The biggest innovation of Blockchain based peer to peer technology is not Bitcoin or Ethereum or other applications but the Economic System that it enables, which had been previously unachievable.
Let’s understand these economic implications by breaking them down. By understanding these economic implications we can understand Blockchain’s application and how it is a power that will fuel future institutions.
Contracts facilitate trade.
When a bank gives you loan there’s a contract that you will pay back with interest. When you rent your building you expect the tenant to fulfill her contract by paying rent each month. When you eat at a restaurant there’s a understood contract that you will pay after finishing your meal, you simply can’t just walk away!
Now, these contracts are enforced by the Government through the trio of legislature judiciary and executive. The problem with this is the uncertainty involved, laws are equivocal, the process time consuming and the results almost always unsatisfactory. The system requires too much trust to be placed in the Government which leads to inefficiency.
Blockchain makes automatically executed contracts possible. Contracts that are not governed by law but by simple clear rules coded into the contract. This is better illustrated with an example:
I want to purchase a mobile phone from bmazon.com however they will not deliver unless I send money first and I don’t trust them enough to do that. An auto executing contract can be entered into by both parties.
The rules are set. Once a working condition phone is received by the buyer money is transferred to the retailer. The money is taken into escrow from the buyer and the retailer has to deliver the phone within the specified time frame. The phone is received opened and the contract is automatically executed. If the retailer does not deliver and the time period elapses the funds are reversed to the buyer.
The beauty of this concept is that it can happen every single time with any such transaction and between any users, no matter how unfamiliar they are with each other.
This is a major reason that lead to the development of Ethereum , a decentralized platform to run such smart contracts.
Powerledger more specifically allows to trade in contracts that deal with energy, it is a blockchain that allows user to trade energy similarly to as they would trade currency.
Trust enables economic activity.
Humans Beings are naturally sceptic That is to say that we do not like to trust, and it is wise to do so. It is our distrusting nature that enables us to examine risks, proceed with caution and minimize losses but due to lack of trust there are also a lot of opportunities that are lost.
Blockchains overrides this problem by creating trustless systems.
We currently have to trust companies such as Google, Microsoft to keep our data secure, and how secure is our data? There is a simple rule in data security anytime data is stored at a central place it can be hacked. Snowden reports revealed that tech companies are strong armed by the Government into sharing private consumer data.
Blockchain by being decentralized in nature provides an alternative. Consumer data can be stored on peer to peer networks instead of private servers.
Examples of new enterprises that utilize this feature are:
Cloud Storage- Instead of relying on private owned services such as Google Drive, Onedrive, Dropbox you can use StorJ.io
A New Internet- The internet today is increasingly becoming centralized, big companies such as Google, Facebook act as monopolies, Government interference is on the rise and from being a place which welcomed the underdogs it has become a place for only the powerful to shine. This is especially true now with the Net Neutrality rules being repealed by the FCC.
Blockstack is the vision for a new internet an internet free from these deformities, a place which it originally was, free, open and innovative.
Decentralized economic systems are better than centralized ones.
By its very nature decentralized systems rely on the help of many while centralized systems relies on the power of one, and no matter how strong the one is, it will still be overpowered.
The power of decentralization can be realized by thinking of giants like Amazon, Uber and Airbnb. In a short time these companies cornered a major market share by providing a collaborative environment. The true power of decentralization can only be obtained when even these intermediaries are removed. Such organizations are called Decentralized Autonomous Organizations (DAO’s)
A free open market OpenBazaar acts as a platform for buyers and sellers to interact directly.
ArcadeCity is an example of a peer to peer ridesharing wherein drivers can set their own rates, directly interact with passengers while sharing no payments with an intermediary.
Steem.io is a social network where content creators are paid for content created, when you post a picture on Facebook you receive nothing but when you do that on “steem” you receive cold hard cash in the form of Smart Media Tokens.
A platform that connects farmers directly to grocery buyers, Demeter.life. This is a new revolution in agriculture as it enables consumers to micro manage farms, removing risks from the farmer, the consumer herself chooses the inputs to the farm and gets the produce.
Recordkeeping is essential for any economic activity to prosper and recent data security risks have made cost of keeping records high and the process complicated and so rigorous that it is hard and time consuming to access records.
Blockchain’s forte is its mind-bogglingly robust way to keep records straight.
This makes it perfect to digitize ANY asset and maintain records with the highest security possible, while sharing information is easy at the same time.
Take the example of property records.
Property records are one of the most cumbersome documentations to maintain, keeping them on the Blockchain would not only facilitate fail proof records but easy property transfers as well.
TeachMePlease.io aims at recording all academic achievements, diploma, degrees, certificates, of a person with proof. Therefore acting as a curriculum vitae that is instantly accessible and verifiable, no need to reproduce original documents each time.
Another powerful application of this concept is the cap and trade system proposed by Joe D’Angelo, recording carbon consumption, capping it and making it tradable. At the same time making carbon usage data by companies publicly available.
Voting can also be radicalized through Blockchain application, in light of accusations of voting machines being rigged, Blockchain technology can provide an efficient, provable and unfailable method to secure voting.
Automated, Trustless and Decentralized, Blockchain is one of the most radical innovation of the 21st Century. These are but a few of the ways that the world is changing with Bitcoin, by seeing the new possibilities Blockchain brings with it you are sure to realize that are we are headed for a really spectacular future!