As Bitcoin’s mainstream moment began to wane, Anthony Di Iorio had already decided it was not the cryptocurrency but the blockchain technology behind it that had true revolutionary potential.
Di Iorio’s Bitcoin Decentral innovation hub in downtown Toronto generated buzz when it opened the city’s first Bitcoin ATM in early 2014. A few months later, the currency’s value plummeted, large exchanges filed for bankruptcy and its use in the black market dominated headlines.
Di Iorio turned his attention to the Ethereum blockchain platform he co-founded to develop blockchain applications outside of currency.
He rebranded, dropping “Bitcoin” from the name of his tech hub, now simply called Decentral.
“That’s the paradigm shift where I realized it’s not just about bitcoin, it’s not just about payments,” he said.
“This will open the doors to everything else, just like the internet touched a lot of different sectors.”
Now, a growing community is jumping on board the belief that blockchain — a peer-to-peer transfer system that eliminates the need for middlemen by trusting the power of the crowd to verify transactions — has the potential to transform the world far beyond finance.
More than $1 billion in venture capital is flowing into the blockchain and the world’s biggest corporations are racing to find new applications for it.
Blockchain could disrupt transactions the way the internet did for communication.
Any information that can be encrypted and stored in digital form can be transmitted — everything from real estate deals to medical records to transferring concert tickets.
Blockchain is a “distributed ledger” invented by the mysterious person or group known as Santoshi Nakamoto that is accessible by everyone, but controlled by no one. It’s searchable and public making it more traceable than cash but encrypted and anonymous to maintain privacy.
Picture it as a communal record-keeping system — the kind small communities kept in the 16th century to keep track of births, marriages, property transfers, anything of importance—but on a massive global scale.
Blockchain is seen as the next great disintermediation.
It would eliminate the need for services like Uber because it would remove the need for an intermediary between drivers and passengers.
“It’s going to be a massive change in the way money is made because no longer are the rent seekers that sit between individuals required because they’re being replaced by technology,” Di Iorio said.
It’s not hard to see why the notion both intrigues and frightens banks and other businesses that hold and move money.
On one hand, it is secure, quick and frictionless. But on the other, the openness and decentralized nature threatens to make them irrelevant.
Banks started embracing the technology behind bitcoin and investing in it in late 2014, said Ron Rimkus, content director at CFA Institute, where he focuses on economics and alternative investments.
“Publicly they were sort of indifferent to it, but privately there were a lot of conversations.”
All five of Canada big banks part of the R3CEV international consortium of more than 40 financial institutions that aims to create a global standard.
Blockchain could remove back office processing on everything from the mortgage settlement period to credit card processing and reduce clearing time and overhead costs to save as much as $30 billion, Rimkus said.
Banks are mostly interested in a private version of the blockchain, in which they can increase transparency for some things but maintain privacy for others, said Kris Hansen, senior principal of financial services at SAP.
For example, clients who hold mortgage-backed bonds — which played a key role in the 2008 global financial crisis — might be able to see how many mortgage holders are current and paying on time, but not their name or address, he said.
“I observed the asset backed securities crisis in Canada and I saw that entire market freeze up overnight because people couldn’t really assess what’s behind the asset and it froze the market,” he said.
“If we have a transparent market, we can always keep the market moving.”
RBC is has partnered with Ripple to make foreign exchange payments easier by connecting banks directly via distributed ledger to shorten the length of time for international money transfers. The bank is also planning to launch a consumer-facing blockchain-backed loyalty program.
“The dream of blockchain and the capability of blockchain would be to take a bunch of things and have a shared system of record so people aren’t inputting and reinputting data,” said Linda Mantia, RBC’s vice-president of digital, cards and payments.
Hansen believes the most immediate use case for blockchain will be on these private networks because they’re relatively closed nature makes them easier to develop.
Public chains, on the other hand, are still working through many kinks.
The lack of central authority makes them harder to corrupt — unlike a bank robbery, there’s no one to point the gun at. But the decentralized nature also makes it harder to reach a decision on principles and protocols.
“That’s the big stumbling block right now,” Di Iorio said.
“There’s so many different interests in Bitcoin — there’s miners, there’s developers, there’s businesses — they can’t come to agreements for very simple changes that are needed for bitcoin to grow and flourish.”
Rizwan Khalfan, chief digital officer at TD believes that once the kinks are worked through, blockchain could be the key to a true sharing economy.
“You can just imagine how it taps into all these assets and value that today are completely underutilized in a manner where you have a full audit trail.”
Digital identities could be stored in the blockchain and someone with an available item such as skis might be able to access certain information, such as a credit report, from someone who needs them. Doctors could access medical histories to determine whether a vaccination is due, administer a shot and update their medical records in the blockchain.
And the potential doesn’t stop there. Enthusiasts also believe it could give musicians greater control over their music or end political corruption by showing an audit trail of where money is spent.
A STEP-BY-STEP GUIDE TO BLOCKCHAIN:
Transaction: Two parties make a deal to exchange data — anything from currency to medical records. That deal is time-stamped.
Verification: The exchange is either verified immediately or recorded in a queue along with other pending deals. A group of computers assesses the deal to ensure it’s valid according to agreedupon principles.
The block: That transaction is bundled into a block along with a number of others that took place in an allotted time — about every 10 minutes for Bitcoin. It’s stored as a hash — a digital fingerprint using numbers and containing a header, reference to the previous block’s hash and the data entered.
Validation: The block is broadcast to every computer or “node” in the network. That block has to be authenticated by the community, usually by creating a puzzle that must be solved. Operators of nodes — or “miners” — compete to solve the complex puzzle, which becomes the “hash”. They get to create the next block and are rewarded with tokens of value — usually digital currency.
The chain: Once the puzzle is solved, the miner collects his or her prize and the block is distributed to the network, which can view the answer. It is attached to the community audit chain. Each block must contain information about the previous one to be valid.
Completion: The exchange is completed. The chain is impenetrable and immutable. If a hacker tries to alter a block in the chain, it will change the block’s hash along with all of those connected — the other computers would be able to see those changes and reject them.
One thought on “Blockchain technology will revolutionize the world, enthusiasts say”
Oh boy… they’re selling this crap like a used car, but the entire “block chain” monetary system is just a way to eliminate cash, and I suspect the entire “bitcoin” fad was created by the bankers just for this purpose. (remember: we knew the global economy must crash in 2006 — long before “bitcoin” became popular)
“Banks are mostly interested in a private version of the blockchain, in which they can increase transparency for some things but maintain privacy for others,…”
Ah yes, there’s going to be a way for the bankers to steal whatever they want, while they convince you that it’s “transparent”.. BS
This is all about control over every penny you have, so naturally it’s being sold as a way to eliminate the bankers, increase “transparency”, and “decentralize” wealth and currency. DON’T FALL FOR IT.