Historical background, revealing context and prescient vision were presented on blockchain and Bitcoin at a recent TampaBay Conference entitled, “The Past, Present and Future of Blockchain and Crypto”. These components are greatly needed in the current discussions and warnings being bandied about by Congress, Wall Street, regulators and now Main Street, thanks to all the sound and fury. But does all this signify nothing?
Three TampaBay entrepreneurial ecosystem leaders BlockSpaces, High Tech Connect, and Masterminds Tampa organized and called forth this event to recognize that, at the core of all this rhetoric, there is a tale told by technologists and data scientists. It is an important perspective addressing major challenges and needs that will drive the future, and will affect our businesses and lives. Unfortunately there are elements of the current discussions that confuse the conversation or deflect attention away from bottom-line issues and very real solutions.
The Conference did a great job of setting the record straight for a proper context for discussions of blockchain and cryptocurrencies. The following are some highlights:
The Past –
Why created & by whom? - Despite the alluring origin story of Bitcoin’s creator being a mysterious individual, Satoshi Nakamoto, or that name being the pseudonym of a merry band of really smart computer scientists and cryptographers, this history to myth to legend nature of its story should not overtake the major point of its history. Enough cannot be said about Bitcoin, a cryptocurrency, directly being created in response to the 2008 financial crisis with its near global banking system failure. It really is quite amazing that Bitcoin is, essentially, a network of people - a rather large network of people (now estimated as to 32 million globally) that stopped believing in the “full faith and credit” of any government and its paper fiat money as a store of value. In a bold act of defiance and creativity, they got up and started their own “currency” that was built by combining a group of technologies in a novel way to create this blockchain digital ledger technology that immortalizes and secures value of all kinds.
Incumbent reaction - As true of most new disruptive innovations and the uprisings behind them, the initial response was one of vehement dismissiveness and downright scorn from leaders throughout the incumbent financial system. Disruption means loss of profits and the potential of going out of business; others fear the consequences of the US dollar losing its place as the reserve currency in the world.
Bitcoin evolution - The first recorded Bitcoin transaction on 5/22/2010 was for two pizzas which rapidly grew into an active promotion for merchant adoption across the global economy. Concerns quickly developed on its use to fund illegal activities on the SilkRoad, a dark shadowy realm on the web. In the early years, it was not known how to track activity on the blockchain as well as they do now. Bitcoin was then getting recognition as a tradeable asset. It was pointed out that there is a finite amount of Bitcoin - only 21 million Bitcoin in existence are hard coded into the source code of the currency (unlike fiat currency which can print infinite amounts of paper). It was pointed out that digital currency does exist - not tangibly to pick up - but as information of value on the internet that is verifiable, quantifiable, and exists as an amount. People started realizing how to use this fact by creating exchanges where Bitcoin and other cryptocurrencies can be bought and sold; where they would trade as an asset, like stocks or bonds. So for many people, the initial interaction with the blockchain space was over this viable, sellable asset that they could potentially buy low and sell high.
2017 had a massive bull run with Bitcoin going to $20,000/Bitcoin with massive hype versus reality going on. It is unfortunate that most people new to blockchain and cryptocurrrencies were introduced in a ridiculous environment driven by different altcoins and crazy scams. That is a shame because it is so much more important to understand the underlying technology and how that technology is going to be radically changing all of our lives –how it is a foundational technology that we will all have to deal with in some manner, shape or form in the coming future. This has been lost in all the hyperbole and speculation.
Blockchain technology –The underlying technology of Bitcoin – the protocol that holds Bitcoin - is really a combination of a lot of really old technologies that were combined in a unique way, such as, time-stamping of digital documents created in early 1990’s by computer scientists which help create a train of “providence” for these digital documents.
Centralized vs. Decentralized systems - We always tend to think in terms of centralized systems that have an intermediary to transactions that establishes trust, like a bank. Blockchain technology allows us to have that kind of interaction in a decentralized environment backed by many entities or participants in the chain that are confirming all transactions on the ledger. It was explained that what centralization means or represents -to be basic about it – is an unfair advantage to a certain player or group of people that are part of the game. If the underlying playing field is decentralized, pretty much anyone can play that game and conduct business fairly -no one has a competitive advantage. Decentralization takes the ownership of the data away from one or a small group of people so someone can’t bring in counterfeits or make illegal changes to the data, to the numbers.
