The BIGfish team is always on the lookout for the latest emerging technologies that are on the verge of disrupting business and driving innovation. One of the most prominent new technologies generating press is blockchain, a new way of interacting digitally that is poised to drastically change finance, trade, legal systems and digital media.
But, as with any new tech, there is a learning to curve to understanding blockchain. After watching countless TED Talks, reading a few books and scouring the web for information, here are the basics you need to know to understand blockchain – as told by the BIGteam’s favorite SNL characters.
New York’s hottest club is Blockchain
The back story? Conceptualized by Satoshi Nakamoto in 2008, blockchain is a peer-to-peer network that uses a distributed database to maintain a growing list of records called blocks. Using a digital ledger, transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly on the blockchain.
The blockchain is rooted in trust. The decentralized nature of the distributed ledger means that transactions can take place between unknown parties without having to go through a middleman (like a banking institution) because the network requires computer servers to reach a consensus. This automated approach enables transactions to happen immediately. With blockchain there is no more waiting for the direct deposit to hit your bank account; it happens instantaneously.
Transactions can not be altered unless there is a consensus among the group. To put this in very simplified terms, blockchain is like a group text – everyone in the group has access to it, and it’s an ongoing record of plans. For example, once the group text agrees on a plan, it can’t be changed. So when Amy and Tina text everyone separately that they should meet for drinks at 8 even though the group text agreed to meet at 7:30, the plan is still to meet at 7:30 until more than half of the group agrees to move the time to 8 in the group text.
This place has everything, from security, to trust, to decentralization and automation!
I have a million coins. They’re chocolate. And imported from the Swiss Alps. Willy Wonka made them for me himself.
In the paper conceptualizing blockchain, Satoshi Nakamoto also proposed Bitcoin, a digital cryptocurrency that is created and held electronically and is the payment method used on the peer-to-peer blockchain technology. Bitcoin enables decentralized transactions to take place immediately.
What makes Bitcoin different than other types of currencies? No one controls it. While the dollar is regulated and distributed by the U.S. government, there is no overarching body that controls the Bitcoin. Rather, they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves the mathematical problems that create the “blocks” in the blockchain. Known as “miners,” these are the people who secure each transaction on the blockchain. Miners are rewarded in Bitcoin when they create a block.
Like regular currency, you can’t just create an unlimited source of Bitcoin without expecting the value of the currency to drop substantially. The total amount of Bitcoin that will ever be available in the market is 21 million bitcoins. These 21 million bitcoins can be divided into smaller pieces of lesser value.
Think of Bitcoin in terms of the California Gold Rush. In 1849, thousands of people flooded to the West Coast in hopes of striking it rich. There was one problem: there isn’t a neverending supply of gold. Once all the gold was mined, it had to be divided into smaller, less valuable pieces.
Its name is Ethereum and it’s at it again, causing lots of ruckus like a barnyard hen. It’s always making trouble, its hair is like a bubble. Knock, knock, who’s there? It’s Ethereum.
Sorry! Just when you thought you knew everything about blockchain, somebody throws a drinkable yogurt from the back of the class. That’s Ethereum.
Ethereum is the next step of blockchain. Using blockchain technology, Ethereum was created by then 19 year-old Vitalik Buterin in 2013. Ethereum is a platform that utilizes the decentralized nature of the blockchain to remove middlemen and enables users to interact directly. The platform makes it possible for any developer to write and distribute next-generation decentralized applications while removing barriers to entry and points of failure and increasing transparency and trust.
The platform’s ability to enable developers to write applications on the Ethereum network has allowed blockchain startups to raise funds on the Ethereum with an ICO. That’s not a typo for IPO. An ICO is an initial coin offering where, similar to an IPO, apps can raise funds by selling tokens that are used in the application. While the acronym might be similar, ICOs are very different than IPOs. When you invest in an IPO, you receive stock that is a representation of your piece of the operation. With an ICO you buy a coin that is specific to the application, and that coin has a value in and of themselves. This means when you buy a coin in an ICO, you are buying an actual piece of the company.
For example, say BIGfish creates a blockchain-based app that seeks to bring a decentralized means of communication with the media. We would sell our BIGtokens at an ICO and those token would have value both on its own and in relation to BIGfish.
“My cat had his identity stolen when I bought him a new scratch post online.”
Wha-whaaaa. Don’t be a Debbie Downer. As with any emerging technology, there are going to be naysayers who don’t believe in the staying power of blockchain. While the speed at which Ethereum and Bitcoin are growing raise more than one red flag that a bubble might be forming, the underlying technology has definite staying power to create a lasting change on how individuals transact.
Ajit Tripathi, a director at PwC, said, “some 90% of so-called distributed-ledger projects will probably fail, but a few will survive with potential to change the financial world.” As PR pros it’s our jobs to help those companies that could be the next Google or Amazon tell their story about how they are different from the herd and have the staying power to make an influential difference in the way individuals interact online.
The BIGtakeaway on Blockchain?
It’s still in its infancy, but blockchain represents a number of possibilities across multiple sectors and you know what? We are pretty freakin’ excited about it. Let us know your thought and feelings about blockchain by tweeting us at @BIGfishPR.