| Singularity Hub | - |
Come to Singularity Hub for the latest from the frontiers of finance and technology as we bring you coverage of Singularity University and CNBC's Exponential Finance conference. The Bitcoin saga is worthy of Homer. Heroes, priests, and prophesies.
Latest
Popular
Editor's Picks
Exponential Finance: Beyond Bitcoin—the Real Power Is In the Blockchain
5,624 5
Come to Singularity Hub for the latest from the
frontiers of finance and technology as we bring you coverage of
Singularity University and CNBC's Exponential Finance conference.
The Bitcoin saga is worthy of Homer. Heroes, priests,
and prophesies. From humble origins on the fringes, the cryptocurrency
has reached stratospheric highs and been knocked down a peg for its
hubris.
But there’s another connection to Homer. To the lay
person, the technology behind Bitcoin, known as blockchain, may as well
be in ancient Greek. Say blockchain and prepare for eyes to glaze over.
That’s significant because while Bitcoin is intriguing—it’s only the most visible portion of a much bigger story.
Part of the challenge is in the language. Unlike
Bitcoin, which sounds like money, blockchain doesn’t evoke visions of,
well, pretty much anything at all.
So, what's a good way to understand blockchain?
Technically, blockchain is a database of
mathematically encrypted transactions. These may be transactions in
Bitcoin, but they don’t have to be. They could be in another
cryptocurrency or even another kind of asset. A distributed network of
computers running specialized software, and often paid in
cryptocurrency, automatically verifies these transactions.
But there's another, less technical way to think about blockchain.
In an excellent talk at Exponential Finance, Blythe Masters, CEO of Digital Asset Holdings and former JP Morgan senior executive, called her firm’s blockchain technology a distributed ledger.
It isn't a new way to describe blockchain technology, but it is a very powerful one.
A ledger is a book or file that records
transactions—a dynamic list of assets and income. And it is an old
technology. Ledgers from Mesopotamia offer some of the earliest examples
of writing. Written ledgers were a technological solution to the
fast-growing complexity of ancient economies and trade.
At a certain point, our limited brains and memories just couldn’t keep up.
Now, as modern economies reach nearly unfathomable
levels of complexity—we may require another technological leap. And
that’s where blockchain and distributed (digital) ledgers enter the
story.
Masters says the biggest challenge modern financial
organizations face is keeping their ledgers tidy. They are tasked with
“processing, recording, reporting, reconciling, and auditing” a daily
flood of transactions.
The
apparatus charged with reconciliation, meanwhile, is centralized,
breachable, and unencrypted. Keeping all those balls in the air is
costly, inefficient, risky, and slow. Trades made today, may not be
received for up to a week.
How does a distributed digital ledger like
blockchain aim to solve these problems? Masters laid out the potential
and versatility of blockchain technology like this:
It isn’t just money: “Economic
transactions on a digital ledger can be programmed to record virtually
anything of value—your identity, a will, a deed, a title, a license,
intellectual property, an invention—but also any type of financial
instrument.”
It isn't just ownership: “It’s
possible to record the actual business logic that has been agreed to
between the parties of the financial transaction. This means the things
that they have agreed to do for each other, their respected liabilities
or responsibilities. So, it’s more than just the facts of ownership.”
It is decentralized and automated:
“This ledger represents an incorruptible truth that can be accessed
because of the fact of the mass collaboration of different computers
that are incentivized, often by the creation of cryptocurrencies like
Bitcoin, to keep that information validated, verified, and safe.”
Blockchain may provide the basis for a new kind
of ledger able to scale with economic complexity instead of being
overwhelmed by it. You have increasing security, automation, and
accuracy at lower risk and cost.
And it’s faster. Much faster. “Once you’ve digitized
a financial asset you can transfer its title on that distributed ledger
at what is effectively real time—at digital speed,” says Masters.
The implications of blockchain and distributed
ledgers are enormous. Perhaps a market measured in trillions of dollars.
Still, Masters cautions against the hype. The world, she says, is a
long way away from economies tabulated on blockchain-enabled disributed
ledgers. We need to determine whether they can withstand a concerted
attack, can handle transactions on a truly global scale, and can
maintain privacy.
Also, Masters believes blockchain may be disruptive,
but equally, it may prove incredibly empowering for existing
organizations that embrace it. “How seriously should you take this?”
Masters asked. “About as seriously as you should have taken the concept
of the Internet in the early 1990s. It’s a big deal.”
Image Credit: Shutterstock.com
No comments:
Post a Comment