What it is: Blockchain technology is going to change the world the same way the Internet changed communication.
Every now and then, a new form of techno0logy arrives and literally rewrites the way the world lives. At one time, people relied on adding machines and typewriters. Then personal computers appeared and wiped out the typewriter business along with numerous other businesses as well. Then the Internet appeared and that created web sites, e-mail, webinars, and video conferencing. The smartphone arrived defined by the iPhone and that created the App Store, ride-sharing services, and augmented reality apps like Pokemon GO.
What’s common among all types of technology isn’t just its initial impact but how it lays the foundation for a whole host of new businesses that couldn’t exist before. Uber could never have existed without smartphones. Websites were useless until the Internet. Now the latest technology that promises to revolutionize the world is blockchain technology.
The basic idea behind blockchain technology is that it relies on encryption and multiple copies stored around the world to record transactions. Bitcoin and cryptocurrencies are just one aspect of blockchain technology just as websites and e-mail are just one aspect of the Internet. While people are following the hype of Bitcoin and other cryptocurrencies, the real change lies with blockchain technology.
By using encryption, blockchain technology makes it extremely difficult for fraud to occur. Since the blockchain is open to everyone to view and stored as multiple copies on different computers, creating fraud means cracking encryption (possible, but not easy) and hijacking more than half of all computers storing a copy of the blockchain (possible, but again not easy). Through both encryption and multiple copies stored around the world, blockchain technology makes fraud extremely difficult for anyone to create, even governments.
That’s why blockchain technology (and not just Bitcoin or cryptocurrencies) is the real revolution to follow. Blockchain technology basically creates trust. In the past, banks, real estate title companies, and government treasuries created trust, but how much can you really trust a bank, financial institution, or government? By spreading blockchain technology across multiple computers, trust isn’t based on a single, large entity but spread out among multiple, anonymous computers.
Today, banks create an aura of trust through their sheer size and political power. Tomorrow, banks and other middlemen who rely on trust will be obsolete because of blockchain technology.
Just as streaming video as decimated DVD rental businesses like Redbox and Blockbuster Video, blockchain technology will devastate all forms of middlemen institutions whose sole existence depends on the aura of trust. That’s why cryptocurrencies threaten ordinary currencies like dollars and yuan. When people don’t need to exchange wealth through government created currencies, governments lose control of money. That’s partially why China has banned cryptocurrencies to keep people from sneaking money out of the country without the government’s approval.
Blockchain technology will define the future and change the way people create trust. No longer will trust be given to large institutions simply because they have the most power. Now trust will depend on encryption and blockchains spread around the world. That’s a threat to national governments and a threat to banks, which is the real reason why so many governments are afraid of it.
Blockchain technology can’t be stopped any more than killing Napster stopped the pirating of music. Curiously, Bank of America has the most blockchain technology patents of any company, which means they’re aware that blockchain technology can change the way banks make money. Instead of charging fees for the privilege of storing your money in a bank, banks will have to make money through managing blockchains. That’s why Bank of America is looking at blockchain technology because their current way of business is obsolete.
Blockchain technology is going to revolutionize the world just like personal computers, the Internet, and smartphones have already done. The key is to get out of those businesses that rely on being a middleman selling trust because those types of businesses are going to follow Blockbuster Video and Borders Books into the graveyard.
The future is clear for everyone willing to see. For everyone else, denial is the most common strategy to deal with change, and it never works. Just ask the slide ruler, typewriter, and DVD rental businesses how well that worked out for them in the end.