Ways to Think About Crypto’s Potential

I have purposely avoided writing about the crypto craze mostly because of the full range of mixed opinions, many of them reasonably strong one way or another. Crypto is either the future or a fraud. Apparently, there is no middle ground. I get asked my opinion on what is going on with crypto often so I figured it was time to share a few points that will help us understand what is going on and what the future may hold for crypto and the blockchain.

The Early Stages
This point I’m about to make is one that comes from having been around the block a few times. Granted, I’m not quite 40 yet, I will be very soon, but I’ve been in this industry now almost 20 years and more importantly have learned from industry leaders who have been in tech since the very beginning. There is a constant pattern that innovations follow that every new major technology follows. Crypto and the BLockfain are not different.

The early part of an innovation cycle is highly fragmented. A lot of money and investment goes into the new innovation but there are yet to be any standards or protocols which help unite or define it so mass adoption can take place. This pattern has taken place with every major technology cycle since the industrial revolution. This particular cycle generally creates a bubble, which bursts, which then paves the way for a better version of the whole technology to take place in the following time period. I have written about this before, in this article, where I outline the boom, bust, and buildout cycle of innovation.

The challenge with crypto today lies in the realization that we may be in the boom period of this cycle. I’ve seen many argue that Bitcoin, in particular, will stick in the long-term and it may. Or it may fail like many early technologies in the boom period. This part is irrelevant in my opinion. Succeed or fail, it will pave the way for something much more significant. The critical point and one that I’m convinced of and are many other brilliant people I respect is the blockchain is the underlying technology that matters here. Not necessarily the early implementations of blockchain we see today.

If you are a fan of the HBO show Silicon Valley, the current season has the perfect analogy of Bitcoin. During an episode where Pied Piper attempts to do an ICO (initial coin release) as an alternative to fundraising, the argument was presented that Bitcoin could be like Myspace or Friendster, things that ultimately didn’t succeed but paved the way for Facebook to become the single largest human network the world has ever seen. Understanding Bitcoin in this fashion, succeed or fail, is exactly how I think about it.

Trust and Verification
I don’t want to get into a detailed explanation of how blockchain works, but two fundamental parts of it are the most compelling to me when it comes to the preservation of information. Essentially, in very simple terms, blockchains are databases (records of information) that encrypt every layer of information from the first to last entry. This fundamentally makes information stored on a blockchain nearly impossible to alter and very easy to see if any information is tampered with. When this is accomplished the information can then be more easily distributed (de-centralized) yet still carry with it a record of trust. Meaning, even though the information may be added to from many different parties, we can still trust that it is accurate. Thus the blockchain carries with it a level of verification and authenticity even though it is decentralized. The result is perhaps one of the more powerful value propositions of the blockchain–trust.

The more I have studied and learned about blockchain technology through the years, the more I’m convinced it will touch every industry. Finance, healthcare, retail/commerce, real-estate, government, etc. Every industry is dealing with legacy database and information recording systems that are often subject to human error intentional tampering and fraudulent practices. While I am greatly exaggerating, the current way critical information is stored comes at the expense of the consumer. Centralized systems allow the power to be held by the organization who holds and manages the information. Blockchain and the decentralization of this information place the power back in the hands of consumers/people. You can see why the powers that be may not be super pumped about the blockchain.

Now, what is left out of the current discussion is the role our devices will play in this future. In particular, around a critical role blockchain will play in the future around trust and verification. In the true decentralized digital age, our identity is going to an essential part of this evolution. In a trust-based situation, as much as I the consumer want to know I can trust the information regarding healthcare, finance, retail, real-estate, etc., the service provider needs to also be able to trust I am who I say I am and that all information regarding myself is intact and unaltered. Interestingly, there is one company who makes devices, and software, that aligns pretty well with the blockchain and crypto trend and that is Apple.

Apple and The Blockchain
In all my discussions with investors and pundits on the blockchain/crypto trend, I’m always surprised the iPhone is not used more as an example. My iPhone is essentially a database of information about me and my life and it is also encrypted. Every layer may not be encrypted yet the same way a blockchain database is but it could be. One area that strikes the most resemblance is Apple Pay. Apple Pay is essentially an encrypted and tokenized crypto payment method in every sense of the word. Apple hard encrypts my payment information into the secure enclave (this is unhackable like the blockchain). When I go to make a purchase a random token is generated that authenticates and verifies my payment information and authorizes it to be able to make a purchase. I then use TouchID or FaceID as an added layer of two-factor security to assure the merchant that I am who I say I am and thus no fraudulent commerce activity is taking place. It’s a beautiful system for commerce and one that is highly aligned with the blockchain. It puts the power, security, and mechanisms of trust all into the hands of the consumer.

While that is just an example when it comes to a transaction, it applies as well to our digital identity. Our devices, like our smartphones, and eventually our wearable computers will play important roles in securing, and protecting our identity. If we view our personal technology devices as the ultimate decentralization of our identity, then we can make the case that Apple is as well positioned as any to capitalize on this new way information is stored, managed, authenticated, verified, and trusted.

Again, what’s going on with the blockchain is the big picture narrative. It has the potential to change information systems from every part of the stack altogether. What we see with Bitcoin, and other specific purpose tokens and networks may fail, or succeed, but ultimately they will pave the way for​ something much bigger I’m sure.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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