How will blockchain technology change the business world? Which cryptocurrencies have a future? What is special about blockchain technology, what makes it so fascinating?
It is primarily the potential of the blockchain, i.e. the technology behind cryptocurrencies such as Bitcoin, that exerts a great fascination. From our point of view, blockchain could manage to become a fundamental pillar of the digital space. Currently, we are still in the early stages of crypto evolution, but once the first blockchain-based business models succeed in the mass market, entire industries will be restructured – comparable to the transformation brought about by the emergence of e-commerce in the early 2000s.
Put simply, the blockchain is just a database in which information is continuously recorded, and which is managed decentrally in a network by many participants at the same time. Encryption algorithms mean that none of the participants can alter or falsify the database after the fact. That’s a big difference from traditional systems, where an administrator can change data after the fact. On a blockchain, this is not so easy.
In our increasingly digitized society, the guarantee that digital data is unchangeable is a big step: I can be sure that my stored data or information will remain unchanged, and I don’t have to fear deletion or changes by third parties. A key point, especially when automating processes.
What is also unique is that in a blockchain network, all participants coordinate and form a consensus without the help of a platform or other central instances. We are used to organizing with the help of central institutions like banks and stock exchanges or platforms like eBay and Amazon. Blockchain eliminates the need for such central hubs. So we are on the cusp of an economy that is much less reliant on centralized governing bodies and middlemen. Musicians, for example, could use the blockchain to securely anchor their rights to songs and transparently settle accounts with all parties involved. They would not need large record companies or GEMA, which generate enormous costs and offer little transparency.
How will blockchain technology change the business landscape? Will banks, Paypal & Co. become extinct?
With the spread of the Internet, people’s behavior has changed. For example, fewer and fewer letters were sent and more e-mails. But even today – 20 years after the introduction of the Internet – the letter is far from extinct. Neither will banks and services like Paypal disappear after the introduction of blockchain. These services and industries will only have to adapt to the technological evolution in the medium term in order not to lose their importance completely.
Blockchain is still at a very early stage. Projects such as Ethereum, which offers smart contract functions, or IOTA, which aims to enable automated communication between machines, are far from being ready for everyday use. However, the potential is enormous. In the early 2000s, many analog business models were digitized, especially in retail. As a result, purchasing behavior changed dramatically, and companies like Amazon became very successful.
Blockchain, and especially its advantages in terms of security and performance, will now in turn fundamentally change business models. This has consequences for the business world as well as for many other areas of our society. In 20 years, blockchain will be a cornerstone of digital society and used on a daily basis. However, the blockchain revolution will take its start in the B2B sector. The B2B landscape will be extremely transformed by blockchain over the next 10 years. In the meantime, there are a bunch of further developments and successor projects besides Bitcoin. New coins are popping up all the time.
Which cryptocurrencies have the best chances of survival?
Bitcoin was developed as a means of payment, but it is also used as a store of value and a reserve currency for cryptocurrencies. This has worked well since 2008 – but that’s all Bitcoin can do to date. It was only designed for this purpose. Changes and further developments are very difficult and lengthy, because the whole network has to agree.
Ethereum, on the other hand, does not store coins but program codes on the blockchain database, so-called smart contracts. Smart contracts are programmed contracts that execute automatically, according to the motto “If x happens, do y”, so for example: If song X is played, make a transfer of Y to the artist. On the blockchain, such contracts are immutable, cheap, easy to use – the potential is virtually limitless.
Another interesting project is NEO from China. In addition to smart contracts, NEO brings digital assets and a digital identity. This means that, in addition to services provided by the smart contracts, property, such as real estate, or proof of identity, such as ID cards, can also be stored on the blockchain. Theft and forgery thus become much more difficult, especially in the digital space. Another feature of NEO is the ability to be linked to other blockchains. This allows NEO to quickly expand its ecosystem.
For the Internet of Things space, crypto technologies are particularly promising. Not having to rely on middlemen in handling M2M communications should enable IOTA, a project from Germany that held a “crowdsell” in 2017 with great success to fund itself through a broad community.
What will a society that relies on blockchain look like in 20 or 30 years?
Decentralization will give individuals more rights over their privacy again, or make them more empowered. It will also likely lead to a renaissance of small and regional communities. For example, blockchain could enable regional electricity trading, with neighbors selling and billing each other for electricity. Lending within a community would also be easier with the help of the blockchain.
Crypto tokens will change our understanding of ownership because they can represent ownership very clearly. Anyone can, in principle, become a part-owner of a company, a wind farm on the edge of town, or a small startup if these projects are tokenized. The prerequisite for this is, of course, a legal basis. Other areas will also become easier and cheaper for ordinary consumers with the blockchain. Cashless payments, for example, will be processed more securely, and the total assets of a person or company can also be measured quickly and clearly using blockchain technology. Even elections could take place via the blockchain – making them fraud-proof and more traceable. Democracy would be more transparent.
In general, crypto technology will play a role in everyday life behind the scenes everywhere, but not always visibly. The blockchain will simplify our lives in many areas of society.