Entrepreneurs ask themselves, how will the internet evolve? How can I profit from it? One answer may be "blockchains". This is a shared encrypted public ledger on which all confirmed transactions are recorded and placed beyond control of any one person or entity. Bitcoin successfully deploys blockchain technology.
"Think of massively replicated databases managed by a network of computers, like a shared decentralised cloud," says Aaron Wright of Cardozo Tech Startup Clinic. "Blockchains are the memory of the internet, but harder, like a permanent record."
Devolved and widely distributed, blockchains are more secure than any cluster of computers can hope to be. Potentially, they provide a very robust and scalable computer system free from bureaucratic and governmental fiat, while offering a means of transacting business without having either to trust your counterparty or trouble the bank.
One can fantasise about a blockchained Utopia unencumbered by paper-based records of title and audit, that is truly global, and that reverses the centralising tendencies of Facebook, Google, the Squid and governments.
"Blockchains will be deployed in the financial realm and then e-commerce," says Wright. Nasdaq is piloting a stock exchange off blockchain technology. UBS is experimenting with "smart bonds" that use the bitcoin blockchain.
One application could be "smart contracts" and micro-contracts that enable you securely to execute tiny transactions. Such micro-contracts offer hope to the unbanked and uncreditworthy. Micro-contracts could fund the internet-of-things, allowing your washing machine to order and pay for its own detergent. "Micro-finance is a killer application," says "Goran", (a potential investor who does not want to reveal his real name) at a Blockchain Workshop this month in London.
"Blockchains can solve areas of business life that frustrate me," he adds, "like the flawed banking system and dysfunctional global payments system. How to monetise blockchain technology? Anyone who says they have struck gold is lying, ignorant or trying to raise finance. If they knew, they'd keep quiet."
Risks and uncertainties abound. A decentralised, flattened and destructured network is prey to undesirable elements. Governments will have to adapt or risk extinction in many functions.
The smart money is eyeing up this "space". Marc Andreessen (co-founder of Netscape), Union Square Ventures and Barry Silbert (Bitcoin Investment Trust) are all over it. As yet no formal investment vehicles exist. Stay tuned.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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