Will The Blockchain Be Bigger Than The Internet?

Jul 6, 2017 · Guest post from Huw Jenkins, CTO of The Money Cloud

Screen shot 2017 07 06 at 17.34.48

Just a few short years ago, if you had suggested to somebody that they should invest in, or convert money to bitcoin in order to transfer money abroad, you may have received a dirty look.

Bitcoin was a byword for the nefarious activities being carried out on the "dark web" – remember Silk Road? And the blockchain ledger, the system that underpins bitcoin and all other digital currencies, was an obscure term that few outside the geeky world of cryptocurrencies were familiar with.

Fast forward to 2017, and the landscape has shifted so drastically, that any bank or financial service provider that is not putting the blockchain top of its agenda for change is considered backward, or uninvestable.

Blockchain has become synonymous with another high growth sector, FinTech, another trend that, if dropped into a conversation back in 2014, for example, would have drawn blank, disbelieving looks.

Today, however, the cryptocurrency market, built on the blockchain, is worth nearly $20 billion. Bitcoin has just broken the $2,00 dollar mark for the first time in its history, having broken through the $1,000 mark just a few months previously, and last year, global investment into Fintech rose by 11% to $17.4 billion, with more than 650 deals in the US, and in China, Ant Financial completing a $4.3bn funding round.

So it’s hardly surprising that people are beginning to ask if the impact of the blockchain could be as significant as that of the internet.

There are a lot of similarities between the two phenomena. The internet was little known in 1996, when it was first made available for public use, but by 1999, it was the biggest show in town. Like bitcoin and blockchain, the internet was first misunderstood, and took time to catch on, before wide-scale adoption exploded.

It seems possible that blockchain could surpass even the world wide web as the most significant technological development of the modern era, and here are a few reasons why.

Potential:

As Benjamin A. Smith puts it in a recent article in Lombardi Letter, discussing bitcoin as an investment proposition:

"If Bitcoin only achieves a quarter of what experts think can happen, it’s still uber-cheap. Bitcoin’s entire currency valuation is only around $22.0 billion, which is peanuts in the greater scheme of world finance pre-eminence".

He goes on to compare the digital currency with Microsoft:

"It’s akin to thinking that Microsoft Corporation was expensive in the early days at $10.00/share just because it had risen 12-fold the year before. It’s not how far price has come, so much as how far it can travel."

The reality is that the bitcoin blockchain still has such a long way to go, it’s almost frightening to think of the impact it could have (and the valuations its products and services could achieve).

Uptake:

The more the reputation of blockchain, bitcoin, and the army of alternative cryptocurrencies and distributed ledger technologies (Ripple, Dogecoin etc.) grows, the more the world’s major corporates seem to get involved.

IBM has recently developed a platform it has christened the "IBM Blockchain"; Infosys has launched Infosys Finacle; the NASDAQ, the world’s second largest stock exchange, has begun to invest heavily in blockchain.

Whilst Fintech disruptors may be responsible for triggering an avalanche of blockchain related services, it’s the world’s biggest corporates, and tech giants such as Apple and Samsung, that can catapult blockchain into the mainstream, and change the way we bank in one fell swoop.

Indeed, thanks to regulations such as PSD2 for example, which will force banks to make their data publicly available, we may no longer have recourse to use traditional banks at all. Everything can be handled by corporate service providers and the blockchain; from transactions, to transparency, and it will all cost us less in fees than ever before.

Overcoming challenges

Of course, the world wide web has had its ups and downs. The Dotcom bubble that had grown up around 1999, which allowed just about any internet related company to achieve a colossal valuation irrespective of its real value to its shareholders or to its consumers, could happen to the blockchain.

Having said that, the blockchain has already had to overcome many hurdles to progress as far as it has today. It has been tried and tested on many occasions, and it has always bounced back and suggested it has the infrastructure, capability and robustness to make a difference over the longer term.

Perhaps the major difference been the rise of the blockchain and the rise of the internet is that it has taken the Blockchain longer to reach the point at which the public have begun to trust and embrace the service, and that there is still such a long way to go.

If you think the blockchain is big now, just wait a few years. In terms of incorporating blockchain into the mainstream, we have barely begun to scratch the surface, and there is still such a long way to go and so many tests still to overcome.

Still, if the early signs are anything to go by, there is every reason to believe that the blockchain could simply blow away the current financial system and replace it with something more streamlined, transparent, accountable, and quick.

It can, and very likely will, have a drastic effect on every world citizen’s life.

________________________________________

Huw Jenkins is Chief Technology Officer at Overseas FX rate comparison site The Money Cloud.

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