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At the beginning of 2018, the astronomical increase in bitcoin values caused speculation that we were seeing speculation based on the hype of even greater proportions than those observed in all South Sea bubbles. , Dutch tulip and dot-com combined. The fall of its value in 2018 has seen many affirm, as Nouriel Roubini did last month, that "the mother of all the bubbles has now failed".
via Twenty20
Highlighting the bitcoin bubble, its price at October 31, 2018 (about $ 6,300) differed little from its price as of October 31, 2017 (about $ 6400) and was very different from its value as of October 31, 2016 (about $ 700) . To be safe, those who bought at the peak may have lost a package, but for those who have invested early in the long term, the outcome is far from fate and sadness.
Despite the evidence, some of the vultures collecting the remains of disappointed blockchain investors continued to pronounce blockchain technology behind bitcoin and other cryptocurrencies like Ether, Litecoin and XRP as the next villain in the land of over-excited technologies. to lead investors to a disastrous end. In the words of Roubini, "Blockchain has been heralded as a potential panacea for everything from poverty to famine to cancer, but in reality it is the most overwritten and least useful technology in human history".
Or is blockchain more like the internet?
Once again, it is useful to put blockchain technology in a realistic context. Not long ago, at the end of the 1990s, in fact, the Internet was subject to the same type of statements as those currently made on the blockchain. If companies did not adopt internet transactions, it was claimed that they were condemned to die. The fortunes were aimed at novice dot-com companies, and most of them were lost in companies that quickly went to the wall. But some, like Amazon and eBay, who were able to ingeniously enable links between Internet technology and their main proposition, not only survived the dot.com bubble, but continued to dominate their industries.
The dot-com bubble learning point and crash for the blockchain era is that no technology can be a panacea for all ills. Some business models will be tailor-made for the new technology, or they can be easily adapted to take advantage of its salient features. Others may not be so clearly suitable. The trick is to find where the lever points are located.
Chain of control
The distinguishing feature of the blockchain is that, unlike conventional database systems, there is no central or "master" copy of the database, with access to information and the ability to edit or record data channeled through discrete points controlled by the "owner" "of the database. "Blockchain is a distributed master book, with potentially thousands of copies and no central control point.With the rules encoded in the software that controls each of the copies of the ledger and the software used by those who make transactions on the system, the transactions are processed and "sealed" in a block (link) in a chain that is added, in the same exact order – to all the distributed copies of the ledger. (C & # 39; is a bit of cryptography involved here to ascertain the The identity of those who carry out transactions and match the parties to transactions in which the value is traded on the system – as for cryptocurrencies – but it is not essential to understand the main features of a distributed ledger.) Once a block it is "sealed" it is almost impossible to change the information in it, since it should be changed in all the thousands of other copies of the ledger. of the ledger is maintained through codified consensus processes – the authoritative version is "accepted" by all copies. If someone attempts to modify data in a block that is stuck on one of the copies, that copy is actually voted by the others and replaced by the agreed version.
A result is a record of timed transactions that is almost immutable. Blockchain technologies are therefore suitable not only for transactions where permanent recordings are required, but also for those where the order is important in which legitimate changes are made to records (hence its usefulness for recording unit movements) of value among the participants – ie currencies). Retrospective surveys can verify that actions have taken place in the intended order (eg audit) and that future actions can be triggered when an authenticated and verified block containing relevant information is added to the chain (the appearance "intelligent contract" of technology).
However, it is the "distributed" nature of the copies, and the concept that no single authority stands as the guardian of a specific blockchain that has attracted attention – both good and bad. Bitcoin (and other cryptocurrencies) received bad press because they allowed some transactions to occur anonymously and outside government control. Concerns have also been expressed that all transactions on a blockchain system are open to control by all those who have access to it.
Or no control?
Nonetheless, a distinction must be made between the use of the particular technology and the application it supports. Blockchain technology is at the heart of bitcoin. While copies of the ledger can be distributed, and there is no central authority that mediates the effective functioning of the blockchain, there is a central authority that, at the outset, has specified the characteristics of the blockchain. Application, including who can participate and how their participation is managed through the relevant software. While bitcoin is a public application that anyone can participate in (since currencies must be widely used to succeed), it is not axiomatic that all blockchain applications should be public. Indeed, it is almost certain that most of the valid commercial applications of distributed registers will be private agreements, primarily controlling access to the application, thereby ensuring that participants are not anonymous and protect information. from external controls to an approved group. That is, exercising explicit control of the application, regardless of the characteristics of the underlying technology. Supply chain applications that track the activities of different parties involved in different sectors that bring a complex product or service to the market require this type of control through an existing alliance ("club") in which the & # 39; membership is managed and managed separately from the application itself, in order to guarantee product integrity.
Interestingly, there are parallels here to the Internet. Initially, the Internet was characterized as a technology that allows all information to be available to everyone and in which users could interact anonymously (infamously, no one would know if a user was a dog). However, most commercial applications are now based on at least some access controls, with the most secure corporate information available online only through protected virtual private networks.
Like the internet, blockchain may not solve all the problems. But surely it has much more to offer than we have seen so far with cryptocurrencies.
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