Why blockchain could be as revolutionary as
smartphones
This is bonkers. A new so-called blockchain company
is selling virtual real estate online with prices as high as $120,000 for a
10-meter by 10-meter piece of virtual land. You can buy a plot of virtual land
in a virtual city, with certain neighbourhoods costing more than others, like
in a real city. Except that it isn’t a real city. It is all virtual. Follow? Me
neither.
Somehow the company, Decentraland, raised $26 million
in 30 seconds from investors last year. That money isn’t “virtual” — it’s real.
Welcome to the world of blockchain, the latest technological
revolution to those inthe-know — and what seems like the latest get-rich-quick
gibberish to the layperson.
You’ve probably heard the blockchain is a technology
that is going to change the world — it is the backbone of Bitcoin, the now
infamous cryptocurrency. You might even have heard someone trying to explain
blockchain by describing it as a “trusted distributed ledger.”
If you’re like most people, that’s when you stopped
understanding — or even trying to understand — what this whole blockchain thing
is all about. (Stick with me for a moment and I promise you’ll understand it
very soon.) It all feels a bit like 1999, circa the dot-com bubble. In Cannes,
France, in June, at a gathering of advertisers, there was a “blockchain yacht”
and a “blockchain villa.” In Davos, Switzerland, there was a “blockchain
lounge.”
Meanwhile, Fortune 500 companies are investing
billions in the blockchain. IBM has a whole division focused on blockchain, as
do the consultancies Accenture and PwC. Jamie Dimon, JPMorgan Chase’s chief
executive, has dismissed Bitcoin, but says “the blockchain is real.”
Silicon Valley venture capitalists have already sunk
more than $1.3 billion into blockchain technology just this year. And in June,
Andreessen Horowitz, one of the most prominent technology firms founded, in
part, by Marc Andreessen — who is credited with inventing the modern Web
browser — announced a $300 million “crypto” fund to exclusively invest in
blockchain technologies.
“For those of us who have been involved in software
for a long time, it feels like the early days of the internet, web 2.0, or
smartphones all over again,” Andreessen and his colleagues said when
introducing the fund.
That explanation of where this new technology sits
within history feels right: While prognosticators love to talk about crypto and
blockchain as a bubble, it is likely just very early days. And while 1999
marked what seemed like a high point for the internet before a precipitous
fall, it proved to only be the first stage of the its rise.
And what was arguably considered wild overspending in
the 1990s on internet infrastructure and experimental companies, ultimately set
the foundation for the modern era we live in today.
Think about blockchain like this: There will be huge
failures and misspent money — and yes, scams (the US Securities and Exchange
Commission can hardly keep up), but a decade from now, when you look back at
2018, it’s more likely than not that blockchain will be embedded in our
day-to-day lives in ways that, today, we can’t even imagine.
“New models of computing have tended to emerge every
10 to 15 years: mainframes in the ’60s, PCs in the late ’70s, the internet in
the early ’90s, and smartphones in the late 2000s,” Andreessen said. And now
blockchain.
The easiest and most basic way to think about the
underlying technology is to think about a technology that keeps a master list
of everyone who has ever interacted with it. It’s a bit of an
oversimplification, but if you’ve ever used Google Docs and allowed others to
share the document so they can make changes, the programs keep a list of all
the changes that are made to the document and by whom. Blockchain does that but
in an even more secure way so that every person who ever touches the document
is trusted and everyone gets a copy of all the changes made so there is never a
question about what happened along the way. There aren’t multiple copies of a
document and different versions — there is only one trusted document and you
can keep track of everything that’s ever happened to it.
The blockchain is, of course, being used to create
all sorts of cryptocurrencies, led by Bitcoin and Ethereum. But more important,
it is touching all different industries.
The advertising industry plans to use it to track ads
on the internet; the music industry is planning to use it to track songs; banks
and mortgage companies want to use it to track the deeds of homes and the
complex process of tracking all the documentation; shipping companies are
investing in blockchain technology to track bills of lading, the pharmaceutical
industry wants to use the technology to verify the drug supply chain.
If it is successful, blockchain technology will bring
a new level of enhanced trust to business and will also cut out the middlemen
that have historically tracked — and profited — from the complexity of so many
different systems trying to communicate with each other. That could lower
prices for goods and services.
At the same time, for all the promise of blockchain,
there are real questions about whether it may be applied to solve problems that
don’t exist. Databases already exist and, in certain cases, a centralised
database might actually be preferable to the blockchain.
Blockchain is about solving society’s ultimate
challenge: trust. Or rather, lack of trust. It’s about using technology to
create a shared sense of trust in a group of disparate participants.
The biggest question is whether the hundreds of
projects like Decentraland, where individuals are using real money to buy
virtual property, will end well or badly — and whether that experience will
ultimately instill or undermine trust in this emerging technology.
Andrew Ross Sorkin
NYT NEWS SERVICE
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