Blockchain enables a new form of money. It’s a type of money with fundamental advantages over traditional money. These advantages are so huge that this new form of money may eventually supplant all legacy money systems in the world. Blockchain will open up opportunities for more buyers and sellers, and enable transactions and economic activity that want to exist, but can’t under the current money system. This new economic activity may come to dwarf the size of the current economy, yielding tremendous opportunity.
Blockchain is the foundation for the next generation of money, and money is extremely important for civilization. We couldn’t have accomplished everything we have throughout history without money. Without money, transactions would have been much more difficult, especially in multi party transactions (think “barter system”). Although traditional money allows people to transact business with each other, it also creates opportunity for disputes.
Encoding promises on the blockchain
“On one occasion Nietzsche argued that what separates humans from animals is the ability to make promises, because this implies both freedom and constancy of character. For Nietzsche, human society depends upon promises. But we are not constant in fulfilling promises – contracts are often broken, whether by negligence, forgetfulness, or plain villainy. Smart contracts are an interesting tool for enforcing promises because they guarantee their own constancy beyond any desire on our part to subvert them; for that reason smart contracts may play an important role in the organization of our social lives.”
– Joshua Broggi PhD, Founder, Woolf University, The First Blockchain University
Blockchain allows people to encode promises on the blockchain giving them an absolute guarantee that they will be paid for their product or service. Blockchain has enormous potential because it gives humans the ability to enforce promises, enabling a level of trust that has never been possible before. The elevation of trust between humans will be one of the most valuable consequences of blockchain. Blockchain will enable new business transactions that we couldn’t previously engage in and will lead to more business activity because people will be able to conduct business with people that they couldn’t have before.
Trust in business is like structural integrity in a building
“What is needed most in architecture today is the very thing that is most needed in life – Integrity. Just as it is in a human being, so integrity is the deepest quality in a building. Stand up for integrity in your building and you stand for integrity not only in the life of those who did the building but socially a reciprocal relationship is inevitable.”
Frank Lloyd Wright, Eminent American Architect
The rock solid trust enabled by blockchain is as important in business as structural integrity in a building. Blockchain solves the problem of trust across networks by enabling complete strangers to transact business without risk. Blockchain enables existing business transactions to be performed much more easily and decreases the friction involved in doing business. Blockchains operate globally, so two people anywhere in the world can transact business with each other with the certainty that the terms of the contract will be kept. Blockchain enables mutual assurance of performance, and gives you a rock solid guarantee. It’s like an escrow system, but in escrow both parties have to trust the escrow company. With blockchain, there’s no intermediary. Blockchain details the specifics of the agreement including offer, acceptance and payment, and provides a record that’s transparent and can’t be tampered with.
We can trust the blockchain because blockchain is designed to leverage the certainty of mathematics. We all agree that 1+1=2. Anyone can review the math that blockchain is built upon. There are two parts of math involved: elliptic curve and cryptographic hashes. With blockchain the guarantee is a mathematical certainty. It’s called a trustless system because the need for a trusted intermediary is eliminated. With blockchain you can do business with anyone on the planet, and you can set requirements that need to be met in order for the transaction to occur. People have assurance that they will receive what they expect, and blockchain provides sophistication in the level of certainty.
A bit is a basic unit of information used in computing and digital communications. Multiple bits are represented as bytes. There are eight bits in one byte.
Bits – the ultimate ease of use
The transition from fiat currency to blockchain based money comes down to bits. Once things are in bits, they can be digitally manipulated by computers. Bits are the ultimate in ease of use. Here are examples of items that have transitioned into bits.
We transitioned from film based cameras to digital cameras. Once we were able to represent photos with bits, we were able to do all kinds of things like adjust brightness and colors easily.
We transitioned from physical mail to instant messaging. Once we were able to represent messages with bits, we were able to transmit messages electronically instead of writing messages on paper and mailing physical letters.
We transitioned from records to streaming music. Once we were able to represent music with bits, we mixed music digitally, and delivered it via internet streaming on demand.
We transitioned from writing books by hand to using word processing. Once we were able to represent words with bits, we produced books in e-format. E-books are more accessible, less expensive, and searchable.
The transition from fiat currency to digital money also comes down to bits. We have traditionally represented money with coins and paper. With blockchain, we are transitioning to a digital system in which money is represented with bits. Once we make the transition to bits we will be able to conduct business with anyone in the world easily, securely and cheaply. Eventually, just like film cameras, fiat currency may exit the stage.
The Transformative Potential of Blockchain
Blockchain is a broad system with a wide variety of uses. Blockchain could become a basic element in every application where immutability, integrity and security is needed. Trusts and wills on the blockchain could operate in perpetuity protecting people from exploitation. Power of attorney contracts and healthcare advance directives could be on the blockchain safeguarding people’s decisions.
This could all happen now – the technology is available. What’s lagging is people’s understanding of blockchain and it’s potential. In May 2018 Gartner reported that only 1% of CIOs indicated that their companies have deployed blockchain, only 8% indicated that they were in planning or active experimentation with blockchain, and 34% said they had no interest in blockchain.
Blockchain has the potential to be as big a jump forward as the transition from the barter system to currency. The people who are involved in blockchain now are defining the way the economy of the future will operate. This new economic activity may come to dwarf the size of the legacy economy. Decentralized networks are already more powerful than traditional systems in many ways, and the technology is advancing rapidly. The scale of the opportunity is staggering.
This article is the first in a series I’m writing on blockchain. Here’s a link to the second article in the series Why Programmability is Critical for the Future of Blockchain.
This article was written by Margaretta Colangelo. Margaretta is President of U1 Technologies. U1 provides the communications infrastructure for trading platforms used by some of the world’s top multinational investment banks. Margaretta is a Partner at Deep Knowledge Ventures, an investment fund focused on investing in DeepTech verticals including AI, Longevity, FinTech and the Crypto Economy.
Thank you to Joshua Broggi, PhD, founder of Woolf University, The First Blockchain University for his comments on Nietzsche. Margaretta Colangelo is on the advisory board of Woolf University. Check out this great video on Woolf University.
Frank Lloyd Wright was an eminent American architect who designed more than 1,000 structures. Wright believed in designing structures that were in harmony with humanity and the environment, a philosophy he called organic architecture.
I’m interested in your feedback. Please leave your comments about this article and your ideas about the potential of blockchain in the comments section. This article is the property of Margaretta Colangelo and may not be used without her express written permission. @realmargaretta