Tell people that you’re interested in cryptocurrency and they might feel that you’re talking about Bitcoin.
If they’re a bit more knowledgeable they might also be aware that there are other digital coins floating around on exchanges, rising and falling in value, and hopefully proving to be good investments for people who got in early.
But there’s still a tendency to associate blockchain technology with coins and digital currencies. Bitcoin picked up so much attention from the media at the end of 2017 that the real potential of the technology that underpins it has been overlooked.
Bitcoin is just one use of the blockchain. It’s an obvious use, and it’s currently the most popular one. But it’s still just one example of the way the blockchain can be used—and it might even turn out not to be the most important.
The blockchain is an authentication tool. It makes a record of the movement of an object from one account to another, and it ensures that that record can’t be changed.
That’s perfect for a currency. It means that no one can forge a new coin or spend the same coin twice. By controlling the rate at which new coins are created, it’s also possible to guard the currency against the kind of deflation that constantly chips away at fiat currencies.
But that kind of record-keeping is important for other things too. If you swap the coin for a token and associate that token with real-world objects then you get an unchangeable record of the ownership of… anything.
That’s what ICOs are doing. They’re not just releasing more digital currencies into the world that people aren’t likely to spend. They’re creating tokens that will be used to safeguard the activities of a real business. And when investors decide to buy those tokens, they’re not just hoping that they go up in value. They’re looking at the business. They’re reviewing the white paper in the same way that venture capitalists look at pitch decks.
If the business looks good, and the team behind it is experienced and talented enough to make it happen, then the business should succeed. It will succeed not because it’s supported by the blockchain. It will succeed because the idea is innovative and the product or service delivers a solution. As the business grows, demand for the token will rise, and that will make the investment worthwhile.
A willingness to invest in an ICO isn’t a vote of trust in the blockchain. It’s a vote of trust made according to old-fashioned business criteria.
It’s a bit like a casino-owner offering chips for sale at a discount before the casino has been built. If you think the casino will be a success, then buying the chips now will give you an asset that will rise in value as people visit the casino and need chips to put on the tables. It will also give the owner the money he needs to hire the croupiers and lay out the roulette wheels. The more successful the casino, the more demand there will be for the chips, the more you’ll be able to charge for them.
It’s still early for blockchain-based businesses, but a few developments are already starting to happen. Patrick Byrne, the CEO and founder of Overstock, has used the blockchain to register land holdings in Zambia and authenticate elections in West Virginia. Steem powers Steemit, a content platform. And ShareRing is looking to power the sharing economy.
These aren’t cryptocurrencies. They’re real businesses built on the blockchain.
Joel Comm is New York Times best-selling author, blockchain enthusiast, professional keynote speaker, social media marketing strategist, live video expert, technologist, brand influencer, futurist and eternal 12-year old. His latest project is as co-host of The Bad Crypto Podcast, a top cryptocurrency show making the future of digital payments easy to understand.
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