Blockchains Could Add Trillions of Dollars to the Global Economy

Blockchains Could Add Trillions of Dollars to the Global Economy
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By Toufi Saliba, CEO of PrivacyShell and Chair of the ACM Practitioners Board Conference Committee

Imagine if the entire global economy could run simply on connected smartphones: no cloud, no servers,no central power, no government. This capability is coming, like it or not. Servers and cloud computing can provide ledgers to be queried along with other elements that are nice to have when stored on the cloud such as large files, audios, videos, etc. Other than that, everything can be enabled on the distributed and decentralized non-ledger-based blockchain.

What is the Blockchain technology?Think of the ability to transfer ownership without an intermediary. Then think of a system that records the correlation of these transfers as time goes by, and it does so every 30 seconds (block) while ensuring correlation with the next block, and so on. This is what is meant by a “blockchain.” As long as the representation doesn’t divulge information on the transfer event itself, then you are safe from a privacy perspective, and you can therefore store sensitive data representation with proof of your transaction. This could be used for patents, images, titles, deeds, audit trails, smart contracts, etc.

This is impressive in and of itself, but blockchain promises financial inclusion, truly decentralized immutability, irrefutability, Byzantine fault tolerance, security, and distributed, efficient transaction cost. Those are big promises, and you couldn’t help but like them.

The problem is, many good people so want them to be true that they refuse to accept that they aren’t there yet. Even combined, the throughput of the three major companies that use blockchain is 1,000 times less than that of Visa alone. The same is true for smart contracts when conforming to protocol and not some side chains, state channels or any other peripheral technology.

At the same time, their transactions are costly to humanity. Because, by their nature, blockchain transactions are calculated over a distributed network, they are powered by numerous pieces of interconnected, but separate, hardware. At the same time, as blockchain transactions have become more complicated, they require more sophisticated hardware. When blockchain transactions were first introduced, miners, the people performing the blockchain calculations, used laptops. Today, most miners use application specific integrated chips (ASICs). Both the volume of hardware needed for these transactions, as well as the sophistication of the hardware required, means that keeping blockchain ledgers is a very energy-intensive activity. One popular blockchain-based company alone consumes more electricity than the country of Iceland. That cost incentivizes those running the servers to charge high fees to anyone making a transaction. Currently over $2.5M is collected per day in mining and transaction fees.

Here is the IF statement: “What if Blockchains become fully distributed and truly decentralized? ” This is likely to be an opportunity that could transform the world economy, and we are closer than ever to experiencing it. For example, a fully decentralized and fully distributed blockchain protocol can enable further innovations such as a file ownership to be transferred between nodes or users–both uniquely and universally.

This ownership transfer can be managed by a ledger-based blockchain that is efficient and scalable. While the benefits of ledger-based are obvious, the ledgerless can work really well towards fully decentralized and benefits from the distributed computing so scalability can grow as network grows and cost of exchange can be as close to zero as possible. If the future of blockchain were to become as disruptive as the World Wide Web, we will see moves toward both: ledger-based and ledgerless combined. Think of databases + http. They were both needed for the WWW to exist.

This means that for a file that you own, you will be able to securely transfer that ownership instantaneously to one and only one other owner in the entire system without any centrally-controlled intermediary.

This may sound too simple, but it couldn’t be done before. The file can carry any representation, and nodes can have as many files and file types as they can possibly afford. This will be considered a major breakthrough not only in fintech but in computer science. This is not just the next bitcoin, it’s the next http. In fact, this innovation will be several orders of magnitude more complex than existing blockchain technologies, yet it is an evolution of the blockchain technology. This isn't ledger-based blockchains, this is fully distributed and decentralized.

The promises of Blockchain: 1) Greater financial inclusion for people in developing countries, because there will be an efficient system of securing their finances 2) A new market for the financial services industry to provide mortgages, loans, etc. to 5 billion people. McKenzie estimates this to be a $2 trillion market.

Global prosperity is not only financial services making $2 trillion extra. Financial services are an artifact of new wealth created. Blockchain will power IOTs, AI, insurtech, healthtech, governments, etc. This will result in an increase of the amount of goods consumed, which could double and potentially triple. The benefits to the global economy could be tremendous.

* This article reflects the individual views of the author and does not necessarily represent the views of ACM.

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