Blockchain Is The Electricity Of The 21st Century
Over the past six months Bitcoin, crypto currencies and the underlying blockchain technology have become hot topics. I visit my in-laws and they ask my about it. I talk to my parents and they quiz me. I find myself defending the technology to lawyers and bankers who aren’t quite convinced that there’s something to this whole blockchain-bitcoin-crypto thing.
Most of the criticism I hear comes from the position of a pre-existing idea of what technology does right now. People are judging a new and revolutionary technology based on the existing norms and capabilities. That’s a mistake. It’s impossible for anyone right now to truly know where blockchain technology is going to end up and what the real value is going to be.
Blockchain technology today is like electricity in the 19th century.
Let me explain.
The potential for electricity in the 19th century seemed to be so obvious when you look back. Between 1761 and 1870 multiple versions of the light bulb were invented by various people across the globe. Thomas Edison gets a lot of the credit for inventing the light bulb but the truth is far more complicated than that. In his book “Fifty Inventions That Shaped The Modern Economy”, Tim Harford explains the potential of electricity as follows:
“In the early 1880s Edison built electricity-generating stations at Pearl Street in Manhattan and Holborn in London. Things moved quickly: within a year, he was selling electricity as a commodity; a year later, the first electric motors were used to drive manufacturing machinery. Yet by 1900, less than 5 percent of mechanical drive power in American factories was coming from electric motors. Most factories were still in the age of steam.” [emphasis is mine]
Harford goes on to explain that steam driven factories were reluctant to spend money changing over to electric motors and when they did, they struggled to see the return. The did not see the return because they would continue to use electric engines in the same way as their steam engines had worked. They did not understand the knock-on effects of the new technology. Over time factory owners came to understand that electric engines could fundementally change the way they did business but all the way up until 1910 there were masses of entrepreneurs who were still opting for steam over electricity in new factories. A full 30 years after Edison was selling electricity en masse there was still minimal adoption in factories across America. That’s even ignoring that in 1752 Benjamin Franklin is said to have placed his metal key on that fateful kite that was illuminated with sparks showing that lightning was indeed electrical in nature.
Does this sound familiar?
Bitcoin is only 9 years old.*
Blockchain technology right now is a bunch of sparks that are visible only to a handful of Franklin-esque individuals in the entire world.
As a community we’re somehow shocked that the entire world isn’t on board. In spite of a vastly better way to do some things (blockchain), people insist on sticking with the way that is comfortable, safe and known to them (legacy methods). This is not surprising at all and in fact plays perfectly into the norms of change throughout history.
Electricity had the ability to replace the candle via the lightbulb. The electric engine was a shoe-in to replace the steam engine. The safer, cheaper, cleaner, smarter technology was there and ready for the world to adopt but it took much longer than anyone had hoped for the tide to shift. Back in the 1800s they could only predict how electricity might be able to change the things they were currently doing in their existing form. They could not predict the invention of the Internet, electric cars, cellphones and the many, many more world-changing inventions that stemmed from the adoption of electricity.
We don’t know what we don’t know and right now when it comes to the blockchain-bitcoin-crypto stuff, no one really knows where it’s heading. Nine years into this technology, no one has a clue and it really isn’t surprising that mass adoption hasn’t kicked in. All we can do is continue to build and wait to see how the next generation of thinkers, builders and users adopt the technology without the preconceived ideas of today.
So why the rush? Why the pushing and the shoving? Why are there so many heated opinions in the world right now about the value of Bitcoin and the other crypto currencies? What is this need that we have to prove that this technology is or is not valuable? The answer lies within our existing way of working, doing, building and thinking. Anything disruptive is going to be fought over and fought against.
Every institution, business and individual is heavily invested in the way things are done today. It makes perfect sense that a bank wants to prevent blockchain from coming into the world because the technology is unequivocally going to disrupt their worlds. They are going to need to adapt and do it fast or risk being destroyed in the coming decades. It makes sense that people like Charlie Munger and Warren Buffet think bitcoin is noxious poison and believe it will all come to a bad end. The Berkshire Hathaway pair have been trailblazers in investing in things they know. That’s their bag. They only invest in things they know and understand deeply. Right now, no one can know and understand the future impact of blockchain technology on the world so why would Buffet and Munger invest in it?
If you are looking to form a secure retirement plan then crypto currencies, blockchain technology and bitcoin specifically are terrible ideas. But why would we judge them as if we want to build a retirement plan? You wouldn’t bet the future of electricity on how it could make the candle shine brighter or last longer, would you? No. If you were a betting person you’d probably wager that the candle would die out and the status quo would be disrupted. Right now, the status quo needs to be disrupted. Centralised systems need to be broken apart. Blockchain technology needs to be developed, experimented with and built upon. We can’t judge things to come on things past.
Blockchain In Real Life
The other major criticism that is waged against blockchain technology is that it doesn’t exist anywhere in the real world. Often this comes in the form of “Bitcoin isn’t useful” or “There’s no real use for bitcoin in the real world”. When in actual fact the person is trying to talk about blockchain technology and not Bitcoin specifically.
Here’s a short but relevant list of articles that refer to places in the real world that have adopted blockchain technology and are using crypto currency effectively:
- Blockchain Adoption in Government
- Arizona Senate Votes to Accept Tax Payments in Bitcoin
- Dubai has world’s first government entity to conduct transactions through Blockchain network
- Daimler and LBBW successfully utilize blockchain technology for launch of corporate Schuldschein
- Microsoft’s Blockchain Experiments Expand to Digital Bank Guarantees
- TransActiv Grid, smart energy made in Brooklyn
- Blockchain-Enabled Cloud: Estonian Government selects Ericsson, Apcera and Guardtime
- South Korea