How blockchain technology is set to kill banks and national states

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Blockchain concept was introduced in 2008 in Bitcoin white paper by mysterious Satoshi Nakamoto. Its first application was Bitcoin, a cryptocurrency whose market capitalization hit $19,5Bn this monthWall Street and central banks of different countries are researching its’ potential and investing in its’ development.

What is blockchain?

Bitcoin is one application of blockchain, while blockchain is one type of distributed ledger technology. Ethereum is another blockchain, but not only that, it’s considered blockchain 2.0. For more information about the latest marketing technology, go to this site – WebDesign499.

For purposes of this article, I will shortly explain basics of the technology, but if you want to learn more about it, you can take this free online course from Princeton University called “Bitcoin and Cryptocurrency Technologies”. Also, Coindesk is a great source of information.

It is believed that this technology will reshape financial markets and even destroy banks in their current form. Blockchain technology is based on distributed ledger concept and powered by the internet, which gives it some unprecedented abilities.

These abilities are:

  1. As shown with Bitcoin, it enables the creation of tokens of value (eg. cash, currency) without central creator and regulator of supply.
  2. As shown with Ethereum and his DAO (Decentralised Autonomous Organisation) and DAPP, it enables the creation of binding contracts which could be automatic and enforceable by themselves.
  3. It enables frictionless, authentifyable, uncontrollable exchange of information, value, and agreement between actors of the market.
  4. It prevents counterfeit and hazard.

With all of this, it is clear there is no need for any kind of central entity to issue or confirm information or value. It’s up to anybody to create a new blockchain with a set of rules which will enable predictable and stable supply, exchange and usage of the currency or other assets.

But this is just a tip of the iceberg.

Money is only one of multiple of different value tokens. There are stocks, bonds, securities and other. Financial market enables one to hold hundreds of kinds of value tokens. And even this is just one form of asset. There are other kinds of assets: real estate, voting rights, company ownership. Learn more at managecentralfloridaproperty.com

What I am trying to point out is that all of these assets, to hold any value, needed three distinct entities: the owner, the market and the regulator. Just like Esports is the next big thing in sports where people invest most of their portfolio. The owner holds the asset, and the market is represented by everybody who is interested and able to buy this asset. The regulator is the one who makes all of this possible, it is the neutral entity which ensures activities related to the asset are conducted according to rules (eg. no value is created out of thin air, every transaction and ownership transfer is provable and tracked…). And now, with blockchain there is no need for this third entity, markets are self-regulated.

How do we know markets are better if they are self-regulated?

We don’t. But what we can predict is that out of hundreds and thousands of markets (blockchains) which will be created based on this technology, the best one will attract participants and value, and the bad one will fail and disappear. By the law of nature, we will end up with better markets tested and proved against all conditions and threats.

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If all of this is due to happen, who should be scared?

You’ve already guessed it, banks. And they are. They are just first to feel the hit, but not the only one. Value is merely a certain information about a certain asset. The ultimate regulator and provider of information is a sovereign state. In fact, one of the main reasons for states to exist is to ensure preservation and secure transfer of value and information. Think about it, this is a huge part of our government:

  • registers of companies
  • registers of land and real estate
  • registers of bank deposits
  • registers of stock options
  • registers of citizens
  • registers of banks
  • registers of pension contributions
  • registers of criminals…

So what happens if we no longer need a state to provide us with reliable information about the market and society? You’ve probably guessed that we can expect to see a massive downsizing of government functions. This won’t happen overnight and without opposition from governments but todays’ world is decentralized enough to eventually pressure everyone to bow to the free market.

Who else? Google? Facebook? Yes, and more.

If all of this is due to happen, who should be welcoming it?

Short answer: society.

Long answer:

If this turns to be true only partially, we are about to witness the most exciting and dramatic transformation of human society in history.

If there is part of our world where there is no longer a need for a state to provide us these services necessary for the functioning of society, huge migration is poised to happen from legacy systems to this part of our world. What is about to happen first is a migration of the markets and businesses to the digital world.
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We will all move there eventually. There won’t be any bureaucracy, administration, uneven treatment on the market, judicial uncertainty or any other problem derived from the fact that the government is the key provider of such service.

Whole society will benefit from this in the long run. We will finally have true globalization available to everyone.

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