In the present times, Blockchain has become a widely adopted word. People are constantly mentioning the transformative and disruptive potential that this technology will bring. It is common to hear that Blockchain will be as disruptive as the internet. If we define a Blockchain as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way; it can get a bit tricky to understand how this can be a parallel to the internet. Since the word Internet can have an ample variety of meanings, the parallel between blockchain and the internet should be different. The right thing to compare Blockchain with is the internet’s protocol – TCP/IP. In the following article, we briefly explain what TCP/IP is, and show a parallelism between it and Blockchain.
TCP/IP (transmission control protocol/internet protocol) was introduced in 1972 as a the basis for email in the ARPAnet, a communication network of the US Department of Defense that precedes the internet. TCP/IP transmits information by digitizing it and breaking it up into very small packets with address information. After being released into the network, the packets can take any route to the recipient. Sending and receiving nodes at the network’s edges disassemble and reassemble the packets to interpret the encoded data. This created an open, shared, public network with no central authority responsible for its maintenance and improvement. It also eliminated the need for dedicated private lines and massive infrastructure, which were required to communicate data in the previous telecommunications architecture based on “circuit switching”.
Once TCP/IP was set, the advent of the world wide web gave rise to a whole new industry. Harvard Business Review wrote an article describing patterns of technology adoption. They state that transformative technologies go through four phases before they completely transform the economy. These phases are single use, localized use, substitution, and transformation. Lets see how TCP/IP went through these phases:
It is clear that TCP/IP had a huge impact on the economy and reshaped most aspects of it. Through initially powering the email, the protocol went on to lower the costs of networks and gave people access to bilateral messages. If we take “giving access to bilateral messages” as a general and basic thing that TCP/IP contributed, what would Blockchain’s contribution be? The contribution is that it enables bilateral transactions. If TCP/IP managed to become the main system for connections and communication, Blockchain could become the main system for transactions of any type, causing a profound impact and a very radical shift.
The possible applications are endless, so lets start with a business case. Currently, businesses keep records of all transactions. These records track past performance and help guide the future for planning. As of now, these organizations have no master ledger of activities, and they distribute their records across internal private ledgers that are prone to error. A stock transaction can be a good example to describe the deficiencies of the current way the companies track their transactions. Stocks can be transacted in seconds, but stock ownership transfer between companies can take weeks. If companies maintained a blockchain that recorded these transactions, this transfer of ownership could be cleared in seconds. Now let’s go back to back to the four phases of technology adoption and map out Blockchain’s position there.
Blockchain is on the right track to completely transform our economies. The first step of single-use has been clearly fulfilled, and localized efforts of adoption are increasing everyday. If we look back to TCP/IP and internet, we can find some interesting parallels. First off, it is important to recognize that the first uses of TCP/IP are no longer working. ARPAnet is dead, and so is Netscape. At the current stage we are at, it is still unclear which will be the dominating projects in the field, as they might change several times. People are connecting to their friends with Facebook, not with Myspace; people are also making their searches on Google, not Altavista. It will be interesting to see what the future brings.
Here at Pool of Stake, we are convinced that Blockchain is the future. It has the endless potential to alter one of the most basic things in human relations, which are transactions. Additionally, we are convinced that Proof of Work Blockchains (like the one Bitcoin uses) will soon phase out, just like many of the first projects using TCP/IP that no longer exist. The future for the next steps of adoption lies on Proof of Stake Blockchains, which function on a more decentralized, fair, and environmental way. Pool of Stake is developing a pool that will let PoS coin holders stake together to share rewards!