Blockchain Systems and the Financial Revolution
This issue is covering the fundamentals of blockchain and why these systems are inherently valuable to our current shortcomings. The most basic level of understanding is that blockchain acts as a ledger for accounting. If someone pays you 5 dollars your ledger book would have a positive 5 dollars and your customer would have negative 5 dollars written at the point of sale. This is how your bank account works; you can see a list of all of your transactions written over time with continuous positive and negatives. This system that we currently use is called SWIFT banking transfer and was introduced in 1973 allowing transfer between banks and other financial institutions. What blockchain systems do is allow everyone to store their banking ledger on a public system where all transactions are visible.
Why is this important if my bank already does this? Great question.
1) This has value because the asset building this public monetary system is deflationary; meaning that over time the asset will become more and more scarce. Think of something that has value to you. If there were a bunch of them do you think it’s value would be higher or lower? It would tend to be lower. Compare that to the greatly inflating currencies of most countries and especially the current strength of the world’s reserve currency, the US dollar.
2) The record is immutable, unable to be edited and has been for over 10 years since it’s inception in 2010. This gives more validity to the ecosystem, as the longer the system remains tamperproof it becomes more valuable.
3) The amount of time saved in a blockchain system is substantial compared to current underlying SWIFT banking protocols. The SWIFT protocols range from 2–5 days for settlement finalization compared to an average blockchain finalization time of approximately 60 seconds.
Over time these factors will lead to a financial revolution similar to how the internet changed data. The birth of the internet allowed for the removal of a middle man that had to print your ideas and add costly production costs. This information sharing allowed for the growth of a multitude of innovations across every aspect of our lives. This change has not yet happened in finance; 1973 is the birth of the SWIFT financial messaging system. Before the internet. That is the last time there has been an upgrade to how all assets are transferred between banks.
Trends in the Current Market:
Multiple big players have been attracted to the table in the last few months leading to an enormous increase in demand. MicroStrategy has acquired 70,784 bitcoins (2.6 Billion USD) since November with other companies such as PayPal and Square are allocating 1% of cash reserves to the rapidly emerging asset as a hedge against the failing dollar . While cryptocurrencies are known for volatility, the higher the price rises the more stability the asset provides as it reaches it’s true value. The nature of the fixed supply leads to wildly changing prices as demand increases from these large corporations looking to save their value in times of uncertainty. While the current trend seems unrelenting, everything that goes up must come down so be on the lookout for a market correction to enter.
Hope you enjoyed this first foray into financial writing as much as I did. As with all of my writing this is not financial advice and is my opinion. I cannot stress enough how important it is to do your own research on all financial endeavors and hope that just as I have been liberated from the bogs of the current financial systems that you to will join me. Let’s build something together.
Let’s end with a quote. Why not?
I believe that banking institutions are more dangerous to our liberties than standing armies. The issuing power of currency shall be taken from the banks and restored to the people, to whom it properly belongs. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered. — Thomas Jefferson
-Dr. Austin Fortner
