There is an invisible force at work in the shadows of the internet.
You can’t see it. You can’t touch it. Yet this single development is arguably the greatest tech breakthrough since the web’s creation. Make no mistake; this innovation will completely overhaul how you do everything.
Chances are you don’t even notice that it’s there.
But you may have heard of it. I’m referring to the blockchain, of course.
The blockchain is what powers bitcoin.
One of the key reasons behind bitcoin’s development was to alter our very understanding of trust.
Right now, we have trust in the existing system.
We trust our politicians to act with our best interests at heart. We hope (in vain) that central bankers won’t destroy the value of fiat currency. We believe bankers will look after our money…rather than run a banking system that benefits the few and screws the many.
And what has this trust given us? A broken financial system.
It’s easy to understand why bitcoin has become so popular. The crypto enables ordinary people the chance to flee the tyranny of central banks.
However, the mechanics of bitcoin — the blockchain — is the ultimate ‘trust-less technology’.
That doesn’t mean it’s a system you can’t trust. Just the opposite, in fact. The blockchain is a piece of technology that revolutionises the very idea of trust.
The secret to blockchain technology is that each step is accepted through what’s called ‘proof of work’.
This means, because the blockchain verifies each proof-of-work transaction as it happens, there’s no trust necessary between the people involved in a transaction. Rather, all that’s required is trust in the system.
In the book Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World, authors Don and Alex Tapscott explain ‘blockchain trust’ in detail:
‘Every ten minutes, like the heartbeat of the Bitcoin network, all the transactions conducted are verified, cleared, and stored in a block which is linked to the preceding block, thereby creating a chain. Each block must refer to the preceding block to be valid.
‘The structure permanently time-stamps and stores exchanges of value, preventing anyone from altering the ledger…so the blockchain is a distributed ledger representing a network consensus of every transaction that has ever occurred. Like the World Wide Web of information, it’s the World Wide Ledger of value…
‘This new digital ledger can be programmed to record virtually everything of value and importance to humankind: birth and death certificates, marriage licenses, deeds and titles of ownership, educational degrees, financial accounts, medical procedures, insurance claims, votes, provenance of food, or anything else that can be expressed in code.’
Blockchain is the future
The blockchain is a gamechanger. How we share information will never be the same again.
For the past few decades we’ve used the internet to share information. But, for instance, take the example of working in the publishing industry. You may work on a Word document at your desk, but email the file across to another team member. They’ll then get it ready to load on the web.
But the file that makes its way to the internet is not the original file. It’s a copy. You still hold the original Word document. But your web team has a copy of it which they then upload to the internet.
It’s these multiple copies that has held back the ‘paperless’ world we were supposed to be living in by now.
The lack of original documents coupled with multiple copies of digital ones means there’s no proof of which one really came first.
When it comes to things like stocks or financial contracts, or even art and voting, having copies is a very bad idea. As the Tapscotts put it: ‘If I send you $100, it’s really important that I don’t have the money afterward.’
With the blockchain, however, there is only one copy. No extra copies floating around on someone else’s laptop. Each block is part of the original item.
What this means is that, for centuries, we’ve relied on middlemen to be the trusted third-party. The ones overseeing the proof of identification. The people who clear the transaction — the record keepers, so to speak. All of these people are the ones we trusted to look after the transaction process.
Yet, with blockchain technology, we don’t need them anymore. In my view, the blockchain will out these people from their roles in a few short years. The power of being a ‘trusted’ party is over. And we will put our faith in the trust-less computer code doing the job for us.
Editor, Markets & Money