The Present –
Corporate blockchains - Blockchain investigation is now rapidly transitioning away from cryptocurrency to corporations thinking about all the use cases for the digital ledger technology. How it creates a distributed, decentralized opportunity to seek and to trace providence- all prior knowledge and movement of data around a product or service. A digital ledger, which allows for open source visibility of transactions and information of all kinds, has great applications for digital commerce and supply chain and is starting to make its way through corporate environments.
Examples were discussed of some of the most interesting use cases hitting the news today like Walmart building a supply chain blockchain that is being used to track romaine lettuce, which may not seem like a big deal, but it is a serious use case for food safety. Remember that some months back there was a salmonella outbreak with romaine lettuce and it took months to track down the central point of where that outbreak started. That shut down the whole romaine lettuce industry for a month which is a multi-million dollar industry. Now that they are tracking every point of the supply chain – from farm to store - on a blockchain, it can take seconds. These are huge efficiencies for corporations which are bringing in an extremely large influx of corporate interest.
Nestle also has a supply chain blockchain prototype right now for tracking milk. In particular, trying to show providence for a milk that came from ethical sources. If you can prove and show consumers a completely transparent tracking for the milk they buy, it increases the appeal, pricing and value for that product.
Corporations are exploring many ways to leverage this technology, including Facebook which announced that they are developing their new Libra cryptocurrency with a network of major partners that include Mastercard, Visa, PayPal, STRIPE, Uber, and Lyft, to mention a few. So you can see this is very rapidly evolving technology from what some have seen as some weird, freakish, tech fad that only nerds, geeks and conspiracy theorists have used.
Regulatory trends – A warning was made clear at the Conference that it is important to understand where we are with legislation on blockchain, as it was stated that the U.S. has already been losing this race before it even began. This is of utmost concern as blockchain is a global phenomenon. Other countries that have embraced this technology are attracting talent and startups in this growing space. We are seeing some U.S. companies innovating with this technology already fleeing the states because of the uncertainty of the regulatory environment here.
The Future –
There are 50 or so industries starting to deploy blockchain, including every major bank in the world. Many are all very new efforts, mainly existing as prototypes and are not production ready yet. This corporate activity and experimentation will increase exponentially as early innovators start showing practical applications as was reported previously.
Active engagement with legislation will be crucial as some states, like New York State, are already losing with restrictive legislation driving companies away, versus Wyoming which is actively attracting the technology. Recently BlockSpaces was proactively involved lobbying for reasonable legislation in Florida with Tallahassee passing Senate HR 1024 and Governor DeSantis putting forth a blockchain taskforce to give recommendations on how this technology can be used and best regulated to create and attract more businesses to the state of Florida. Florida is becoming a good model, unlike NY and California, on how the future needs leadership of taking the mantle of this and other technologies. What was recommended was that business leaders need to rally for more education and create many local and regional business initiatives to have the right kind of conversations and enable this technology to bloom.
Conclusion – We have gone through the worst of the hype cycle. Hopefully we can bring discussions back to reality by focusing on the underlying technology and the serious corporate efforts to use this technology to address real world problems and challenges. We need to really understand that Bitcoin is to blockchain, as email is to the internet. The internet is infinitely so much more than sending emails. Blockchain is infinitely more than Bitcoin. Bitcoin is just a financial tech application which runs on the blockchain. Blockchain technology will fundamentally change how transparency and authenticity are derived with anything from food, to ownership of vehicles, to verifying memorabilia, to personal identification due to continuing centralized companies being hacked.
Blockchain is an infrastructure level technology meaning it is going to be used by everyone without our even knowing it. So, it is my recommendation that you don’t get side-tracked, pulled into discussions motivated by fear, or deflected by non-consequential points. We need to understand blockchain technology and how it works. Focus attention on the underlying technology, not the price of Bitcoin and other cryptocurrencies.
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