Millenial Money

How Block chain is changing money and businesses

The technology likely to have the greatest impact on the next few decades has arrived and it’s not social media, it’s not big data, it’s not robotics, it’s not even AI. And you’ll be surprised to learn that it’s the underlying technology of digital currencies like bitcoin. It’s called the block chain. It’s not the most sonorous word in the world but it is the next generation of the internet and it holds vast promise for every business and every society and for everyone individually. For the past few decades, we have had the internet of information. When you send someone an email or PowerPoint file or something, you are usually sending a copy, and that’s great because it’s democratized information. But when it comes to assets, things like money, financial assets like stocks and bonds, loyalty points, intellectual property, music, art, a vote, carbon credit and other assets…sending a copy is a really bad idea. If I send you a 1000 shillings, it’s really important that I still don’t have the money and that I can’t send it to someone else. This is the double spend problem that cryptography aims to curb.


Today we rely entirely on the middleman/big intermediaries like banks, government, big social media companies, credit companies to establish trust in our economies. These intermediaries perform all the transactions and business logic of every kind of commerce from authentication, identification, clearing and settling to record keeping. And overall they perform a pretty good job but there are growing problems. To begin with, these intermediaries are centralised meaning they can be hacked and increasingly are and some companies etc. have had to find out the hard way. They also exclude a lot of people from the global economy for example people who don’t have enough money to have a bank account. They slow things down; it can take second for an email to go around the world but it can take days or weeks for money to move through the banking system across a city or country. And they take a big piece of the action (10 to 20% just to send money to another country. They capture our data and that means we can’t monetize or use it to better manage our lives and our privacy is undermined and the biggest problem is that overall they have appropriated the largess of the digital age asymmetrically where we have wealth creation but growing social inequality


So what if…they were not only an internet of information but an internet of value…some kind of vast global distributed ledger running in millions of computers and available to everyone. Whatever kind of asset from money to music could be stored, moved, transacted, exchanged and managed all without powerful intermediaries. What if there was a native medium of value? In 2008, the world financial market/industry crashed and out of that some anonymous guy who goes by the name Nakamoto created a paper where he developed a protocol for a digital cash that used an underlying cryptocurrency called Bitcoin. This cryptocurrency enables people to establish trust and do transactions without a third party. This seemingly simple act set off a spark that’s ignited the world and that has had everyone excited, terrified or otherwise interested. Now don’t be confused about bitcoin. Bitcoin is an asset that goes up and down and that should be of interest to you if you are a speculative investor. More broadly it’s a cryptocurrency not a fiat currency controlled by a nation or state and that’s of greater interest. But the real game changer here is the underlying technology…BLOCKCHAIN.


For the first time now in human history people everywhere can trust each other and transact peer to peer. And trust is established not by an institution but by collaboration, by cryptography and some clever code. And because trust is native to the technology…it’s the trust protocol. Now you are probably wondering; how does this thing work? Fair enough. Assets, digital assets like money and music and everything in between are not kept in a central place but are distributed across a global ledger using the highest level of cryptography. And when a transaction is conducted, it’s posted globally across millions of computers. Out there is a group of people called miners? These are not young people, they are bitcoin miners and they have massive computing power at their fingertips (10 to 100 times bigger than all of google worldwide) and these miners do a lot of work.


Every ten minutes kind of like the heartbeat of a network, a block is created that has all the transactions from the previous ten minutes and then the miners get to work trying to solve some tough problems. They compete and the first miner to find out the truth and validate the block is rewarded in digital currency e.g. in the case of the bitcoin block chain with bitcoin. Then that block is linked to the previous block and the previous block to create a chain of blocks and each is time stamped kind of like a digital wax seal. So if I wanted to go and hack a block .g pay two people with the same money, I would have to hack that block plus all the preceding blocks; an entire history of commerce; on that block chain, and not just on one computer but across millions of computers SIMULTANEOUSLY all using the highest levels of encryption in light of the most powerful computing resource in the world watching me….TOUGH TO DO. And this is infinitely more secure than the computer systems we have today. That’s how block chain essentially works.


The bitcoin block chain is just one. There are quite a number. The ethereum block chain was developed by a 19 year old Canadian and this block chain has some extraordinary capabilities. One of them is that you can build smart contracts. It’s a kind of contract that self-executes by handling the enforcement and the management performance and payment (the contract has kind of a bank account in a sense) of agreements between people. Today on the ethereum block chain, there are projects underway to do everything from create a new replacement for the stock market to create a new model of democracy where politicians are accountable to citizens.


To understand what a radical change this is going to bring, let’s look at one industry…financial services. Imagine the Rube Goldenberg machine. It’s a ridiculously complicated machine that does something really simple like crack an egg or shut a door. Just like a financial services industry. You tap your card in a store and a bit stream goes through a dozen companies each with their own computer systems some of them being 1970s mainframes older than a lot of people reading this then three days later a “settlement” occurs. With a block chain financial industry, there would be no settlement because the block chain and the settlement is the same activity (just a change in the ledger). All over the world, the financial industry is in upheaval wondering if it will be replaced or how do we embrace this technology for success.


