I am getting asked a lot of questions on Blockchain. I have promised many that I will start a post and begin putting down some of my thoughts for the IG Community to read and consider. If those who read do not agree or appreciate my thoughts then that is absolutely fine.
In my opinion (based on what I have read on the subject matter) then Blockchain is at the same level to where the Internet was during its earlier years. If Blockchain is applied successfully then it could make the Internet more decentralised which is how it was initially intended. I think it is the most important development since the Internet. For me in simple terms, Blockchain is a form of technology that can record transactions on a permanent basis which cannot be altered. This is extremely useful from an audit perspective. I can envisage most people checking and verifying information on the 'Blockchain'. It may well even replace the word database!
Blockchain is the technology behind Bitcoin and Cryptocurrencies. They exist because of the Blockchain technology behind it and underpinning it. From a technical perspective, Blockchain could be described as a back end database that maintains a distributed ledger. From a business perspective, Blockchain could be described as an exchange network for moving transactions, value, assets without any intermediaries. From a legal perspective, Blockchain validates transactions which replaces that historically trusted institutions / organisations.
One way of looking at Blockchain is merely an extension of the Internet. Those who appreciate the historical evolution of the World Wide Web will appreciate Blockchain and the journey it is heading towards. Just like the World Wide Web needs the Internet so too does Blockchain applications. The ambition is that they can bypass the Web and create a more decentralised version. This is one of the biggest promises of Blockchain technology.
In all my time investing, my experience tells me that as a trend follower, the strongest impact for a trend or technology is whether it has a strong narrative. In my opinion, Blockchain, has an extremely strong narrative. The Internet too had a strong narrative. The most popular use of Blockchain technology has been Cryptocurrencies such as Bitcoin and Ethereum. In simplistic terms, Blockchain is like a very large database.
Blockchain is also very technical. I suggest anyone who is genuinely really interested to read books on Blockchain as that is the only way they can really even begin to understand the complexities behind Blockchain. I am keeping things very simple for the IG Community. However I will add more detail and specifics in future parts to this post.
If one looks at Blockchain from a technology perspective then one will implement it as a technology. However, if one looks at Blockchain as a business change enabler then one will begin to think about business processes. It is only when one starts looking at different business processes where Blockchain could be applied to make it more efficient, effective, robust and quick that the markets around the world really do begin to open up in one's mind.
I think what people forget is that Blockchain offers a genuine new way of implementing trust in relation to transactions. It is perfectly feasible to make an assumption that going forwards in the future it will be machines that will compute trust rather than it being verified by humans. I think from an evidential standard, it is not unreasonable to even suggest that proving that something did actually happen will be served by Blockchains. A lot of people will be aware of smart contracts and smart property. These in my opinion will be Blockchain's initial biggest drivers.
I think the mainstream is simply not educated enough in the subject area to truly appreciate Blockchain and Cryptocurrencies. For example, if I had a rare vintage Swiss watch, expensive art, unique stamp or rare diamond ring then I would go to the relevant specialists and experts to get a true valuation of its worth. Blockchain and especially Cryptocurrencies are the same but the audience commenting on it may not have the specialist knowledge required to even understand what the true valuation could be for Blockchain and Cryptocurrencies. Why should a journalist, news reporter, mainstream media, person on the street, your neighbour, relative, friend or colleague be qualified to even comment that Blockchain and Cryptocurrencies are worthless and frauds. How can they without having the technical knowledge behind the subject area suggest that for example Bitcoin is going down to zero.
I will end this part by stating that we are beginning to accept that the future of cars is 'self-driving' and 'electric / hydrogen'. If we open our mind then we will begin to accept that the future of money is 'digital' and the way to move assets and conduct transactions around the world are going to be based on the 'Blockchain'.
How do I see Blockchain being adopted in financial institutions? This is a question that I get asked a lot. I think they will try and adopt certain parts in a subtle way but it is start ups that are really going to aggressively push the boundaries of blockchain within the financial industry. For those who want exposure to this area then they will have to consider looking at start ups and especially those who have a real 'edge'. Once mainstream banks start providing cryptocurrency services whether it be in the form of digital wallets, crypto bank accounts, or crypto money transfers against fiat currencies then there really will be a blockchain revolution of some form. I think the in between step could be say linking your traditional bank accounts to your crypto wallets. It may be that banks do not adopt such a method and it ends up being the crypto wallets offering links to fiat accounts and currencies.
