In late 2017, as the price of Bitcoin, the fledgling digital currency, continued to hurtle towards the now infamous $20,000 mark. Many were praising Satoshi Nakamoto, the name used by the unknown creator (or creators) or the world’s first cryptocurrency.
However, the true genius perhaps lies in the underlying technology that powers the cryptocurrency. It’s known as Blockchain (or the block chain), the digital ledger system that is used to record transactions.
To identify the origins of Blockchain, we have to go back to 1990. The first mention of a blockchain architecture was from a publication co-authored by W. Scott Stornetta and Stuart Haber. The paper entitled, ‘How to time-stamp a digital document,’ which described a digital hierarchy system known as a “block chain” that uses digital time-stamps for ordering transactions.
That paper was clearly the starting point for which Bitcoin and now many other cryptocurrencies have been built.
While the opportunity for investment has seemingly been in the dot-com boom like run-up in the prices of the various coins. The smart money is now focused on the underlying technology – Blockchain. And the applications only continue to grow.
Humble Beginnings of Blockchain
At the time he wrote the paper, W. Scott Stornetta was a recent Stanford Physics Graduate focused on the world of cryptography and distributed computing. Recently he’s become Chief Scientist at First Digital Capital, a global investment management firm, focused on Blockchain investments.
A young Dr Stornetta could have never imagined where his version of blockchain would end up today.
“It’s been sobering to see just how expansive the uses are. I’d be the first to admit, that there are ideas that go so far beyond what we initially imagine. We certainly don’t claim monopoly on creative genius. We’re very gratified to see all these potential technologies, but that’s what happens when you bring all these really good people together to start focusing on a particular new tool.”
It’s been nearly 30 years since Dr Stornetta first published his thoughts on blockchain. Ultimately it took a lot of effort to thrust the technology into the mainstream and to let it grow to where it’s at today.
“I would say that Bitcoin and Satoshi’s original paper has had its fair share of birthing pains. Stuart and I look back and look at our repeated efforts to try and explain to corporate America as to why this could be such a useful technology.”
“In a sense, Satoshi, in a single swoop, made it extremely attention-getting, which is terrific by creating a kind of money. But it came at a cost. I have terrific regard for Satoshi as well as the community that has nurtured the technology,” he said.
Dr Stornetta believes that there is a lot more still to come in the world of digital currencies and that there is still much to come from blockchain technology.
“As Bitcoin rolled out, it was important for us that people understand that this was not the only way to play the game. We now have broad recognition that proof of work is not the essence of blockchain.”
“Many of the next generation currencies are attempting to minimize the downside and preserve what is good about the decentralisation. The whole issue of scalability is something many intelligent people are coming to bear how to deal with that problem.”
More Than Digital Currencies
While much of the attention surrounding blockchain has been linked to digital currencies. The technology itself is now very clearly becoming a game changer in many different industries.
When the dot-com boom was in full flight, few people understood both the huge changes the economy would face as a result of this new way of doing business. In a sense, blockchain technology is doing things in a similar fashion.
Dr Stornetta is excited at the next generation of coins and ICOs that are building on those early developments.
“While we still might be in the midst of a bubble, that doesn’t mean there’s not underlying value being created. First, you had the Bitcoins. The second stage is what is currently happening with Ethereum, where people are building apps and smart contracts on top of the blockchain platform.”
“There’s also a third layer, which is the next generation beyond Ethereum, which are defined by their token. You have DFINITY, EOS, NEO just to name a few. There we’ve seen almost nothing. However, an enormous amount of money and talent has gone into them.”
Disrupting the Disruptors
When Dr Stornetta first drafted his paper, he originally had intended to use blockchain to help eliminate fraud and misrepresentation. His goal was to create a process that encouraged truth. There is now a range of different applications for the new technology.
We are seeing new applications every day that range from preventing counterfeit goods in the manufacturing sector to smart insurance contracts. And these are clearly opportunities for those savvy investors with an eye to the future.
Dr Stornetta’s partner and Chairman of global investment management firm First Digital Capital, Deryck Graham is excited at the possible areas of disruption blockchain can potentially cause.
“We’re seeing at some extremely exciting ICO’s and token events that are focused on disrupting the previous disruptors,” said Mr Graham.
“By example, the giant online travel agencies that are out there. They dominate, they don’t democratise. The hold to ransom the hotels and they charge them 20% to do it. So much so that groups like the Accor Group went from a hugely profitable organisation in 2012/13 to a loss-making organisation in 2015. They fought back against the OTAs by building their own network.”
“What’s interesting is there are now companies like Winding Tree, which by using a blockchain structure are able to produce a platform which is not for profit. But the structure is such that the investors are sitting in a position where applications are built on top of it, and people can buy hotel rooms direct, but to do it they have to buy coins. And in doing that the demand for the coins goes up. How does an OTA compete with that? And that’s an example of a fully democratised solution, in an industry where the disruptors are soon to be disrupted.”
The underlying blockchain technology is powering these new ideas and it is just the beginning. And that’s what excites both Dr Stornetta’s and Deryck Graham.
“Now that we have this toy, what can we do with it? I’m not saying it can cure polio or anything like that. But it can certainly be a part of the tools that are applied.”
Photos taken at The Blockchain Economy were supplied by Andre Chang-Fane.
