How Revolutionary Is Blockchain Technology?
Bitcoin has seen its value rise from a few pennies to now over $450, but does it really have the “status quo” around American financial markets concerned? Some might say yes, and clearly there’s been more acceptance of the digital currency these days, but is it really causing the disruptions that many thought would happen by this time?
There’s been a fair amount of lip service being paid to Bitcoin these days by companies that comprise the current financial status quo. Much of this has to do not with their direct interest in Bitcoin, but in the Blockchain, which is the underlying infrastructure of the digital currency.
Big Investments in Blockchain Technology
It’s clear that many U.S. based financial companies are investigating how Blockchain technology can streamline their current work processes and create more efficient networks to process financial transactions on. The investments and efforts of groups such as the R3 Consortium, the introduction of robust Blockchain technology resources by both new companies like Bloq, and “old guard” companies like IBM, indicate a significant level of interest by U.S. companies in the technology.
The sold-out “Consensus 2016: Making Blockchain Real” conference in New York City was notable for its many big-name presenters from both inside (Gavin Andresen, Vitalik Buterin) and outside (Larry Summers, Delaware’s Governor Jack Markell) the Bitcoin world. It was clear that the amount of “suits” at this conference signaled a major shift from Bitcoin and Blockchain conferences of old, which should not be construed as a bad thing.
This pivot from an interest in Bitcoin to a new love affair with Blockchain seems to be where American companies are focusing.
What Is Blockchain, Really?
At this point, the Blockchain is two things. It refers to either a currently operating and open distributed network that is processing Bitcoin transactions worldwide, or to a concept that can be used by any company to build their applications on. Many companies of all sizes have recognized the efficiencies of the Blockchain technology and now want to harness this concept to power their existing systems.
The good news is that the ability to harness the concept of Blockchain will be possible thanks to the tools and resources being created by firms like Circle, Bloq, Gem, and Factom. The question will be whether these applications will actually disrupt the current “status quo” or simply be an example of rearranging the deck chairs on the Titanic?
Simply applying an underlying Blockchain-based system to a financial system model that requires drastic changes is not real change. When you see large financial firms like JP Morgan (their CEO Jamie Dimon dismisses any value in Bitcoin) embracing Blockchain technology and dismissing Bitcoin, do you really think that these new applications will significantly change how banking is done in this country?
This is also leading to a growing argument in the Bitcoin world about the distinction between a public Blockchain, which exists now, and private Blockchains, which is what will be created by these new tools. Some in the Bitcoin world feel that the Blockchain technology is fundamentally an open distributed network, and efforts to create private Blockchains should not even be considered Blockchains.
Will It Be a "Disruptor" or "Enabler"?
Bitcoin is being embraced throughout the world by countries who are seeing its potential to not just disrupt existing financial systems, but to solve existing financial concerns such as to provide banking for the unbanked, lowering transaction costs, and making cross-border transfers easier and more efficient.
In the United States, companies are having a courtship and love affair with Blockchain that can lead to solutions that either prop up their existing models or will create new innovative ways to address the current banking and financial system. If you’re leaving that decision up to the companies that are part of the “status quo”, you may end up with Blockchain being little more than the “new database tool” rather than the “next internet”.
Blockchain could have a similarly disruptive effect to the internet, or it could be the next Y2K. It’ll be up to innovators, disruptors, and visionaries to accept or address the “status quo” and ultimately, create a better financial system for all people.