As with any new, ‘disruptive’ technological innovation, bitcoin has found convincing the mass consumer market of its usefulness problematic.
3D printing may be able supply astronauts with pizza or on-demand body organs, but has not yet reached the point where the average person is convinced to spend the hundreds of pounds needed to get started. The internet of things offers a way for all your kitchen appliances to communicate online: but not everyone is yet convinced why that’s such a good thing.
For bitcoin, the public appetite for decentralising economic transactions was perhaps not as strong as some were hoping. At the moment the dissuasive security problems, complicated interface and wobbly volatility outweigh the perceived benefits of transferring cash without going through a third party.
Those expecting an overnight revolution will have been disappointed, then. This may go some way towards explaining bitcoin’s overwrought price moves over the past year and a half; when those engaged in bitcoin trading drove its price from $120 up to over $1150 in just a few months, then back down to below $200 over the next year.
That steady decline has led to several pronouncements on the failure of bitcoin to achieve its original objectives. As a proof of concept for the revolutionary ability of cryptography to bring about change in unexpected ways, though, bitcoin has done much more than could have been expected. And there are signs that its biggest innovation, the blockchain, is just beginning to see its full potential tapped.
The blockchain is the idea that backs bitcoin, facilitating payments and limiting fraud without the need for banks to get involved. It works as a massive, open, encrypted ledger that keeps public record of every bitcoin in existence. When bitcoins are transferred, bitcoin miners complete complex algorithms that verify the payment and allow it to be added to the blockchain. In return they are paid in newly minted bitcoin, allowing both money supply and security to be taken care of independently.
In 2011, about two years after bitcoin was introduced, the first new use for its underlying technology was realised: Namecoin. Based on bitcoin’s architecture of the blockchain and mining, Namecoin offers a way to take cryptocurrency’s revolutionary ideas and apply them to website domains.
Namecoin’s code allows for other types of data than financial records to be stored in the blockchain. Because of this functionality, its primary use is as a domain registry: by trading Namecoin, users are either registering a new domain or trading an existing one. This allows for websites to be registered on the .bit domain without the need for a central body, which would typically be ICANN.
Because the .bit domain exists outside of ICANN’s control, a special browser add on is needed to access sites. For that reason Namecoin may never become a mainstream solution. It has, however, inspired many other types of data storage systems using bitcoin: like datacoin and filecoin.
These are the ideas put forward by those who were involved in the early days of bitcoin. But as the ideas behind cryptocurrencies become more widely known and understood, exciting new plans for how to use them come about.
The Fuqua School of Business at Duke University is running a course devoted to finding innovative ways of utilising bitcoin’s blockchain. Some that have already been mooted include the decentralisation of stock market trading, which would see stocks, contracts and even currencies exchanged online instead of via a traditional bank.
The way that the blockchain works – assigning unique keys that validate identity – mean that it could replace traditional locks and offer a way for you to open your car, house or unlock your phone entirely safely and securely. Secure documents like insurance and medical records could be sent and stored in an environment far more secure and private than email or the cloud.
Other technological advancements could well be enhanced with the use of the blockchain. The ‘sharing economy’, for instance, could be even more democratised if it wasn’t always handled by a third-party. Some have postulated that the blockchain could ‘run’ a city’s driverless car network, where the cars are owned by the blockchain and not a taxi company.
Of course it’s early days yet, and much may yet depend on the success of bitcoin (or one of its successors, like Ripple) over the next few years. The blockchain relies on crowdsourced mining to work, after all, and crowdsourcing needs a groundswell of support: especially if it is to be scaled upwards further.
The technology, then, is in the midst of a difficult transition. It needs new ideas to capture the public imagination, but needs bitcoin to succeed for those ideas to work. Many will tell you that the cryptocurrency’s price collapse in 2014 was a normal part of its evolution: for a future of independent travel, communication and storage we have to hope that they are right.