Now why should you care? Some applications of block chain include; PROSPERITY. The first era of the internet, the internet of information, brought us wealth but not shared prosperity, and social inequality is growing. Which is at the heart of all the anger, extremism and protectionism and xenophobia and worse that we are seeing growing in the world today…Brexit being one of the most recent cases. Could we develop some new approaches to this problem of inequality because the only approach we have today is redistributing of wealth (tax people more and spread it around more)

Rather than re-distribute wealth, could we pre-distribute it?

Could we change the way wealth is created in the first place?

Could we do this by democratizing the way it is created? Engage more people in the economy? And ensure fair compensation?


Five ways to do this:

  1. Protecting rights through immutable records

70% of the people who have land in the world have a tenuous title to it. Hernando Desoro, a Latin American economist identified that this is the number one issue in the world in terms of economic mobility; more important than having a bank account. Because if you do not have a valid title to your land, you can’t borrow against it and you can’t plan for the future. Today companies are working with governments to put land titles on a block chain which will make it immutable and unhackable.


  1. Creating a true sharing economy

A lot of writers talk about uber and airbnb etc. as part of the sharing economy. This is a very powerful idea that peers can come together to create and share wealth. These companies are not essentially sharing wealth, in fact they are successful because they do not share. They aggregate services together and sell them. What if instead of Airbnb for example being a 25bn corporation, there was distributed application on a block chain that is owned by all the people who have a room to rent? When someone wants to rent a room, they go on to the block chain database and all the criteria helps them find a room and the block chain helps with the contracting and identifies the party, handles the payments through digital payments in-built into the system and even handles reputation because if it rates a room as a 5-star room that room is there rated and its immutable. The big sharing economies disruptors in Silicon Valley could be disrupted and this will be good for prosperity.


  1. Ending the remittance Rip-Off

The biggest flow of funds from developed worlds to developing worlds is not corporate investments and it’s not even foreign aid. Its remittances. The global diaspora of people who have left their ancestral lands and sending money back to their families. More than USD 600 MN a year and growing. There is a block chain system called Abra which allows direct transfers of funds without going through an intermediary. Abra has tellers who are easily accessible to hand over the money saving time and transaction fees (which are subsidized)


  1. Recapturing identities and enabling citizens to own and monetize their own data

The most powerful asset of the digital age is data. Data is a new asset class maybe even bigger than previous asset classes like land during the Agrarian revolution or Industries in the industrial revolution…even bigger than money. People create this data, this asset, and we leave a trail of digital crumbs throughout life which are collected into a mirror image of you; a virtual you; one that may know more about you because you can’t possibly remember what you did or said about a year or so ago specifically. At the moment, the virtual you is not owned by you, which is the big problem. Imagine an identity in a black box; a virtual you owned by you. This black box would move around with you as you travel through the world and in life and its stingy. It will only give away the shred of information that is required to do something. Most transactions sellers don’t even need to know who you are, they just need to know that they got paid. The avatar would be sweeping up all this data and enabling you to monetize it. This is a good thing because it will help protect individual privacy which is the foundation of a free society. Block chain will allow one to get this asset they own back in control where you own your identity and manage it responsibly.


  1. Ensuring compensation for the creators of value

There are a lot of creators of content who do not receive fair compensation because the system of intellectual property is broken. It was broken by the first era of the internet. E.g., music; musicians are left with crumbs at the end of the food chain. If you were a song writer 20 years ago you wrote a song and it got a million singles and you got royalties of around 40k. Today you are a song writer, it gets a million streams, get 36 dollars, enough to buy a nice pizza. Grammy winner Imogen Heap is now putting music in a block chain ecosystem which she calls Mycelium. The music has a smart contract surrounding it and the music protects her intellectual property rights. You want to listen to the song, its free or its a few micro cents that flow into a digital account. You want to put the song in a movie that’s different and the IP Rights are all specified. You want to make a ringtone that’s different. The song becomes the business built on this platform marketing itself, protecting the rights of the author and because the song is a payment system in the sense of a bank account, money flows back to the artist allowing the musicians to control the industry rather than powerful intermediaries. Not just songwriters but any creator of content like art, inventions, scientific discoveries, journalists. People who don’t get fair compensation but will have the power through block chain


Technology doesn’t create prosperity people do but the technology genie has escaped from the bottle, giving humanity another stab at rewriting the economic power grid and the old order of things and solve some of the world’s most difficult problems if we will it.

Article transcribed from Ted Talk 

My mission is to help you (and myself) exploit these opportunities and break free: launch a business, start a charity, travel the world and read as many books as is humanly possible!


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