In 2009, I wrote a book called Pull, on how things would be different once everything is online and interconnected. That vision is finally coming to life. Here is the one-minute summary:
Blockchain technology is a shared ledger that everyone trusts to be accurate and permanent. By sharing a single ledger, we can:
Eliminate trillions of dollars of wasted effort in coordination, market functions, and clearing.
Record data — including ownership rights to anything of value — permanently, in a way that can’t be hacked or stolen.
Eliminate middle men — companies that bring buyers and sellers together and charge high fees (everything from banks to insurance companies to ecommerce to Uber)
Eliminate data centers, which are targets for hackers.
Eliminate IT departments, which are expensive, sluggish, and prevent companies from being agile.
Radically transform government services to be far cheaper, faster, and better.
In addition, we can now add programming to blockchain-based assets, which makes them programmable and “smart.” We are actively creating new data ecosystems that allow many real-time innovations, from remote surgery to fleets of drones to programmable music rights to tracking blood diamonds and minerals. While it’s still in its infancy, blockchain technology has tremendous promise. My estimate is that by 2030, more than $10 trillion and possibly as much as $20 trillion of world GDP will be on the blockchain.
Let’s use eBay as an example.
Today, eBay is a public company with 165 million active users, 35,000 employees, $18 billion in revenues and net income of $530 million. Around the world, eBay owns and operates huge buildings full of servers — to make sure all the information is backed up and available. If any one data center is attacked or destroyed, the other locations will take the load.
eBay is a centralized system with its own infrastructure, controlled by its executives. It’s expensive and profitable: by the time you get paid, you’ll lose about 10% of the price to the various intermediaries in the eBay ecosystem. It’s also vulnerable: it can be hacked, not least by its own employees, and credit card numbers and account information can be stolen.
There’s another way to build that system now. In a decentralized system, we could design an application similar to eBay that doesn’t use central servers and control. We could store data on anyone’s computer who wants to store it. These aren’t volunteers — we pay them a few cents for their computing power. At the scale of eBay, there would be tens of thousands of such computers, and all of them store a full copy of the system, creating massive redundancy. Since thousands of computers have a copy, no “bad actors” can disrupt it.
Today, you wave your credit card at a little box and your payment goes through. But what goes on behind the scenes? Mastercard and Visa have built enormous infrastructure to manage this convenience, and they take 3.5 percent of every transaction. Their profit exceeds $50 billion a year. And they settle in days, not minutes. How many times have you had to have your credit-card unblocked because you made some small online transaction?
Bank wires are worse. A bank wire can cost from $10 up to ten percent of the transaction value and take days. There is a lot of special handholding that takes place for most wires. For most international transfers, you can actually get on a plane and be at the receiving bank before the money gets there. And you can forget about weekends.
Recently, someone moved over $300 million worth of bitcoin to another address for a total cost of 40 cents US. It confirmed in less than an hour. On the Ethereum blockchain, a move is finalized and confirmed in minutes. The costs are miniscule. And you are in complete control.
In this world, money doesn’t exist in some location. The money is everywhere. As long as you have your private key, you can control and move it. Soon, you’ll be able to settle a transaction in less than a second and you’ll pay a few cents for the service. And we don’t need to use cryptocurrencies. We’ll be able to use tokenized dollars, euros, pounds, yen, and other fiat currencies, so we can get the best of both worlds and move toward permissionless finance.
Blockchains allow these innovations and many more. We are removing middlemen and giving ownership to people. We are redesigning many industries now, from finance and insurance to supply chain and asset tracking. We are tokenizing assets and anything of value, including your time. Within a few decades, everything will be tradable, markets will change dramatically, and we will have new levels of liquidity. We will have self-sovereign identity and decentralized voting systems. We will be able to implement new systems that remove middlemen, even in politics and government.
A blockchain records an encrypted, permanent record of every transaction; hardware+software nodes on the network called “miners” verify and store that information for a small price. This creates a distributed system that expands as necessary and can’t be hacked. It forms the foundation of a new kind of ownership, tracking, interaction, and governance.
This much for now. I will soon be working on a video series to unpack all these terms.