A key point of Blockchain is that information is cryptographically secure. Trust plays a crucial role. I am mindful of my audience and I could at this point get technical but my aim was to bring some exposure of blockchain to those that may not fully appreciate this new technology. This journey that has began with Blockchain will not be anywhere near complete until it enters into a variety of different industries and governments around the world. Blockchain at its most effective will provide "proof of everything". It will great for audit / assurance. One can see health care, energy, governments and financial sector being great beneficiaries of Blockchain. I have seen signs of adoption of Blockchain with shipping companies and supply chain management.
I remember reading something where Albert Einstein was quoted as saying that imagination was more important than knowledge. This was because knowledge was limited to all we now know and understand while imagination embraces the whole world. Due to limited knowledge about Blockchain people are finding it really difficult to appreciate it. Those that do appreciate it have read about the subject area and hence they have the knowledge to embrace and accept it. Those who created the concept of Blockchain and made it possible to execute are those with great imagination who created the knowledge for others to acquire.
Blockchain does not just improve processes. For me it is a disruptive technology and if it fulfils its potential then can be game changing which is why I am extremely interested from an investment perspective. To really create genuine true wealth, one needs to invest in those disruptive, game changing investments and this is where Blockchain could present returns similar to the likes of Amazon, Google, Apple, etc. Those who held for say a 20 year period are sitting on unimaginable returns. The best way one could describe Blockchain is that it is a new major software development platform. I have read recently that Universities are looking at offering courses on Blockchain. Education will be key. Those countries that offer this through recognised qualifications will attract those with great imaginations that provide knowledge for others. It is a must that the new generation learn the basic functionality of a blockchain and what it enables generically.
For me there is no doubt that for start ups the Blockchain is a disruptor. Larger companies do not generally like to disrupt themselves for this is what start ups are essential to the success of Blockchain adoption. In my personal opinion you can either take a proactive approach to education yourself on Blockchain technology or you can wait until the market educated everyone. For those who want to get in early for the bigger returns and larger profits then it makes sense to educate yourself. If you wait for the market then you will amass returns similar to others who acted in a similar way. For those who have studied any sort of Business degree will understand 'Business Process Re-Engineering'. I remember reading a book which suggested that implementing the blockchain was around 80% about business process changes and around 20% about figuring out the technology behind it.
As someone who is involved in start up investing and who gets sent investment proposals and business plans, one of the first questions that I tend to ask is what the specific problem is that this business is trying to solve. When looking at Blockchain opportunities a potential investor needs to ask is it actually solving a real problem and will the solution that Blockchain offers truly improve that business and bring with it efficiency, speed and a higher level of effectiveness. One thing to remember is that the truly great businesses do not just solve a problem. They create new opportunities instead of solving existing problems. Spotting such businesses in the start up arena associated with the use of Blockchain is the most difficult and challenging aspect.
In the future there could be a crypto economy based on Blockchain. This could create millions of jobs worldwide. Value creation will be a key feature. Part of that value will be running services on the Blockchain. This is a new frontier. Yes, it is ultra high risk and I believe we are at an early stage of really understanding and appreciate the value the Blockchain can truly bring to a possible crypto driven economy. We use the term 'Fin-Tech' but who knows there may be a new term like 'Crypto-Tech' which will embrace us. I can see cryptocurrency only banks emerging around the world. I think digital wallets will become mainstream and be embedded into future smartphones and smartwatches. I have already started seeing services where users can earn cryptocurrency by performing routine services and I think these will grow in popularity.
I have already seen businesses attempting to set up businesses involved in the digital trading of commodities like gold and diamonds on the blockchain anywhere in the world. I read something recently which summed up how to describe what we may witness in the coming years. It was something like the crypto economy being a trust economy that was decentralised at birth. I thought this was a wonderful way to describe in a few words what we may begin to see not just in the future but now.
For those familiar with the Marvel Cinematic Universe will appreciate why this section is titled the 'Easter Egg'.
I think IG could reward the IG community in cryptocurrency and this would be revolutionary.
It would also attract top quality content, information and knowledge to be shared with the IG Community.
I think IG should seriously think about this idea. If participants get paid to provide value that leads to a transaction opportunity then IG must seriously consider this. For example if I wrote a piece on a trade for Bitcoin or even a commodity like Lumber and this led to what IG deemed as a transaction opportunity then IG could pay me in crypto.
If IG wants to create a world class IG Community that benefits its members and educates others which can lead to an increase in transactions on its platform then it must incentivise the authors that post on it quality material. I don't just mean posting chart after chart or posting links after links. I mean top quality content which makes those who read it seriously think about the subject area. It must educate those who read it and offer seriously value enrichment to its readers. This will drive up the quality of the posts. It is not about the quantity but the quality. So for a supreme, world class post it could reward the writer more cryptos.