On one hand, the developers of bitcoin continue to find an assertive solutions for the block size problem. On the other hand, the people who are getting to know about bitcoin are rather focused towards the disruptive and innovative power of the bitcoin’s blockchain technology and are trying to investigate further on its possible applications, the sharing economy and P2P lending services.
Blockchain’s disruptive power
Blockchain’s disruptive potential has given birth to its own philosophy of community empowerment and solidarity-based finance, as a result of decentralization. This is evident from the growing number of working papers and position pieces, such as “How Can Cryptocurrency and Blockchain Technology Play a Role in Building Social and Solidarity Finance?” by the United Nation. Another example is the publication by Deloitte LLP’s David Schatsky and Craig Muraskin, which bring into lightblockchain’s salient features that increase the possibility for innovation in every major industry: reliability and availability, transparency, immutability and irrevocability, and blockchain’s digital nature.
Also according to Rodriguez,
‘The architecture of the blockchain can enable the first effective peer-to-peer (P2P) e-commerce network in which buyers and sellers can interact directly without the need of a central authority. The absence of a central marketplace eliminates many of the restrictions of e-commerce models such as fees, regulated transactions, etc.’
Blockchain successfully paved way for peer-to-peer economy, which is now among the examples for the technology’s disruptive and innovative potential given by Don Tapscott, Senior Advisor at the World Economic Forum and the fourth most influential thinker in the world for 2015, according to Thinkers50 Awards. Tapscott described to blockchain as “the biggest innovation in computer science in a generation” which “holds the potential for unleashing countless new applications and as yet unrealized capabilities that have the potential to transform everything in the next 25 years.”
In an interview for WSJ, Tapscott further explained blockchain’s disruptive abilities in services such as Uber and Airbnb, the key expressions being “real sharing economy” and “distributed application on the blockchain.” Tapscott concluded:
“Ultimately, I think, we are looking at potentially some huge changes to the deep structure and architecture of the corporation… We are looking at really radically distributed models of how we create value in society, how we orchestrate capability to innovate…”
Decentralization and ‘sharing economy’
Looking at the innovative side of bitcoin and blockchain technology, these gave rise to the so-called ‘sharing economy’ and their impact on the process of value generation grabbed the attention of economists in no time. For instance, Arun Sundararajan from the NYU Stern School of Business also referred to Uber and Airbnb as prioritized examples for crowd-based capitalism, explaining the re-aggregation of distributed value from blockchain markets. More importantly, Sundararajan said,
“…What we are doing is we are taking economic activity out of institutions. Over the last one hundred years we have evolved into an organisational economy, one in which most economic activity is mediated by large companies and we are starting to shift some of that activity into these decentralized peer-to-peer communities which are largely market-based; which are largely based on a digital platform sitting between people who have stuff or have money or have labour and people who need it.”
Consequently, a new generation of P2P markets has appeared:
“…We’ve seen the demonstration of pure peer-to-peer, decentralized payment systems through the emergence of bitcoin. And this signifies sort of the next generation of P2P markets for the following reason: all of the examples I gave you thus far were examples where the crowd was the source… the source of information, the source of labour, the source of capital, the source of money. Bitcoin represents a shift where the crowd becomes the market. The entire clearing of transactions and managing of the markets is done in a decentralized consensus-based way where you don’t need an Airbnb or an Uber, but this entire set of people who are participating in the market are also running the market.”
Sundararajan said, an important question is raised by development of peer-to-peer market, namely whether this is actually an example of decentralization:
And so, even though this decentralized blockchain based peer-to-peer future does show a world in which there will be a much larger scope of distributing value among participants, But still… we are going to see over the next decade, the creation of seams that re-aggregate some of this appraise through either the logistics or through trust and stature, or through pursuing and discovery.
Sundararajan is one of many experts who compare bitcoin and blockchain to the early internet. He, for instance, recalls the effect in re-aggregation of value through innovation in search and discovery that Google brought to the table, thus introducing a new level of centralization to the initially decentralized system. In two recent blog posts the director of MIT Media Lab Joichi “Joi” Ito made the same comparison:
Bitcoin is a decentralized, efficient and based on an open protocol transportation infrastructure. Bitcoin’s protocol, the blockchain, allows establishment of trust between two mutually distrusting parties efficiently. Although one can claim that the ledger is “centralized”, it’s created through mechanical decentralized consensus. …Similarly, we can say that Bitcoin is the first one of its kind of app of The Blockchain just the way email for the beginning of the Internet.
P2P payment and lending services
Despite the vast scale of impending opportunities, blockchain and bitcoin’s disruptive potential is still primary topic of discussion with respect to their impact on the financial and banking sectors. It is disappointing to see that, though, the P2P payment market is booming, bitcoin P2P payments are still lagging behind.
The Business Insider is expecting the P2P payments market to grow to US $86 billion approximately by 2018, and social media are simultaneously platforms are developing ways to inculcate and facilitate online digital transactions, bitcoin is paving way to position itself as a feasible replacement of the currently prevailent applications using fiat currency, such as PayPal’s Venmo, whose integration with Facebook has helped it pioneer social payments and made it viral.
Instead, what seems to be trending among bitcoin users is peer-to-peer lending services and platforms, such as BTCJam, Loanbase, Bitbond, BTCPOP, and StemFund, among others. Since BTCJam and Loanbase have been functioning for a quite some time now and have gained popularity. Despite their fair share of the history of scams and frauds, BTCPOP that has caught the media’s attention as of late. Promoting its service as a “P2P banking experience,” BTCPOP offers a variety of bitcoin investments through investment pools at different risk levels. Importantly, the P2P loans on BTCPOP are collateralised and insured against default. Further, the lending platform provides it’s users with a savings account that grants 5% interest and even functions as a coin exchange, operating with bitcoin, litecoin, dogecoin, blackcoin, among others. Recently, Matthew Hickey reviewed BTCPOP for Cryptocrooks by giving it 8.5/10 and by concluding that “BTCPop is promising with plenty of room to grow.”
Payment services remain the main implementation of bitcoin and blockchain, and P2P bitcoin lending is one of its offshoots. The impact of bitcoin’s P2P network and blockchain’s decentralized nature on economy and capital, value transfer and distribution, as well as on how we collaborate and innovate, however, go way beyond mere payment, as showcased by Don Tapscott and Arun Sundararajan.