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In the last two decades, the internet has upended many industries. Giant, powerful corporations were caught off guard by the internet’s liberating influence on information flow. Newspapers, books, music, movies, even retailing—the landscape has completely changed.
And the change has been for the better. I’m not forced to buy an entire album just for that one catchy tune I desperately want. I can now buy just that one particular song, and I can buy it instantly. No need to visit a store and purchase a piece of plastic. The internet has democratized information and liberated it from the need to have a physical form.
During the initial euphoria of the internet’s arrival, I had imagined it would sweep away all the inefficiencies in the market and make it better across the board. But that was so naïve.
Of course, the existing power structure would resist; it would do everything possible to maintain a hold on its industry. And some of these old guards have been very successful in doing so. One industry, in particular, an obscenely profitable one at that, appears to have been totally immune to the effects of the internet.
I’m talking about the world of finance—banks, credit card companies, money transfer corporations, investment firms etc. These guys continue to have an iron grip on the financial industry. What’s worse—they have been able to leverage the net's power to burrow even deeper into our lives.
And we, the masses, continue to suffer because of that. We can fret and complain but there is nothing we can do. You want to buy a cup of coffee and want the convenience of just waving a piece of plastic to pay for it. Well, you can do it but Visa is going to take its cut. Yep! Even on a two-dollar purchase, they want a transaction fee.
It’s untrammeled greed like this that annoys the hell out of me. And I don’t even want to discuss the unfairness that poor migrant workers face when they send money back to their families. 10 percent of remittance fee is totally normal; nothing to get outrageous about.
So why does this continue to happen? Why has the internet not been able to liberate us from these greedy corporations?
One of the main reasons is because of the need for a trusted intermediary. Having a trusted intermediary is essential for monetary transaction between strangers. If I hand over my money to a faceless handle on the internet, what stops him… her… it, from taking my money and disappearing? How do I ensure I get the promised service? That’s where banks and credit card companies step in. They act as the trusted third party in every transaction. They are the oil that keeps the world of finance moving.
And this is where technology and the internet have not been able to deliver us a solution. So far we haven’t been able to figure out how to build an automatic trusted intermediary. The internet is full of scam artists, phishing emails, ransomware, and God knows what else. It’s a scary place for your money. And that’s why we have to put up with financial intermediaries to make sure we can do business with complete strangers.
But, like I said in the heading of the post, the day of reckoning has arrived. Finally, we have the technology that will take away the most valuable role of a financial entity—their need as a trusted intermediary in financial transactions. And guess what follows automation—a cheaper, fairer, and abundant society.
The saviour technology is called Blockchain. The easiest way to understand it is through BitTorrent—the infamous peer-to-peer distributed network that people use to share music, movies and other digital products.
The reason music companies and Hollywood failed to shut down mass piracy, was because of the underlying technology behind BitTorrent. It’s a decentralized system; it doesn’t have a central server that doles out free music and movies. The files are stored across the network, on thousands of user machines. It’s impossible to shut it down.
The same underlying concept is at play with Blockchain. The difference here is the content—it’s a public ledger that is distributed across machines on the network. The ledger is open; anyone can see it, and there is a consensus mechanism for updating the contents of the ledger. After nine years of relentless attacks on Bitcoin, it’s proven that there is no way to game the Blockchain technology. It’s going to change the world.
I believe the change in the financial world will be swift and brutal. There is a lot of pent-up animosity towards the financial types—what with great recession and breach of trust by governments and corporations. People are going to put their money and trust in a system that is fair, impartial and incorruptible.
In Blockchain we trust!