Our world is a world of laws. By this statement, I do not just mean societal order and mandates. Every known element in the universe obeys natural laws dictated by God, a supreme being, or an unknown superior force. Even economic trends conform to — for the most part — market efficiency laws. As we dive further into the blockchain revolution, I think it is imperative that we recognize its possibilities and limitations.
A major reason why the general public misunderstands the blockchain, and cryptocurrency assets like bitcoin and ethereum, is simple ignorance. To them, the crypto sector is a foreign one, integrating its own unique language and culture. This digital xenophobia tends to engender mass hyperbole. For instance, how many times have we read on the mainstream stories about the “demise of bitcoin” or, on the flipside, sensational forecasts of bitcoin hitting seven-digits, and beyond?
Fear and sensationalism appear to be the two consistent byproducts of an unknown commodity. But this is not just the result of public ignorance. Indeed, hoards of cryptocurrency advocates simply do not understand the blockchain, even at a basic level. This is confirmed through reading random postings in social media networks that utilize the cryptocurrency language, but have clearly not mastered the context.
What is the Blockchain?
At the most rudimentary and simplistic explanation, a blockchain is a database system that facilitates entries and transactions without the need for a centralized authority or a third-party intermediary. Instead, a process called mining, or decentralized agents who essentially compete with each other to validate transactions, assumes the authorizing or intermediary role.
Transactional data within a given time frame is collected in blocks, and later, miners verify them. Successfully verified blocks of data are integrated sequentially in a network chain; hence the term “blockchain.”
One of the primary reasons for using the blockchain is cryptocurrency distribution. That is, through this revolutionary system, digital tokens can be created and distributed, with each unit of issued currency being completely unique from every other created token (thanks to the mining verification process). It profoundly ushers in the era of international monetary transactions without the need for government oversight.
This is the reason why governments and bankers “hate” bitcoin. To be more specific, they despise the idea of the blockchain completely sidestepping them. Until bitcoin came along, bankers enjoyed a monopoly on monetary transactions, and thus derived revenues from “financial services.” With the blockchain, it is entirely possible to conduct “off-balance sheet” transactions.
To be sure, this is an incredible upheaval. In recent months, we witnessed the impact of bitcoin towards the traditional financial markets. Wall Street is taking note. The consequences of ignoring bitcoin cannot itself be ignored.
Don’t Fall for the Blockchain Delusion
Yet at the same time, I think we are experiencing blockchain delusion. Stemming from the aforementioned ignorance of the blockchain, people, especially newcomers, are beginning to associate cryptocurrency assets with a mysticism that was never once originally marketed.
The blockchain will revolutionize economic transactions, but it will not change the economy. By itself, it has no intrinsic value. A sinking company that integrates a blockchain accounting system is still a sinking company, but with a shiny new database.
In other words, the blockchain magnifies your capacity, and makes (some) standard procedures more efficient. It does not make you taller. It does not grow your penis, or give you bigger boobs.
While someone who is hell-bent on never utilizing bitcoin or other cryptocurrency assets will find this information of no consequence, most people should at least have a basic knowledge of the blockchain to separate fact from fiction.
Because the blockchain is still in its infancy stage, I fear that charlatans and con artists will manipulate the mystical feelings people have towards this digital revolution for their own selfish gain. Is it any wonder that popular social media platforms like the blockchain-powered Steemit.com regularly feature and promote known snake-oil salesmen?
Without proper education and research, novel concepts like the blockchain are often used as the justification for evermore ridiculous conspiracy theories that inevitably end up costing swindled families. The blockchain is unquestionably a powerful tool.
But at the end of the day, that’s all that it is.