Blockchain is an amazing tool first proposed in 1991 and first implemented exceptionally well by the nom-de-plume “Satoshi Nakamoto” in 2008 to build the algorithm for the first Crypto Currency; Bitcoin.
This was an brilliant attempt at creating a non fiat (formal Government backed) currency that contained the attributes of a finite resource (such as gold originally used as a standard to back currencies), user control and a peer verified ledger. It allows the user to take back control of the mechanism for currency from banks and governments. It theoretically eliminates inflation, quantitative easing by governments, bank runs, bank margins on interest, or bank failure. It even negates the need for banks to exist in the first place.
Bitcoin is awaiting a second generation version more capable of scaling to the needs of a global economy and real time ledger system. Until this appears, the world is being engulfed by thousands of iterations and facsimiles of bitcoin all hoping to earn their place at the currency table. None of these, with a few minor exceptions, have any merit. But worse, this unrestricted influx of copycat cryptocurrencies is having a negative affect on the image of a very valid system for establishing the next generation of disruptive currency system to be adopted by nations and the world.
So let’s talk next about the “Blockchain”, the technology behind crypto currencies. This is an amazing tool that is revolutionising many industries and will have game changing effects on the world for years to come. It is an algorithm that links every entry in a ledger to every other entry by performing a mathematical hash function (which includes date and time and entry number) and inextricably prevents any single transaction entry being modified without modifying every other entry in the ledger. This has several attributes, its primary advantage is that it renders impossible to change historically recorded transactions making theft or corruption impossible. It also means that such a system can only be operated using computers. These computers have to be capable of handling not only the volume of current transactions, but also operating the algorithms to enter those transactions into a ledger which requires every transaction to be included in the calculation to include a new transaction.
This is one of the problems currently faced by Bitcoin. It is a victim of its own success, as the huge uptake in usage has grown the blockchain ledger to a current size well in excess of 185GB. This is more than many home computers (or broadband connections can cope with), meaning that the time to process new transactions has steadily increased to over 10 minutes, not practical if you want to buy a loaf of bread with bitcoins. The other problem faced by Bitcoin is the finite number available. The limit was set back at inception to 21 million, of which approximately 17 million are currently in circulation. As a global currency, this number becomes extremely difficult to subdivide at the human level. While a computer can easily understand that a loaf of bread is 0.00015286 Bitcoins, a human finds it difficult or even incapable of understanding or comparing this in the real world.
These two problems, as well as others, need to be solved in Bitcoin version 2, which will then allow the general adoption of a crypto currency in the real world.
So blockchain as a technology is applicable to many industries. Pretty much any industry that requires maintaining a ledger or contracts that need protection from tampering or corruption. While the banks and government hate Bitcoin (for obvious reasons), both use the Blockchain extensively for many different applications and it is being adopted by industries such as the legal profession for contracts, medical for storing records and business for data integrity.
It is not, however, a business or industry in its own right and so no business should consider itself a blockchain company, outside of education and consultancy.
Therefore, if you are seeking investment, don’t bother if:
- You call yourself a blockchain company.
- You consider yourself a crypto currency company.
- You are offering an ICO (initial coin offering) instead of shares in exchange for investment. Shares allow me ownership and voting rights in your company, ICO’s don’t.
If you think you’ve got the answer to Bitcoins problems, don’t get in touch with me, I am not an expert in this field nor am I in a position to help you get your V2 currency widely adopted.
Do, however, make contact if you use Blockchain technology in a novel way that will disrupt or evolve an existing industry.