The Blockchain Revolution

We believe blockchain technology will be the next technology wave that will impact the world during the next couple of decades as much as the invention of the Internet did since the early 90’s. To explain this and the vision behind our Blockchain Fund, we should first explain what blockchain technology actually is.

Blockchain technology is the result of 20 years of research. Most people associate blockchain technology with Bitcoin, but Bitcoin is just the first commonly known implementation of blockchain technology. Newer, better, faster and more flexible technology has already been built, inspired by the technology behind Bitcoin. Apart from transferring Bitcoin from one user to another, blockchains can be used for many things. Some examples:

  • Transferring other types of digital or even regular money (dollars, euros, etc) between parties,
  • Issuing stocks in companies and trading them,
  • Signing a contract between two parties that automatically executes,
  • Registering property and digital rights

And many other examples. The common denominator in using blockchain technology instead of “regular” technology for these examples, is that there is no need for a central authority, and authority is instead decentralized between peers.

A blockchain is a technology that solves the so called “Byzantine Generals Problem”, which is an old problem in game theory: how can you reach consensus among peers if you don’t know which peers are to be trusted and which have malicious intent? Historically this problem has been circumvented by introducing a central authority. For instance a bank or credit card company that vouches for creditworthiness of a consumer that wants to make a payment. Or a government that issues an ID to prove the identity of a person.

In contrast to this, all transactions on a blockchain are secure, irreversible and indisputable without the need of a central authority. How? Instead of a central organization acting as the authority, a blockchain is a ledger or database that is stored at many nodes (being computers of users) in the network of that blockchain. In case of Bitcoin, the nodes in the network are the computers of Bitcoin users that run a small program that contains the code that defines the rules of the Bitcoin blockchain. The reason that no central authority is needed to legitimize a transaction, is that even if some nodes of the network decide to input fraudulent information or are malfunctioning, the network ensures that the majority of the nodes in the network reach consensus about the state of everything in the entire system, overruling the input of the fraudulent nodes.

There can and probably will be many different blockchains. Different blockchains already exist that are optimized for specific use cases, like the transaction of money, stocks, the processing of contracts, communication on a private network, and so on.