So there has been plenty of chatter and debate and news coverage tied to cryptocurrencies, Bitcoin, and NFTs over the last 12 months. While any one of those things in and of themselves are still quite speculative and with uncertain futures one thing is for sure. The underlying technology that powers those things is not only here to stay, but can pave the way to a more efficient and transparent future, let’s talk a bit more about blockchain and distributed ledger technology.
So, what exactly is blockchain and distributed ledger technology (DLT)? The idea stems from sharing data and information throughout a system versus keeping it all in a centralized system. A perfect example is your bank, information is all stored on computers these days and your bank is not different. They control and maintain a centralized ledger of all of their customer's transactions and balances giving you access to view this information about yourself so you can track purchases and keep tabs on your money. Well, that is about all you can do with that data because from your standpoint it is all you have access to, you are not aware of or able to see my financial status or the terms under which the bank has issued me a credit card or a mortgage. Sure the bank can tell you that given interest rates and your credit score and your asset these are the loan terms they can offer you but there really is no way for you or I to be 100% sure that those terms are equal to other people who are in the same financial situation.
Let’s say we take that same bank that you and I are part of and put it on the blockchain. What does that mean? Well to start, that central database that the bank controls is no longer controlled by them. The “ledger” or master list of transactions, balances, etc. is distributed across all of the devices within the system. Then, each individual on the system is given a key (this is just a unique set of numbers and letters) that enables you to go into the system and access your information. But the real benefit comes from the transparency behind this centralized ledger, every transaction and the terms of those transactions are public knowledge. Now the identities involved remain anonymous, but imagine being able to see the credit score and interest rates of every mortgage a bank approves? Now you will actually know for sure if the terms they offered you are far and in line with others similar to you.
Now blockchain tech isn’t perfect yet, but nothing happens overnight. As a reminder, we first put a human on the moon in 1969, it’s 2021, 52 years later and space flights still cost millions, and only a few highly trained individuals can make the trip. One of the biggest concerns with blockchain tech, specifically cryptocurrency, is energy usage. To use bitcoin and other cryptocurrencies “miners” who are part of the system use computers to solve complex mathematical equations. All these computers running 24/7 to solve these equations to enable the network to suck in an impressive amount of electricity and bandwidth.
The good news is there are new things in the works to help solve this issue. New distributed protocols have come about in the last few years to help address this concern. One of them is Hashgraph, a new distributed protocol that greatly reduces the network demand and thus reduced electricity.
With protocols such as Hashgraph, distributed ledgers will also be able to achieve greater speed and volume of transactions that the network can handle. Bitcoin and Ethereum can process 5–10 transactions per second, Hashgraph, 10,000. Volume has practical implications for blockchain tech to reach mass-market adoption. To put things in perspective, Bitcoin average 4.6 transactions per second on its network, Visa processes 1,700! This brings us to another point about the future of the block and that is utility. Sure bitcoin has captured attention as the “virtual currency” but there are numerous other applications and uses for blockchain tech. A great example is Chainlink, a token that was built specifically to help connect smart contracts to data from real-world systems. There are massive implications for a token such as Chainlink, think about our recent Suez canal shipping issue. Imagine the Ever Given had never gotten stuck and the containers on the ship were all equipped with IoT sensors. Those sensors could be tied to a smart contract that is triggered and releases payment when the containers reach their intended port of call.
There are already companies working on real-world applications of tech such as this such as Edge, an EU startup, build a smart contracts engine for influencers and brands. Imagine brands simply placing a $ or BTC value on a tweet or Tik Tok engagements and the payment is automatically calculated and released upon triggers that are set?
Long story short, while blockchain tech certainly has made waves but we still are very much in inning 1 of the innovation curve and plenty of exciting and game-changing new innovations powered by blockchain tech are yet to come.