We have been here before. After the internet bubble of the 1990s, Washington entrepreneurs went on to found dozens of companies that helped shoppers buy goods and services online. But at the same time, many of the startups failed as consumers flooded the market with increasingly available products and services, and merchants continually adjusted their retail prices to combat competition. For many entrepreneurial ventures, that cycle only ended with the recession and the eventual implosion of the dot-com industry. Many now see the potential for blockchain to play a similar role in the online market.
Relying on a trustless currency that relies on underlying cryptography, bitcoin still remains the most prominent example of blockchain in a wider field. But it’s not the only one. For instance, many cryptocurrency holders use the common practice of “mining” to generate units of bitcoin. In this way, users provide energy to help create “blocks” of encrypted transactions that are verified by the network. But behind the scenes, traditional computing power – traditionally confined to large software programs that use tens of millions of processors – can perform the same job with a comparatively small amount of power. This increased computing capacity can be used for ever-growing computational feats, such as building ever bigger blockchains.
The blockchain’s potential benefits include a history of transaction costs that would be hard to replicate if a “digital wallet” or other centralized service were responsible for processing payments, a decentralization of existing currencies and an ability to conduct transactions without centralized control. Before the invention of smartphones and messaging apps, check-ins and social media in the U.S. felt extremely centralized and particularly prone to scams, akin to slot machines that quickly run out of money. These problems are addressed by the decentralization of traditional transactions, and with the possibility of blockchain technology-enabled micropayments for popular services, instead of working by paying a fixed rate that could be paid by thousands of consumers, the transaction fees would instead be controlled by a handful of central managers in the private sector.
Chain-connected transactions also further strengthen the attractiveness of cryptocurrencies to mainstream shoppers. At the very least, the average consumer realizes that a well-regulated transaction facilitated by a cryptocurrency like bitcoin could eliminate the need for financing, interest payments and installment payments.
Rather than a single service provider being able to act as a trustless currency, you’d need to use a service provider that aggregates transactions from all the leading services on any given service provider, such as shopping or connecting to friends. This would ultimately open the door to more widely adopted cryptocurrencies because future transactions would be secured and, in the long run, performed more efficiently. For instance, a growing number of companies are offering cryptocurrencies for use in a range of services, as an alternative to traditional fiat currencies. From a global perspective, the addition of a trusted trusted token or other standardized currency associated with an open-source platform will not only make additional services more acceptable and usable, but will make transfer of funds through more complex financial services more effective and smoother.
Though bitcoin and other cryptocurrencies may be initially perceived as less attractive to mainstream buyers, each crypto variant has its own benefits. For instance, potential Bitcoin scammers would face the additional obstacle of the abundance of tokens that will remain in circulation, and customers would easily have the ability to leverage smart contracts (a technology that lends itself to blockchains) in a way never possible before, which could make for instant feedback to a seller or client regarding a fraud and instigate refunds if needed.
Ultimately, the decentralized nature of blockchains has been an asset to anti-corruption and anti-virus companies in the past, which developed popular programs that could be isolated from one another, and empower users to save important information that would not have been accessible otherwise. I predict the same may be true of consumers in the long run.
Copyright 21st Century Press