Blockchain – current state of affairs

Blockchain is an exciting new technology, which is still in its infancy and naturally needs to resolve some issues and mature before it reaches global mass adoption.

Currently, there is a lot of ongoing innovation in the blockchain space taking place at an accelerated rate. This new field has managed to excite a lot of smart people, which see enormous opportunities opening up. Talent and money are flowing in with a strong momentum from all parts of the world.

The trend is similar to what we have seen in previous industrial revolutions like steam power, railroads, automobiles, electricity, computers, and the Internet. They all have gone through the cycle blockchain technology is experiencing now.

Besides the well-known issues of scalability, interoperability, governance and privacy, user-friendly interface also needs to be addressed.

But hey, we all know how early prototypes of each of the above-mentioned technologies looked like and how they performed. We also know how they have evolved afterwards to reach mass adoption.

For the closest comparison, just have a look at the early web interfaces and capabilities.

In the dawn of the Internet, it used to take 24 to 48 hours to transmit a text message because it was routed from one dial-up connection to another. And now we have instant global messaging.

When email first came along, it used to take 2 hours to cross the Internet and reach the recipient. Now, we can live-stream high-definition video around the world.

In 1992, there were only a couple of websites on the Internet… And look how many things we can do online now – communication, education, shopping, entertainment, business, and the list goes on…

And on top of that, pretty much everyone has a smart phone nowadays and can use these applications. Even many people who don’t have access to a bank account, can access all the capabilities of the modern Internet.

Blockchain is not a panacea. It is not a solution for every single problem in the world and certainly shouldn’t be treated like a get-rich-quick scheme. Nothing is perfect, and so is not the blockchain. Like any technology it has its strengths and weaknesses. And also, just like any major innovation it goes through a familiar hype cycle.

If we look at the recent past – all new ground-breaking disruptive tech concepts from the Internet age have followed the same cycle.

Internet search gave huge boost to the web and Google emerged as the big innovator and winner in that area. Baidu then brought the concept over to the Chinese market.

Then e-commerce revolutionized the global retail industry and Amazon led the way there. Alibaba followed and took over the Asian market my storm with a similar concept.

Then social networks emerged and redesigned the paradigm of social interaction and communication around the world. Facebook led the wave of new global competitors there, followed by Twitter, Instagram, LinkedIn, SnapChat and many others targeting different sub-segments of the social network space. Tencent brought the business model to Asia and even improved upon it with its WeChat platform.

These social networks proved an important point – the social element is very important piece of the puzzle for any media company and almost any other business venture nowadays. It empowers long-lasting customer relationships and boosts network effects, which create economic value and provide sustainable competitive advantage to any business.

Blockchain builds upon this aspect even further.

Meanwhile, the Internet of Things gained momentum with the advent of smart phones and upgraded communication networks.

Cloud computing has been developing in parallel, also enabled by the faster and more robust Internet connectivity. This changed the way IT services are delivered both in the corporate and the consumer space.

The next wave of technological innovation was led by big data, artificial intelligence and machine learning – all very powerful technologies.

Huge amounts of human and financial capital poured into all these technologies, to an extent driven by the hype factor; but these investments also spurred a lot innovation and economic growth.

The combination of all these technologies is bringing really powerful new solutions and improvements to the world.

The latest new frontier in technology and business is blockchain. Like its predecessors, it quickly became a buzz word, due to the familiar hype cycle and human psychology. However, it is a real ground-breaking technology, and this fact has already been recognized by most established business, technology, economic, political and social leaders around the world. Like its predecessors, it is expected to deliver huge economic benefits, and perhaps its potential to change the world is even greater.

For publicly traded crypto-assets the process of price discovery is currently ongoing and the market swings in wild speculation up and down, unable to reach consensus on the present value of these new technological networks.

However, blockchain crypto-assets have the potential to gain global recognition as a new class of digital assets or commodities. They can have various functions like medium of exchange, unit of account and store of value, like standard currencies or gold. They can power the economy in a similar way to oil, electricity and internet bandwidth. They can also enable distribution and trade of various economic resources and risks like company shares. Since they exhibit features of various established asset classes, perhaps they don’t belong to any pre-existing category but should be considered a separate asset class of their own.

Bitcoin futures contracts, a standard type of commodity trading contracts, are already trading on major global exchanges like the Chicago Mercantile Exchange (or CME). Similar contracts are trading also on CBOE and are expected soon on Nasdaq. Bitcoin Exchange Traded Funds (or ETFs), an established investment vehicle used for many assets and commodities, have also been in the pipeline for some time, and probably will be listed on the New York Stock Exchange at some point. These developments manifest the status Bitcoin is gaining globally as a form of “digital gold”. Perhaps, other crypto-assets will follow suit, based on their further development and adoption. For example, Ether, the token giving access to distributed computational resources and storage on the Ethereum network, could be the next crypto-commodity traded on established financial venues around the world.

Blockchain technology brings a new paradigm, which is a huge improvement upon the current status quo in many industries.

The new era of decentralized economies powered by blockchain started with Bitcoin. It clearly showed to the world how value transfer can be managed in a decentralized self-sustaining way unlike any other financial or economic system before.

Then came Ethereum, which is widely considered the greatest milestone in blockchain technology since Bitcoin. It built upon the fundamentals of Bitcoin and brought about Blockchain 2.0 with many use cases beyond cryptocurrency. It enabled decentralized applications with huge potential economic impact. Ethereum’s innovation paved the way to future sophisticated and autonomous decentralized economic and social systems. The new field of crypto-economics emerged combining economic game theory, cryptography and blockchain with the power of the Internet to create new types of connected global ecosystems.

We are currently at a stage where a new third generation of blockchain technology is emerging. Again, it builds upon the previous generations most clearly manifested by Bitcoin and Ethereum. The key building blocks of modern blockchains like consensus algorithms, cryptography, data structures, network protocols, governance mechanisms, virtual machines, programming languages and so on, are being tried and tested, modified and experimented with in the pursuit of the optimal solution. And perhaps, there isn’t even a single optimal solution and the future global economy will have a myriad of different blockchains fitting different purposes. Most new blockchain designs evolve towards more complex architecture with multiple layers and modules that facilitate scalability, interconnectivity, governance and privacy. The trajectory of this trend resembles the way the Internet evolved towards a universe of interconnected public and private networks, and now we have the public Internet and millions of private intranets. We also have multiple blockchain applications focused on solving different problems in various sectors of the global economy and society. The main difference with the current Internet is that Web 3.0 should be more decentralized, fair and censorship-resistant.

These new concepts hold promises to fundamentally change the way business corporations and other organizations operate as we know them. The potential benefits for societies around the world are huge – from banking the billions of unbanked people to optimizing the performance of current industry leaders. All these improvements can not only create a lot of new economic value, but also can help distribute it in a better way, rewarding all participants in the ecosystem for their fair share.

As much as there is enthusiasm and optimism about the bright future, it is also important to understand that there is still a lot of hard work ahead in order to bring blockchain technology to the next level.

This new game-changing technology holds so much potential and exciting innovation that it shouldn’t be ignored. Blockchain is at a very early stage, and at the same time it’s evolving so quickly that new interesting technological and business developments come up almost every day.

Blockchain technology is here to stay and we should expect to see some new major breakthroughs soon.

For more information on the topic:
https://www.udemy.com/blockchain-for-business-the-new-industrial-revolution/