How Blockchain Technology Is Revolutionary

A young businessman checking his phone at a bridge with lights

Qi Yang/Getty Images

Bitcoin has seen its value rise from a few pennies to nearly $65,000 at one point, but has it yet earned the “status quo” as far as the U.S. markets are concerned? Some might say yes, and indeed digital currency is more accepted now than it once was. But is it really causing the massive upset 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 with blockchain, which is the underlying infrastructure of this digital currency.

Why Are U.S.-Based Financial Companies Investing in Blockchain Technology?

One of the features blockchain technology offers is a method to create more efficient networks to process financial transactions. Many U.S.-based companies are seeking out ways to streamline their current work processes, and so they invest in blockchain tech as a way to help their bottom line. Some examples include the efforts of groups such as the R3 Consortium, and the adoption of robust blockchain resources by new companies like Bloq, as well as by “old guard” companies like IBM.

The sold-out "Consensus 2016: Making Blockchain Real" conference in New York City was notable for its many big-name speakers. They came 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 event signaled a major shift from the early days of Bitcoin and blockchain culture that drew tech crowds rather than investors.

The rise and success of Bitcoin opened the door for a more in-depth interest in blockchain, which is where U.S. companies are now focusing.

What Exactly Is Blockchain Technology?

At this point, the blockchain is two things. The first meaning of the word refers to a currently operating and open distributed network that is processing Bitcoin transactions worldwide. Bitcoin also refers to a concept that can be used by any company to build their applications. Many companies of all sizes became aware of the efficiencies that come along with blockchain tech, and now want to use this concept to power their current systems.

The good news is that thanks to the tools and resources being created by firms like Circle, Bloq, Gem, and Factom, non-tech companies will be able to harness the concept of blockchain for their own uses. The question that remains is whether these applications will truly disrupt the current “status quo” or whether they will merely shift things around, like rearranging the deck chairs on the Titanic.

Simply laying a blockchain model beneath a financial system that needs drastic changes is not real change. When you see large firms like J.P. Morgan embrace blockchain technology and dismiss Bitcoin (as CEO Jamie Dimon did when he doubted any value in Bitcoin), do you really think that these new applications will produce any major change in how banking is done in this country?

Public vs. Private Blockchain

This issue also leads to a growing debate in the Bitcoin world about the distinction between a public blockchain, which exists now, and private modes of blockchain tech, which is what will be created by these new tools. Some in the Bitcoin world feel that the blockchain tech is at its core an open distributed network. This group thinks that any efforts to create private blockchain tech should not even be called blockchain tech, since it does away with the core function and open culture of the original.

What Is the Future of Blockchain?

Bitcoin is being embraced throughout the world as more and more countries see how it might enact change. Not only can it disrupt the broken systems that exist now, but it might also be able to solve financial concerns as well.

Bitcoin may be able to provide banking for the unbanked, lower transaction costs, and make cross-border transfers easier and more efficient.

In the U.S., companies are having a love affair with blockchain, and like most courtships, it can lead to one of two outcomes. Either it will add to and prop up the current financial models, or it will create new innovative ways to address the current banking and financial system. If you let companies decide whether to be 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 on the internet, or it could be the next Y2K. Its fate will be up to innovators, disruptors, and visionaries to accept or address the “status quo” and ultimately, create a better financial system for all people.