The hype around bitcoin as an investment is hard to miss. But could new infrastructure being built off the back of the digital currency allow us to have an internet where we keep our privacy? Technology blogger Richard MacManus says blockchain is a new and significant platform.
Right now we’re experiencing a bubble in cryptocurrencies, led by Bitcoin. You can go right down the list of 1494 – and counting – tokens on CoinMarketCap to see the feverish movement in the price graphs.
But more importantly, I believe we’re seeing a new and significant internet platform develop in the form of blockchain. Bitcoin was the very first blockchain, invented by the mysterious person or group called Satoshi Nakamoto, but it’s by no means the last – or the best.
So what is a blockchain? Basically it’s an open decentralised database, but watch this two-minute video by the World Economic Forum for a fuller description.
Some have already started calling blockchain “Web 3″ – forget the marketing buzzwords though. What’s most fascinating about blockchain technology is its potential to bring decentralisation back to the fore on the Internet. The web started out as an open system, but unfortunately it has lost its way in the past few years, and power on the internet is now consolidated amongst four technology companies: Amazon, Apple, Facebook and Google.
Blockchain represents a ray of hope for escaping that digital oligarchy.
For example, Facebook currently owns a lot of valuable data about your social networking profile: who you’re connected to, what you “like,” what content you engage with the most, perhaps your political viewpoints, and so on. A blockchain version of Facebook might involve several companies, none of which has control over your personal data. One company could put your identity data on the blockchain (a startup called Civic is essentially trying to do this), another company could provide the social connections, and yet another could handle your media preferences. Regardless of the setup, all of the data would be decentralised and only you would have the private keys to control it. This is all pie-in-the-sky of course, but it’s one way that decentralisation could potentially disrupt the likes of Facebook.
But again, a word of caution: we’re very early in blockchain’s evolution. I’ve seen people in blockchain circles compare it to the web in the mid-1990s. With that in mind, the most promising blockchain startups currently are those that are building the infrastructure – for example Filecoin is aiming to build a decentralised storage network. Once those layers of underlying software (such as storage) are built, then we’ll see a wave of consumer apps – but it may be another five to ten years before the blockchain versions of Facebook and Spotify emerge.
The key blockchain to watch this year will be Ethereum. Not only is it the second largest blockchain, behind only Bitcoin, but it was designed to be a development platform for apps. Or “Dapps” as they’re called in Ethereum’s world (Decentralised Apps). I’m expecting to see a bunch more Initial Coin Offerings this year, as promising new Dapp startups emerge on Ethereum and other blockchains. That said, it’s very much buyer beware in the ICO world. Many of those startups will fail, just as many did in the dotcom boom and bust.
That’s another thing to be cautious of: although cryptocurrencies already have frothy valuations, if this is akin to the mid-1990s then we may have another half decade or so of such growth. The big crash may not happen for several years. However, I think there’ll be at least one Amazon or eBay-like company to emerge from the dust. Those big winners may already have been created and ICO’ed, so that’s part of the excitement of starting Blocksplain – to see if I can find them now.
However the initial challenge for my new project will be to get past the hype – and cynicism, in some quarters – about blockchain. So my aim with Blocksplain is to write balanced posts that weigh up the potential and the risks.
Richard McManus is the founder of ReadWriteWeb, which was ranked among the top 10 blogs in the world according to Technorati, that was syndicated by the New York Times before it was sold to SAY Media. He has just started Blocksplain, dedicated to profiling blockchain and cryptocurrency startups.
The Spinoff’s business content is brought to you by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.
The Spinoff’s business section is enabled by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.