The recent rise and fall of Bitcoin (slight uptick recently), should give you pause for thought and help you understand where the real potential might be. While the future potential of secure digital payments through crypto currency remains to be seen, the focus should be on building blockchain based platforms and marketplaces. The rapid rise and fall in Bitcoin should remind us of the early Internet days when a new technology arrives but no one really knows how to use it. Early websites were nothing more than brochure ware while companies like Amazon saw the real potential to conduct enterprise-based ecommerce in entirely new ways. Sometimes, it’s not about the product but about the technology. And in this case, that is blockchain.
Here is a simple definition of blockchain. A blockchain is a digital record of transactions. The name comes from its structure, in which individual records, called blocks, are linked together in single list, called a chain. Blockchain can be used for recording transactions made with crypto currencies, such as Bitcoin, but have many other powerful applications. Each transaction added to a blockchain is validated by multiple computers on the Internet. These systems, which are configured to monitor specific types of blockchain transactions, form a peer-to-peer network. They work together to ensure each transaction is valid before it is added to the blockchain. This decentralized network of computers ensures a single system cannot add invalid blocks to the chain.
So why should you as an entrepreneur or investor care more about blockchain than Bitcoin? Bitcoin is still a speculation on a future crypto currency that the world may not yet adopt. Maybe in the future, maybe not. But blockchain is a serious technology that can provide a variety of solutions. Imagine you are an automotive manufacturer and you have a product quality problem. Rather than recall thousands or millions of cars, you can simply recall the cars whose part is potentially defective based on blockchain identification and tracking. Or perhaps you need to track a product or good all the way through the supply chain to verify its source or heritage. Think heirloom tomatoes or cannabis where absolute tracking is critical.
The real potential for blockchain will come from existing companies or startups that actually build the new platforms and marketplaces of the future. Using tokens (values of an asset), here are four potential solutions that companies can build using blockchain.
Digital Rights Management: As assets continue to get deployed across the Internet, whether that is images, music or code, blockchain solutions to track them would be a powerful way to control and mange the rights to that asset in an extremely secure manner. That could lead to future royalty payments for the owners of that asset.
Unlocking Real Assets: It’s almost impossible to raise funds to support the building of real assets without tons of paperwork and lawyers. But imagine if you were a developer building 200 homes in a new neighborhood and you wanted to generate some more free cash flow without taking on debt. You could convert the value of the land and the new homes being built into tokens, assign a real value to a token and allow multiple investors to buy into a real estate asset class that would appreciate in value and provide a return as the homes were sold.
Investing in Assets: Again, using blockchain technology and tokens, you would have the ability to take real assets around the world and allow people (investors) to invest in the asset without contracts or lawyers by simply purchasing tokens of value for that secured asset. Want to invest in a large plot of land in Montana as a partial investor? You could. Want to invest in a Palladium mine in a foreign country? It would be possible.
Customer Reward Marketplaces: Today, we get gift cards, coupons and special promotions that are used to incent us to buy something. Imagine if these offers were based on tokens of value and available to trade in a digital marketplace. That would allow for not only secure tracking but for people to sell or exchange these tokens based on need or want. You don’t want the 40% off of the product but someone else does. Great, exchange or sell it in a marketplace using blockchain and tokens. The manufacturer or brand stills wins as they gain a new customer.
In the 1800’s it was not always the gold miners who thrived. But the people who sold picks and shovels did. In the early days of the internet, it was not the multitude of startups that were rewarded. Most failed. But the builders of web infrastructure and internet technology thrived. Don’t confuse the adoption of Bitcoin as a digital currency with the enormous potential for blockchain technology.