In 1992 Rupert Murdoch commented that he did not know how to make money out of the internet, 12 years later Mark Zuckerberg founded Facebook. Today, News Corp has a market capitalisation of circa USD 7.4 bn, Facebook is at USD 410bn. The moral of this story is that even one of the most successful entrepreneurs of the past 5 decades missed the internet moment.
Today (2017), it is 1992 all over again but the word this time is Blockchain.
We believe that blockchain will be a far more significant development than the internet, it will develop faster and within a decade will have fundamentally changed many aspects of the way we do business and conduct commercial, social and political interactions with each other.
It all started in 2008 when a Satoshi Nakamoto (a pseudonym for a person or persons unknown) published a white paper on the internet called ‘Bitcoin: A Peer-to-Peer Electronic Cash System’. The 9 page document set out an idea for developing an electronic currency which would enable individuals to transfer the currency across the internet, without needing to go through a third party (such as a bank). The currency system was called Bitcoin.
The enabling technology of Bitcoin is known as blockchain technology. Blockchain because each block of transactions are linked together in such a way that it is possible to trace the movement of Bitcoins between parties.
It is as if it was possible to trace every dollar note issued, who sent it to whom and how many each person has, although through the use of a long alphanumeric label, individual names are never known or used.
Since Bitcoin, many other cryptocurrencies and blockchain platforms have developed, new forms of organisation are evolving (the Distributed Autonomous Organisation, for example) and a new way of raising capital (Initial Coin Offering, for example) are being refined. It is as if we back in 1550 (circa) when the first joint stock companies were being formed and the notion of shared investment risk were being developed.
What is Blockchain?
We describe blockchain as a ledger system, a book of record where the ownership and transfer of assets is recorded. We already have many books of record but to date they are centrally controlled and managed, they are referred to as the single source of truth and typically they are quite opaque. A great example of this is your own bank account, the record keeping is controlled by your bank and no one can see it other than you and your bank.
A blockchain ledger system is also a single source of truth, however, it is not centrally controlled and managed, instead it is held on multiple (thousands) of computers at the same time, each record identical to the others. A single source of truth but not centralised. The ledger is also fully open so that anyone can see transactions, although it is important to note, identities are protected by a long alpha numeric tag such as ‘2JJQiB4oyrGMU2w6yWf6FtoANVMzKHZWvq’ (this is a made up one).
How did it start?
The key so what answer is that there is no longer the need for a trusted central ledger manager, the middle person can be cut out of any process. So for example, a peer to peer money transfer (very obvious and early ‘use case’) can now be done over the internet without having to go through a bank.
Transparency with anonymity is a significant benefit as reduces the opportunity for corruption and reliance on the trust of third party.
The third and most exciting 'so what' answer is that blockchain is a leapfrog technology in the same way that mobile telephones leapfrogged the telecommunication accessibility issues in the third world. Now anyone with a basic smart phone, even those without formal identity documents, can enjoy access to basic banking facilities.