any middle man firm would be unnecessary as interactions would be verified in real time. Verification that would involve hundreds of computers, encrypted and time stamped, and maintained on the P2P network (i.e. hundreds of computers rather than one server).
A person would own their entire identity, maintained and verified by the network at large.
Satoshi Nakamoto, the anonymous programmer/programmers responsible for bitcoin, introduced a different reality with their anonymous email list in 2008. The system described is open protocol with compensation for participation. Not to mention, as uptake increases compensation decreases, keeping the system stabilized and preventing venture capital getting too big of a piece.
Nakamoto’s proposal could wipe away layer two of the internet, as well as completely change how we do business.
While the focus has been on cryptocurrencies, the first real test of blockchain, the underlying technology is far more fascinating and disruptive. In fact, Ethereum is more focused on building apps designed to work on blockchain than their cryptocurrency, Ether. Despite not having real uptake in the technology to date.
Blockchain technology change how governments, economies, and virtual human interactions function. The question is if investor interest in bitcoin and other cyptocurrencies will sideline the technology before it can make a difference.
For more information, read Steven Johnson’s article “Beyond the Bitcoin Bubble.”