171130 Selling Certainty

Screen Shot 2017-11-30 at 7.55.21 PMBlockchain technology, the basis for Bitcoin and other cryptocurrencies, has been broadly acclaimed for what it does: create trustworthy, distributed, decentralized networks.  Until now we have relied on centralized clearinghouses to manage and process ‘the books’ for most of our important infrastructural ledgers such as credit, banking, stocks and bonds, real estate, insurance and investments of all kinds.  Those systems have their own inherent problems, something that blockchain overcomes nicely.  Moreover, blockchains have been shown to be inherently trustworthy.  So where we were once forced to keep secret our usernames and passwords and garner our administrative privileges carefully, we may freely distribute our wallet addresses so that others can make payments to us, all without fees or fear of theft.

What does it mean for you? Let’s explain it in more personal terms.  Let’s say you meet a stranger on the street who offers you a $200 personal check for the hat on your head.  Would you take it?  The hat cost you $50 and you have no love for this hat but losing it to a fraudulent check would be a bummer. You’re not comfortable with that arrangement and say no.  Now, let’s do that again.  The stranger says “I don’t have that much cash but I’ll give you the equivalent in bitcoin.  Bitcoin is $10000 at the moment so I’ll give you $200 as .005 bitcoin, ok?” Bitcoin is based on a blockchain.  You take out the Coinbase app on your smartphone, a bitcoin exchange, show his bitcoin wallet camera your address and the transfer is made instantly.  Very comfortable with that payment, you say “Thank you.”

For too long our society has been burdened with the need for more and more security.  We have locks on everything public.  We have passwords, administrative levels, and private keys for everything, both actual and virtual.   We all carry around a heavy set of keys, passcards and ID badges in our wallets.  If we begin switching over to blockchain for all of the things that need to be safe, secure, private and accessible, we will no longer need all of those levels of security.

You will begin seeing blockchain applied to real estate, contracts, building passes, insurance, as well as currency.  Blockchain will be applied to more and more things that you would have thought did not need ledger journal entries.  Every time blockchain is applied reduces the need and therefore the costs of security.  That’s a good thing.

171106 Trusted Distributed Networks

trusted bridgeYou’re walking along the street, minding your own business, when a stranger comes up to you and says, “I’ll give you $10,000 for your hat.”  You know the hat is worth at best $25.  In fact, there is no love lost were you to part with this hat which you’ve been meaning to replace for months.  But this man’s proposal is crazy.  Who would pay $10,000 for a cheap hat? And, were you to agree how would he pay you?

If he gave you $10,000 in cash, chances are much more likely the bills would be counterfeit than real. Besides, who wants to walk around with $10,000 in cash on them? A check wouldn’t be worth the paper it was written on.  By the time you cashed it this guy would be long gone.  You can accept Mastercard or Visa with your smartphone.  The fee, though, is 6% or $600.00 in this case.  His phone allows him to make a Paypal payment.   But you don’t have a Paypal account.  What do you do?

You use Bitcoin, of course. You flash your Bitcoin wallet address barcode which his Bitcoin wallet reads and sends you the $10,000 in Bitcoin.  You give him the hat.  An instantaneous, no-fee, anonymous transaction.  You don’t have to pay a processing fee, the transaction happens in the wink of an eye, he doesn’t have to know your name, you don’t have to know his, and it is completely trustworthy.  That’s the value of Bitcoin’s trusted, distributed network.