“Blockchain Will Revolutionize Agriculture and Food Supply Chain”, “Study Reveals 6 out of 10 Major Corporations are Looking at Blockchain Technology Integration”, “Dubai Set to Achieve Goal of Becoming First Blockchain Government by 2020”, “Hackers Seize $32 Million in Ethereum in Parity Wallet Breach”, “116 Billion to Set New All-Tie High

[1]

” – these are just a few of the recent headlines shooting across Twitter, LinkedIn, Facebook, SteemIt, and many other social media platforms regarding the coming revolution of Blockchain technology.  Despite the interesting article headlines for Blockchain, the most simplistic question remains for so many people: What in the world is this thing called blockchain? 

Our hope in this article is to define blockchain, explain how it works and why it is important and how might this new technology disrupt global civil society. At the very end of the article, we also provide a host of additional resources that we curated that may be beneficial to you as you explore this new and exciting technology and business movement.   Over the next few months, we will publish additional articles digging deeper into this evolving space.  Future articles will include but are not limited to, 1. What are the legal implications for blockchain companies, 2. What are the tax consequences for blockchain entrepreneurs, 3. What is a token, 4. What does the SEC think of blockchain and the tokenization movement, 5. What are the IRSs positions on blockchain and tokens, 6. What are the consumer issues that blockchain companies should be aware of, 7. What should blockchain entrepreneurs know about fraud, 8. How are tokens valued, 9. How should tokens be valued, 10. Is a token a security or a pre-payment for goods and services? 11. How does blockchain help capitalism? 12. What are the ethical implications of blockchain technology, 13. What are some of the new business models and strategies being employed by blockchain companies, 14. What industries will be impacted by blockchain in the short term and longer term, and 15. Where do we see the future legal, tax and consumer issues coming from?  These are just some of the ideas we will discuss but should a topic of interest be relevant to you, and we have not covered it, feel free to give us a call directly.  Our contact information follows below. 

Internet 1.0

In order to understand Blockchain technology, perhaps it makes sense to first define the basic technological infrastructure of companies doing business over the Internet today.  We refer to the current Internet infrastructure as Internet 1.0.  The Internet is made up of a multitude of different businesses where many are providing services online where users contribute content, engage in commercial activities, and/or share ideas.  The actions completed over the Internet are typically stored by the company providing the services.  These actions are stored as structured content in a centralized database or ledger, and the structured content is typically owned by the company providing the service. 

Amazon Example 1.1

As an example, Internet purchasers using Amazon have a user profile which is created by them and where their purchasing and shopping/browsing information is stored by Amazon.  This information can be used by Amazon to help sell more services to the Internet user, and/or can be sold to service providers.  In this current landscape, Amazon captures all purchasing and browsing information on their centralized server, and typically does not share this information with anyone else unless compensated to do so.  Because of this centralized database, it becomes prone to hacking, where the database can be altered and where limited if anything can be proven after the fact.  In this sense, the Internet user can be irrevocably harmed.  Another interesting fact related to the Amazon example is with respect to the transaction itself.  Under the current landscape, a seller posts content on Amazon, with the anticipation that a buyer sees the content and chooses to purchase it.  In this transaction, the money is sent to Amazon by the buyer, the product is delivered by the seller, and once the product is delivered and accepted, money is transferred from Amazon to the seller. It typically takes 3-5 days after acceptance of the product for the seller to have access to his sale proceeds.   

In this example, the buyer’s information is captured and owned by the service provider; the data is stored in a single location and can be hacked and stolen by bad actors; the data can be used to manipulate the purchaser; the seller of the information on the platform gets paid 3-5 days after the sale; and Amazon receives an agency fee for providing such services. 

Blockchain Controls for Many Internet 1.0 Shortcomings 1.2

Blockchain was created by a pseudonymous person or persons referred to as Satoshi Nakamoto (Nakamoto).  Nakomoto’s main contribution was the design of a peer-to-peer electronic cash system using a cryptocurrency.  This cryptocurrency is what is presently referred to as bitcoin.  Bitcoin is unlike any other currency in the sense that it is not controlled by any sovereign state, cannot be increased or decreased because of macro-economic fluctuations and comes with predefined rules between the users of the coins.  A bitcoin is a digital record of ownership to a certain property, and this ownership is validated by billions of devices (referred to as Miners) throughout the world simultaneously.  Unlike the bank providing you information about ownership to dollars and other things in your account (single ledger), the record of ownership to digital assets is known by the entire population simultaneously (distributed ledger), thus further increasing trust between parties as trade and transfer of assets begin.  The technological architecture used to transfer these coins and validate ownership is referred to as the blockchain. 

The blockchain is an architecture and protocol where information is stored simultaneously in multiple places – called nodes.  Rather than validation of ownership occurring via a bank or a company like Amazon, everyone in the community has a record of activity as it happens in realtime. This means there is no single point of failure in the network. This is what is referred to as a distributed ledger. But blockchain goes further than the distributed ledger.  Not only are records saved in multiple locations simultaneously, but these records grow over time and are saved in sequential records called blocks, and each of these blocks are chained together and secured using cryptography.  Cryptography is an ancient practice to convert information to a readable state from what appears to be nonsense (Remember The Imitation Game).

Why Blockchain Technology is Important 1.3

Blockchain is important because it will change the way in which commerce happens over the Internet and will most likely usurp many of the brick-and-mortar service providers such as broker dealers, agents, accountants, lawyers, banks and the list goes on.  Other industries will also be disrupted, including but not limited to social media, where content contributors do not receive much, if any compensation for their contributions.  Internet 2.0 hopes to change this, by providing market participants the opportunity share in the value they bring to certain products and services. 

Future Disruption 1.4

Future disruptions will include but not be limited to the recreation of industry boundaries and failures of some legacy industries but rather will open an entire new way to envision commerce and social good as byproducts of each other.  It seems like disruptions may occur on a geopolitical scale with many countries adopting this technology winning, and other countries losing.  If there were one major disruption that appears to be coming is the redistribution of wealth on a scale no seen since the turn of the 18th century. 

Additional Resources 1.5

Following are a list of resources that may help you as you navigate this new wonderful world of blockchain.

1.     

BLOCKCHAIN EXPLAINED (basic overview)

https://www.youtube.com/watch?v=YIVAluSL9SU

2.     

RADICALLY TRANSFORMING THE ECONOMY (Beginner Video)

https://www.youtube.com/watch?v=RplnSVTzvnU

3.     

BLOCK CHAIN REVOLUTION (Beginner Video)          

https://www.youtube.com/watch?v=3PdO7zVqOwc&t=237s

4.     

THE BLOCKCHAIN AND US (General Overview)

https://www.youtube.com/watch?v=2iF73cybTBs

5.     

19 INDUSTRIES THE BLOCKCHAIN WILL DISRUPT

https://www.youtube.com/watch?v=G3psxs3gyf8


[1]

All of these headlines were captured from Cryptocoinsnews, www.cryptocoinsnews.com