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4/27/2015 Does Bitcoin Foreshadow a Decentralized World? - Techonomy
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Does Bitcoin Foreshadow aDecentralized World?By Wayne Lam | June 27, 2014, 4:43 PM | Techonomy Exclusive
Will we one day be able to tradestocks without a brokerage or pay forgoods with a currency that has nocentral issuer? With Bitcoin, peoplecan now do the latter. In the future,they may also be able to do theformer, and much more, in a worldwhere applications are open-source,commonly controlled, and operatedwithout middlemen. This is thedisruptive power of the blockchain, arevolutionary piece of software that
can defy convention.
When Bitcoin creator Satoshi Nakamoto (a pseudonym—his actual identity is unknown)introduced the digital currency, people were mesmerized that a currency could existwithout a central governing authority. It seemed like magic, but it wasn’t. Nakamotodeveloped a tool known as the blockchain, which allows Bitcoin to becomedecentralized and independent from a central authority. The blockchain has escapedthe spotlight until now.
In simple terms, the blockchain is a public database that stores and validates Bitcointransfers. It can be replicated or modified to decentralize many online transactions, likestock trading, that have historically been managed by a third party. Normally when youwant to trade stocks, you must use a brokerage service like ETrade or Scottrade toprocess each transaction. Those platforms in turn charge you a commission fee. If theblockchain technology was applied to stock trading, a network of computers donated byhumans could process each trade instead of a brokerage service. No third-party ormiddleman fees would be involved. Stock trading might become autonomous andindependent of a central authority thanks to the unique blockchain architecture.
But the real genius of Bitcoin’s blockchain is that its underlying technology and conceptis not limited to financial instruments or data. Email, voting, and cloud storage are justa few applications that could also be decentralized. As long as there is an activecommunity of volunteers that donates computers and resources to record and validatetransactions in such a system, any application should be able to operate autonomouslywithout third party oversight or control.
To enable such radical innovations, a programmer named Vitalik Buterin and his co-founders created Ethereum, a new platform and programming language inspired bythe Bitcoin blockchain that will allow developers to build decentralized applications.Like many entrepreneurs, Buterin is trying to solve what he sees as a problem: peopleentrusting companies with their personal information and money. He believestechnology breakthroughs like Ethereum will put an end to that.
Fred Wilson of Union Square Ventures is especially excited about the blockchain, andbelieves the technology could dramatically change how we share and store personalinformation, particularly services that represent our online identity. “Right now youneed someone to be the arbiter of identity—either Facebook, Twitter or Google—somebody who developers can use for login and other information sharing. I think youcould do the same thing with a blockchain architecture, where there is no third party,there is no clearinghouse of identity information,” Wilson said at TechCrunchDisrupt at New York City. With its apparently limitless potential to disruptindustries, Wilson thinks the blockchain architecture could eventually trump the
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controversial digital currency that it underpins. (He has invested in several Bitcoin-related startups.)
Picturing a world of decentralized applications is no longer farfetched. Bitcoin is thetesting ground for the blockchain concept. And although the controversial digitalcurrency has not conclusively demonstrated its value to people around the world, thereis reason to believe that at a minimum the blockchain may live on in services andplatforms we will use regularly. Provided that services built on top of the blockchaintechnology have the resources and community of volunteers required to functionsmoothly, a future with many decentralized applications will not be far away.
Tags: Bitcoin, blockchain
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