Satoshi Nakamoto was the pseudonym under which a person or persons released the invention of the Bitcoin, and more importantly, the Blockchain. Bitcoin has proved to be influential and has a fervent user-base that believes it holds the keys to upending the banking and finance world through decentralized cryptocurrency. The power behind Bitcoin, however, lies with the Blockchain. And the power of the Blockchain has the potential to spawn new technologies and help the poor.

The Blockchain technology developed by “Satoshi Nakamoto” has been hailed as a practical solution to the “Byzantine General’s Problem.” It does not completely solve the Byzantine General’s Problem, but it does enough to bypass the issue to the extent that it should pose no issue in reality. The Byzantine General’s Problem proposes the flaw of sharing information between, say, two Generals. If one wants to tell the other to “attack point A,” he or she may send a message, but then he will never be sure if the other General got the message. The Blockchain is important because it solves the problem of “double spending” by providing a practical solution to the Byzantine General’s Problem. This means that there is no risk of a Bitcoin being spent twice, which would be similar to counterfeiting money. The Blockchain does this by creating a public ledger that records every transaction that ever took place with Bitcoin. Essentially, the Blockchain enables trust without the need for identity.

Blockchain technology could be used in wide-ranging applications. For example, NASDAQ recently announced that it will be testing Blockchain technology to record transactions of share trades for privately-held companies. Brian Singer explained in an interview with Forbes that he believes that Bitcoin and the Blockchain can substantially reduce poverty around the globe. Singer argues that the ability to have undeniable, transparent ownership of something that everyone can trust is imperative. Ownership of, say, a Bitcoin is ownership overvalue. This undeniable ownership of value that is recognized in a system no matter what anyone says is what causes Singer to believe that the Blockchain technology behind Bitcoin can have a profound impact on the poor. Bitcoin has already caused disruption in the remittance business; immigrants have been using Bitcoin to send money back home. Bitcoin does not demand costly extra fees like Western Union.

The Blockchain also removes the need for a third party, such as a computer server. One purpose of a bank is to store value safely and efficiently and also manage exchanges of value at high rates using credit card and debit card systems, which are centralized. The Blockchain can safely and effectively protect your value from “double spending” and digital theft – only by mistake of the user can it be stolen – and at the same time avoid the pesky fees and rules that banks impose.

Because of the Blockchain’s ability to essentially create trust without identity in a system, it lends itself to secondary innovations such as being used for other distributed systems that are without a central point, such as one server that contains all necessary information. Although distributed systems are not new, the Blockchain could help facilitate the creation of even more. These systems are in many ways more powerful than a centralized system. They rely on much less digital and physical infrastructure, such as a server run by a third party. These systems can run independently of authority. Distributed systems of all sorts have many advantages that lend themselves to the poor. By curtailing the need for a trusted authority or more infrastructures, it makes it easier for the poor to use and access these technologies from their respective countries and makes them more reliable.

It is possible that new innovations will emerge that are of particular use to the poor, as seen when people use the Blockchain and Bitcoin to bypass traditional remittance markets. The possibilities are endless; new companies are popping up and attempting to leverage this new technology. Like the Internet or other technologies, it can be difficult at first to see where the end of the tunnel leads, and the Blockchain may be no different. With smartphones becoming more and more common even amongst the poor, innovations on the Blockchain may hold hidden solutions.

– Martin Yim

Sources: Brookings, Marketplace, Forbes, The Guardian
Photo: The Cointelegraph