Here’s a question for you.
What do marijuana, wine, baby food, porn, taxis, bananas, mobile networks, Kodak, video games and casinos all have in common?
They’re all being put on the blockchain.
This isn’t necessarily a good idea. Not everything needs to be on the blockchain. Companies launching many of these platforms are just taking advantage of the Bitcoin hype. Of course there’s nothing wrong with that. If people want to invest, that’s great. Welcome to dotcom bubble 2.0.
That means if you want to pick the next Amazon or Google, you need to sift through all the junk. And you can, if you understand what cryptocurrency and blockchain tech is actually needed for.
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Before we can go into that, you need to understand what the blockchain does, and why it’s so valuable.
The first key aspect of blockchain tech is immutability. Once a block has been written, it’s there forever. This idea of ‘immutability of information’ is important, because it eliminates possibilities for fraud, counterfeiting, ownership disputes and so on.
A second aspect of blockchain tech is decentralisation. Information is not stored on a single database in a Google warehouse somewhere. It is stored on hundreds, maybe thousands, maybe tens of thousands, maybe even millions of computers around the world. Therefore, to alter the records, you can’t just hack into a company’s database. You need to hack into millions of computers and edit all the records at the same time. Not impossible, but about as close as to impossible as you can get. This goes hand in hand with immutability. The records are immutable because the records are decentralised. There is no longer a single point of failure.
A third aspect of blockchain tech is transparency. Think about a bank, or a company like Apple. They keep all their information on a private database that probably needs 100 passwords to access. That means you and I need to rely on the bank, or Apple, to keep the integrity of our data. We can’t see any of it, so we just need to trust them. When it comes to blockchains, they’re (usually) public, so anyone with internet access can simply go online and look at it. This is powerful because it removes authority from a central organisation and returns it to the public.
There are many other features of blockchain tech, but these are the three I consider most important to disrupting the world as we see it today. Below I’m going to outline the areas where I think cryptocurrency has the potential to do this in a big way.
This is similar to the way Uber and Airbnb completely turned the taxi and hotel industries upside down. People’s cars are unused 80% of the time. They’re sitting in the carpark or in the driveway, while you’re off living your life. That’s a huge amount of idle capacity. It’s the same with Airbnb. Most people have spare rooms in their house that nobody uses, ever! That’s a lot of idle space that could be used – maybe for travellers, for storage, or just for regular people who need somewhere to live. Uber and Airbnb turned this “idle capacity” into billion dollar businesses.
This idea of idle space can be applied to computers too. When I worked in an office, I didn’t use my computer for anything other than Microsoft Excel. In fact if you open up your Task Manager, you can see you’re only using about 15% of your CPU power at any one point. So what about the other 85%? What if you could rent that out? Since your computer is on anyway, you might as well use it to full capacity, right?
I’ll give you an example of where this is already happening: Bitcoin mining.
Bitcoins are mined using computer power. When your computer is “mining Bitcoin”, it’s basically trying to solve a really difficult mathematical equation on the Bitcoin blockchain. Whichever computer solves the algorithm first, earns a Bitcoin. The algorithm gets more and more difficult each time. When people talk about “mining Bitcoin”, this is what they’re talking about.
When the Bitcoin blockchain was first launched, the early users were getting up to five Bitcoin per day. But the algorithm is a lot more difficult today. Now, even if you leave your computer mining 24/7, you might not even get one per year.
The way people get around this is they use mining pools. For example, you, me, and 10,000 other people can join a pool. We combine all our computers to solve the Bitcoin algorithm, and with the the power of 10,000 computers we might be able to earn one or two Bitcoin every few months. This would then be shared between the pooling members.
How does this relate to blockchain tech?
Well, the same principle can be applied to pretty much everything that’s done on the internet. One example is data storage. Right now, people pay Dropbox pretty good money to store all their files safely in the cloud – home videos, photos – things like that. There are currently around 500 million people that use Dropbox. Think about the the amount of server space Dropbox needs. Millions of servers!
Now think about this: I’ve got 300GB free on my laptop right now. If you multiply that by everyone in New Zealand, and that’s 1.2 billion GB of unused storage space. Just in New Zealand. Imagine how much idle storage space there is in the whole world. And not just on computers – on smartphones, iPads, video game consoles. Enormous, right?
So why don’t we rent it out? Even for 10 cents per GB. Wouldn’t that be worth it?
This is an idea that is made possible with blockchain tech. It’s exactly the same concept as Bitcoin, except instead of storing Bitcoins on the blockchain, we’re storing data. It’s decentralised, immutable, transparent. This could be applied for all kinds of web applications: web hosting, photo storage, backups, computing power. I think this space will be enormous when mass adoption is reached.
Cryptocurrencies already active in this area:
Let’s say you feel like splurging and you want to buy a Louis Vuitton bag. You see one on Trademe for $2,000 – a nice discount to the price in store. What’s the main reason you won’t buy it?
Because you don’t know if it’s real.
Nobody wants to risk paying $2,000 for a fake Louis Vuitton, right?
