The More Important Question:
Where Should We Use Blockchain
Over the last month, a few events seem to be skewing the direction of blockchain. But is that important in the long run?
1. ICO Regulations and Restrictions
The Wild West Suddenly has Some Rules
First, the United States of America’s SEC cracked down on nonsensical ICO’s forcing them to comply with securities regulations and pass the Howey Test. More on that here.
And now, China has banned ICO’s. More on that here.
What is an ICO?
An ICO, or initial coin offering, is a fundraising strategy for cryptocurrency/blockchain ventures. Often unregulated, these went from optimistic, new age fundraisers that allowed the little guy to participate, to pump and dump schemes. The tokens that would be received in exchange for funds were worthless and the projects they represented, not more than an unoriginal idea and a landing page. Regulation and restriction was, by many, expected.
2. Hype vs. Realism : Where is the Common Sense?
Day traders, inexperienced millennials, and scammers populate many of the slack channels and messaging boards of popular cryptocurrency projects. “To the moon” is a more common saying than anything else, and people talk about how project X is more promising than project Y because of a single feature. In reality, many people try to hype up their investments, hoping to sell high and make a quick buck.
This is the reality of many coins and projects currently, and it is blinding us from reality by leading to unhealthy expectations.
A coin that one of our members recently invested in promises a VISA partnership for their cryptocurrency debit card. When their app was released without clear instructions on how to obtain a debit card and certainly with no VISA partnership, our member quickly dumped the coin and wrote off the project (as many, many others did). This is toxic for the community. Is it realistic to expect these revolutionary companies to succeed over night? Is it realistic to expect that they’ll have a functional, secure product running on Ethereum, a technology that is hardly two years old? The answer that people are unwilling to admit to is NO… we must step back, think with our head and not our money, and resurvey the situation.
But, what really matters?
Nearly everyone new to the space that we talk to will discuss the crypto prices, the pump and dump schemes, or the latest ICO. But, all that is very in the moment, short term thinking. Sure, a few lucky HODLers will be millionaires, maybe some multi-millionaires, but THAT IS NOT the future of this space.
Many think that tokenization and ICO’s are the first killer application for blockchain technology. Well… looks like ICO’s may not live up to all the hype. Others will say tokenization of assets, governance, supply chain, currency, etc. There are many ideas being throw around, pilots being tested, POC’s hacked together, but there is no consensus (pun intended) on what the killer application(s) of blockchain will be.
So what are the characteristics of a blockchain application?
There are two requirements for using blockchain technology:
- An exchange of value. First and foremost, a blockchain is a ledger of transactions. If your proposed application does not need a ledger of transactions, then you definitely don’t need blockchain technology.
- A need for trust. The beauty of blockchain is the audibility of the data. Due to the decentralized nature of a typical blockchain network, no single party can tamper with or corrupt the ledger. Thus, it is possible to create a network of trust between parties that may hate and/or distrust each other.
And really, that is it.
Consider Bitcoin: it has an exchange of value, Bitcoins, and a need for trust, people don’t necessarilly trust that Bob will send them their promised money.
Why is Proof of Vote a good application of blockchain technology?
An exchange of value: the exchange of value in the Proof of Vote application are votes. Votes are valuable because they allow people to be elected, and stealing votes, hacking votes, and accumulating votes are all inherently valuable propositions.
A need for trust: people NEED to trust that the election system is fair. In today’s world, there is no guarantee or way to verify your vote is counted and un-tampered. If votes were to be broadcasted on the blockchain, and you were able to anonymously identify your own vote, you’d be able to instill trust in an historically untrusted system.
Conclusion
People get caught up in the ups and downs of the short term events in the blockchain space. Yet, what will really dictate the direction of this evolving technology is not the latest ICO, but the first truly ground breaking application; we need to start looking at the long term and step back and appreciate how far we have come. Then we’ll realize, the path ahead is even brighter than we imagined.
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NOTE: this was originally posted by me on Medium.