One of the most significant technological developments of 2017 revolved around the interest, obsession and speculation of cryptocurrencies, especially Bitcoin. While there is a place for discussing their worth and application, the recent uptick in public interest of these monetary vehicles problematically shrouds their true significance: the value of blockchain technology.
A blockchain is a ledger of transactions stored in a public network, with a given set of encrypted transactions coupled into lists of records named “blocks.” Strung together consecutively, these blocks form a single chain, hence the name of the technology. The technology allows for a constantly updating record of transactions; this record is the same on every computer using the platform. In short, it decentralizes record-keeping, effectively eliminates the need for a middleman and protects users from would-be fraudsters and saboteurs via complex mathematical cryptography.
Blockchain’s true advent occurred in 2008 when an anonymous individual under the pseudonym Satoshi Nakamoto penned a conceptual paper of the technology and its use. Its first true application came shortly afterward, when Nakamoto launched Bitcoin on the internet using blockchain’s technology to register transactions between users. Since Bitcoin’s emergence, other cryptocurrencies and tokens have been launched, including Ethereum, Ripple and Litecoin. Notably, Bitcoin’s value rose from one coin equaling nearly $950 in January 2017 to a peak of over $19,000 in mid-December.
However, the near-frenzy provoked by these assets, which simultaneously enamor individuals and institutions with bullish sentiment and stoke fears of a disastrous bubble, ultimately shrouds the true promise of blockchain and its potential applications.
Blockchain’s strongest characteristics are its decentralization, consistently updated record-keeping and complex mathematical encryption. Given these attributes, its potential uses — as some companies are seeing — go beyond digital tokens. The technology could be used by a government to track land-ownership contracts and titles and help prevent conflicting claims on assets.
In addition, financial transactions that need to be tracked by middlemen, brokers and accountants could be instead moved onto a blockchain that automatically executes bookkeeping operations without the interference of centralized institutions and their services. Blockchain technology can also serve applications beyond digital tokens, including tracking diversified supply chains, automatizing payments and helping derivatives traders at international investment banks.
Yet even with blockchain’s promise for businesses and individuals alike, its relevance and significance are in danger of being sidelined given current speculation over the digital tokens it supports. Looking at a simple Google Trends comparison between searches for “blockchain” and “Bitcoin” against one another, there are nine times more searches for the latter over the former.
In addition, Bitcoin’s meteoric rise in price and public recognition, along with the recognition of other cryptocurrencies, have fueled a frenzy of investment activity and speculation. Individual newcomers are pouring money into introductory trading platforms such as Coinbase. Juxtapose this with billionaires such as Mark Cuban claiming they have positions in such assets and institutional investors such as JPMorgan Chase CEO Jamie Dimon claiming bitcoin is a “fraud,” and it is clear that attitudes toward cryptocurrencies span the gamut.
However, in all the conversation and hype surrounding an asset that still cannot be used to pay for your groceries, its technological significance should not be lost on us. History constantly teaches us about the separation that emerges between a technology’s short-term and long-term impact. Napster, the original digital music service, ushered in an age of digitized media and content sharing while also influencing the development of the first iPod music player, despite ultimately shutting down due to copyright infringement.
Netflix slayed Blockbuster as a movie-rental service because the former’s founder Reed Hastings poured enormous resources into its content-streaming division that today keeps us glued to our televisions and mobile devices. Google’s first and foremost function has been to help people search the web, and yet that same tool is at the heart of its deep-learning algorithms and artificial intelligence-technology found in phones across the world, quantum computers and board game-playing software.
The advent of cryptocurrencies is intriguing and exciting. Yet we must not lose sight of the promise of blockchain technology as we advance through 2018 and beyond. Plenty of cryptocurrencies will rise and fall, yet blockchain’s potential should not be lost in the noise.
Humza Moinuddin is a senior in the School of Foreign Service. Ones and Zeros appears online every other Wednesday.
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