In 2017, Bitcoin, and cryptocurrency in general, firmly planted themselves into the mainstream news cycle. Reporting mostly consisted of speculative hype, some critical, some optimistic, about the future of Bitcoin as a legitimate currency and its potential to revolutionise the world’s financial systems. Some saw an opportunity for a new, secure, decentralised monetary system, others saw get rich quick investment opportunities and a speculative bubble. At any rate, Bitcoin is flying a flag for disruptive technology, despite its unpredictability.
Bitcoin’s revolution didn’t happen at the exchanges, nor when it became one of 2017’s buzzwords, but via the blockchain technology that underpins its existence.
Bitcoin was the first application of blockchain technology. The blockchain is a distributed, decentralised ledger which allows transactions to be recorded in a way that is transparent, verifiable and secure. It’s somewhat like a shared database where information can be protected from interference, manipulation or revision.
Bitcoin is disruptive whereas blockchain is foundational. It isn’t simply attacking or subverting existing structures and systems, it’s creating entirely new ones.
Contracts, records and transactions underpin much of the existing structures in our political and economic systems, and these structures have struggled to keep up with rapid digitisation and increasing proliferation of technology into everyday life. In a basic sense, blockchain removes the need for intermediaries, and so it’s unsurprising that the application of blockchain is currently being driven the financial services industry. The complexity and opaqueness of the global financial system is what creates risk and inefficiency. Blockchain has the potential to remove layers of intermediation, reducing both risk and cost.
The adoption of blockchain across varying sectors will not happen overnight and significant changes are, at best, decades away. But, its adoption isn’t simply utopian idealism that has no real-world grounding. TCP/IP – the technology that laid the foundation for the modern internet – was met with scorn initially and took roughly 30 years from its creation to become readily accepted as a way to transmit information. Similarly, TCP/IP proposed an open architecture whereby no single entity was responsible for controlling, maintaining or developing the internet. In short, TCP/IP turned the telecommunications industry on its head in a way that few people could have imagined.
When it comes to blockchain, cryptocurrency is the first step towards foundational change. Blockchain’s true potential has yet to be fully realised.