Blockchain: The Ledger Behind Bitcoin
Bitcoin may currently be too volatile for mainstream transactions, but the internet protocol behind them is beginning to bloom
Blockchain revolution's on the way, says DonTapscott in his new book.
Last week, the value of bitcoins rose 21% in the space of four days. It would be natural to assume this brightens the cryptocurrency's prospects in the mainstream, but actually the opposite is true. Such volatility is just what established retailers seek to avoid.
“The overwhelming majority of merchants don't have to deal with exchange rates and currency fluctuations right now, so for bitcoin to make a widespread push with online merchants, it's going to need more stability and more consumer demand,” said David Rekuc, marketing director of Ripen eCommerce.
But that doesn't mean that e-tailers and other online marketers should shun the blockchain technology that allows bitcoin to exist. Following the financial industry crash of 2008, the mysterious Satoshi Nakamoto introduced bitcoin and blockchain—very simply, a protocol allowing person A to send money to company B minus a third party such as Wells Fargo Bank, MasterCard or Paypal.
Such transactions are recorded in a blockchain, essentially a global ledger. Each blockchain is “distributed” and runs on computers manned by volunteers around the world. There is no central database to be hacked and the data is double-encrypted, employing both public and private keys.
Blockchain is the most practical realization of the Holy Grail sought by Internet pioneers: the so-called Trust Protocol. Nick Szabo, a founder of the early digital currency eCash, called it the “God Protocol,” in that “God being the ultimate in confessional discretion, no party would learn anything more about the other parties' inputs than they could learn from their own inputs and the output.”
eCash failed because internet users in the Nineties neither thought nor cared about their personal data being scattered about the World Wide Web. Fifty million Americans and 80 million Europeans using ad blockers now illustrate that people care very much about their personal identification, and that's why Internet marketers should keep a casual watch on what's happening in blockchain tech.
In his new book Blockchain Revolution, internet business guru Don Tapscott notes that greed for privacy will direct the protocol into areas such as private databases, property transfers and social media. Tapscott writes: “At its most basic, it is an open source code: Anyone can download it for free, run it, and use it to develop new tools for managing transactions online. As such, it holds the potential for unleashing countless new applications and as yet unrealized capabilities that have the potential to transform many things.”
One of those things being-- in the the words of Tapscott's son and co-author Alex Tapscott-- the financial services industry. Promoting the book on Huffington Post recently, Alex said that “virtually every major player in the financial service industry [is] investing significant resources into this. And for good reason: Blockchain can radically reduce costs for banks…making it easier to offer products and services to a global clientele."
Another strong sign that cryptocurrencies like bitcoin, Peercoin and Ripple are aiming for the mainstream is the recent news that former New York State financial service's chief Benjamin Lawsky's firm had taken on a blockchain company as a client. As one of Wall Street's most aggressive regulators, Lawsky was accused of slowing the development of virtual currencies.