The potential benefits of the blockchain technology

At the dawn of the Internet, many hoped that the cost of internal and external financial transactions would be reduced to the bare minimum, benefiting companies and consumers alike. These hopes, it turns out, were too far-fetched due to the issue of trust between financial sector players. This manifested itself vividly during the 2008 financial crisis, when inter-bank financial lending reached its lowest point. Could blockchain, the technology behind the crypto-currency Bitcom, provide the solution? Likely so, argues Alex Tapscott, the CEO of Northwest Passage Ventures, a firm that helps start-ups, and the co-author of the book titled Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World.

 

What is blockchain and why are we seeing so much interest in this technology from the financial services sector?
 
Blockchain represents the second generation of the Internet. The first generation was the Internet of information. The second generation is the Internet of value. And simply put, a blockchain is just a distributed ledger or a database that enables individuals and companies to make payments, to transact, to do business peer-to-peer without an intermediary. The underlying mechanism is trust between parties that don’t know each other.
 
What blockchain does is reduce the cost of establishing trust, the role traditionally played by banks and other financial institutions. So as much as these organizations are motivated by opportunity, they are also motivated by fear as many things are subject to disruption.
 
What are the benefits of the blockchain technology for individuals?
 
There is a myth that this technology will only affect companies. That´s wrong. It will affect consumers and individuals in profound ways. So maybe you are one of the 2 billion people in the world with no access to financial services. Blockchain lowers barriers for financial inclusion, which means that finally those people would also have ways to store and move value, thereby being able to participate in the economy. Maybe you are a journalist or a song writer and you want to ensure that you are getting fairly compensated for the value that you are creating. With blockchain there are ways to ensure that artists get fed first when the creative content is consumed.
 
Maybe you are one of the 70% of people in the world who own land but have no enforcement mechanisms because the government records are unreliable or worse, they chose not to enforce them. With blockchain you can create land registries that are easily defended. And that creates huge economic opportunities.
 
Maybe you live in Germany and own solar panels. At some point you would like to sell energy not back to the grid at a cheap price but to your neighbor at a market rate. Well, now you can enter into a peer-to-peer transaction using blockchain.
 
What are the key risks associated with this technology?
 
There are lots of lists about why blockchain might not reach its full potential. And in the book we identified ten showstoppers. How do you govern it? How do you ensure that governments do not stifle it? What happens if it becomes a job killer? What if criminals use it? These are all big issues. But do these risks mean that blockchain is a bad idea? Or are these just implementation challenges? Is the opportunity great enough that we try to solve them? It turns out that with the right kind of leadership they can be solved.
 
Interested in learning more about the blockchain technology? Watch the full presentation of Alex Tapscott and Allianz`s Michael Eitelwein from the DLDsummer 16.

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The potential benefits of the blockchain technology

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