But what if that bag had a unique private code, similar to your Bitcoin address. And what if, when Louis Vuitton manufactured that bag, they loaded all the information – when it was made, when it was shipped, what material it was made of – into the blockchain? Before you buy the bag, simply scan it on an app and check if it’s real. Again, instead of storing Bitcoins on the blockchain, you’re storing information. Because the blockchain is immutable, you would know the information is genuine.
This is the exact system that various teams in the crypto sphere are building right now. They’re making huge waves in this space. Because there’s such a strong need for it, partnerships are being signed left and right with some of the biggest companies in the world. Everything from luxury cars, to baby food, to designer clothes, to shipping containers.
Supply chain management is a huge problem for many companies, especially now that sourcing is often global. The ability to trace products from raw material extraction to end consumer is hugely valuable. Many fortunes will be made in this space by the people who get it right.
Cryptocurrencies already active in this area:
Read my full guide on Vechain here.
This is the most obvious use-case of cryptocurrency, which is transactional value (i.e. money). The current banking system is slow and expensive. SWIFT is currently the only way to send money overseas, and it normally takes at least two working days and a sizeable fee.
But what if you could send money overseas instantly for just a few dollars. Maybe even free?
This is exactly what Bitcoin is. It’s a currency that can be sent anywhere in the world, any amount, to any person, for almost free. That’s why it’s so valuable.
But there are alternatives to Bitcoin. There are hundreds of currency coins out there, each with different characteristics.
For example, you have inflationary cryptocurrencies, meaning the supply grows a little each year. Stellar is an example of that (1% per year).
You also have fixed supply cryptocurrencies, such as Bitcoin. Bitcoin has a supply of 21 million Bitcoins, and no more than that will ever be mined, ever.
You have cryptocurrencies that have low privacy, where everything is transparent.
You have cryptocurrencies with hyper privacy, where everything is completely hidden and anonymous.
You have cryptocurrency with high fees, with low fees, with no fees. You have cryptocurrency that transacts instantly, and cryptocurrency that takes a few hours.
The one thing they all have in common is, they all move a lot faster than dollars.
It’s up to you to choose which one fits your view of the world and you like the most.
Some transactional cryptocurrencies being used today:
Windows. iOS. Android.
These are all platforms.
By platform, I mean things can be built on top of them. If someone wants to make a video game, they learn how to develop on Android, or iOS, or Windows, and they create the game.
The reason blockchain platforms are going to be huge is because they allow the entrepreneurs and innovators to get to work and start building things for the world to use.
A good example of a blockchain platform is Ethereum.
Ethereum is like the Windows of cryptocurrency. In fact, most of the companies I’ve mentioned above (such as Golem, Sia, Wabi, Bluzelle etc) are all built on Ethereum. Without Ethereum, none of those apps can exist.
Now again, Ethereum is like Windows. Windows was the first one out there, right? If you grew up when PCs got popular in the 90s, everyone was using Windows. But then iOS came along and shook up the game. Android followed a few years later and shook things up even further.
So investing in Ethereum is good. But if you could pick the next iOS, that would be even better. And if you could pick the next Android, that would be better still.
The thing is, you can only guess. Maybe there won’t be a next iOS or Android. Maybe there will be, but it hasn’t been invented yet. Maybe it’s already here. It’s up to you to do some research and find out.
However, what we can be sure of is that platforms are going to be biggest sector of them all. Without blockchain platforms, there are no apps or programs for people to use. The dominant blockchain platforms to emerge in the next few years are going to be the future.
Some platforms currently being used/built:
If you think about the current world, we have many ways to verify our identities. We have passports, social media accounts, credit cards, drivers licenses, IRD numbers, phone numbers, corporate swipe cards, birth certificates, death certificates, marriage certificates, pin numbers…
What if you could put all this into one app, accessed only by your voice or your fingerprint or your retina scan?
Better yet, what if you could actually own this information. What if you could sell access to it to corporations, advertising agencies, email marketers and so on. After all, it’s your identity. Why shouldn’t you own it?
Identity is a big deal these days. With the government trying to keep tabs on everyone, with Facebook and Google watching your every move and recording everything you do and selling it to advertisers, with Amazon logging all your shopping habits, with passports and fingerprints being scanned at every airport. You can see how much information about you is floating around out there. Technically, this all belongs to you. And if anyone should be making any money off it, it’s you. After all, it’s your life.
Can the blockchain make this happen?
Immutable, transparent, decentralised information. A digital identity controlled only by you. You could sell access to it – to banks, to stores you buy things from, to news channels and advertisers. If customs is hooked up to the blockchain, you could simply scan your fingerprint and they’ll know it’s you. These are all thought experiments of what identity on the blockchain could do in the future. Whoever gets it right will be standing at the footsteps of an entirely new, global, lucrative industry.
Some cryptocurrencies already active in this area:
Do some research and happy investing 😉
Note: This is not investment advice. I am not a financial advisor. Please research any companies/organisations/platforms mentioned in this article thoroughly before investing. Good luck!