Blockchain: Investors Are Sold, But Why Are Consumers Skeptical?

Bitcoin was the hot topic in financial and tech circles in 2017. The decentralized digital currency jumped from just under $1,000 at the start of the year to a $20,000 all-time high in December. The real game-changer here isn’t Bitcoin, though, but the technology that powers it, known as blockchain.

Despite volatility and suspicion marking the crypto-market, the blockchain concept could be a truly revolutionary innovation. The problem: While investors and some institutions are ready, consumers remain highly skeptical of blockchain because of its relation to Bitcoin.

Let’s explore the benefits blockchain can offer both consumers and businesses, and try to figure out why so many people remain on the fence about the technology.

Separating the Coin From the Chain

There’s a lot of buzz around Bitcoin and other cryptocurrencies such as Ethereum and Neo, but there’s a lot of confusion circulating as well. Some believe that cryptocurrency is the future of money, while others have called it a fraud in no uncertain terms. The problem is that our impressions of cryptocurrency tend to get tangled up in our impression of blockchain systems. So, before we can get into the details of blockchain’s broader potential, let’s straighten out what these blockchain-backed currencies hope to do.

Cryptocurrencies were created to exchange value anonymously through a decentralized network: no institutions, card schemes, or network fees involved. Bitcoin is just one of hundreds of different currencies. Some were created simply as a general means of exchange, while others are meant to be industry-specific. Audiocoin, for example, hopes to enable easier monetization of music streaming services.

Overall, the cryptocurrencies that came after Bitcoin tend to be technologically superior by allowing for faster and more efficient transactions, but Bitcoin is still hanging on as a store of value. What’s triggered Bitcoin’s dramatic rise in value, though?

Part of it is genuine belief in the project, but another part is simple speculation and FOMO (“fear of missing out”). Maybe Bitcoin will reach $100,000 by 2020 as some predict, or maybe it won’t. Perhaps Bitcoin should be viewed as more of a proof-of-concept: While the coin’s value will fluctuate, the fact that it works validates the underlying blockchain technology.

Blockchain’s Broader Applications

One can think of blockchain’s concept as a shared digital ledger, similar to a Google Sheet. Every exchange or update of information is added to the ledger and stored as a “block” of transactions. Since the blockchain is decentralized across all the different machines participating in the chain, no one can simply hack into the record and change any information. Similarly, if one computer—or an entire bank of computers—were to fail, the record would still be safe.

When one gets down to it, the tangible value of different cryptocurrencies isn’t in how they’re marketed but in the strength of their technology. It’s how effectively they address the problems they were created to solve through an efficient, secure, and fast-resolving exchange of data.

Take banking and financial services, for example. Clearing payments is traditionally done through an automated clearinghouse (ACH) model, with multiple entities trying to verify multiple records against one another. This process can take several days and is open to clerical errors. A coin that can enable secure, reliable payments clearing in a matter of seconds would shake the banking sector to its core, freeing up billions of dollars wasted on redundant processes each year.

There are many other applications for the technology as well. Storing medical records using a blockchain could protect patients from dangerous recordkeeping errors while allowing doctors to provide more informed, consistent, and responsive care. Retailers could prevent loss, track stock, and reduce costs by managing inventory and supply chain information with blockchain records. Airlines could use blockchain as a tool for faster and more reliable identification and security.

Real estate, legal administration, government recordkeeping—these are just a few ways blockchain adoption could dramatically increase efficiency and free up resources.

Blockchain Is Still Not Perfect

Of course, it’s not a perfect system; despite its decentralized nature, it’s still possible to pull off an attack against a blockchain system. Two possible vulnerabilities—the eclipse attack and a 51% attack—have been suggested as theoretical methods of hijacking a blockchain network. It’s important to point out, though, that these methods are still just theoretical. No one has ever successfully accomplished such an attack on a large scale, as it would take an astronomical amount of resources to do.

Bitcoin exchanges have been attacked on multiple occasions, but in each case, the hackers attacked the exchange itself, not the blockchain. They managed to steal wallet keys, then transfer Bitcoin out of users’ accounts—something that could easily happen in any other recordkeeping system.

The downside in this case: Given there’s no centralized record, there’s no way to reverse a fraudulent transaction. But again, this is a vulnerability of the website, not the blockchain model.

Why the Skepticism Regarding Blockchain?

If blockchain seems to be an improvement on traditional clearing and recordkeeping models in just about every way, why haven’t people jumped on the technology? One of the main roadblocks may be blockchain’s image, and, specifically, its association with Bitcoin and other cryptocurrencies.

When the average person thinks of Bitcoin, the image that comes to mind is probably of illicit activity carried out in some corner of the dark web. That’s not entirely untrue; after all, Bitcoin first started to gain notoriety after the bust of Silk Road, the online black market, back in 2013. Bitcoin has also been used to conduct other shadowy ventures such as funding terrorism, bypassing international sanctions, and laundering money. The currency’s image rubbed off on blockchain, as the two were closely identified with one another.

Blockchain’s struggle to win hearts and minds may come with time. Major players will be the ones who can really change the narrative regarding this technology, and once more get on board, everyone will be open to it.

Banks, including Goldman Sachs and JP Morgan Chase, completed a successful test of blockchain back in 2017. As Axoni CEO Greg Schvey remarked, “We’re on a path to take this forward … we know the thing works now.”

Blockchain Is an Inevitability

Blockchain technology has a bright future in many industries, and we’re going to see further adoption, regardless of whether Bitcoin and other cryptocurrencies come along for the ride.

Let’s imagine the digital coin market were to crash entirely and wipe out all the different coins. Such an event could possibly shake confidence in blockchain technology … for a while. However, you can’t keep a good idea down. The market wants more efficient, easier, and cost-?effective ways of doing business, which is why blockchain is going to remain relevant either way. A tool that gives institutions the power to do business faster and smarter is too promising to pass up.

Large financial institutions are already taking the lead in the move to blockchain, but they’re going to need to keep driving that initiative forward to encourage other industries to try it. These early investors are evangelists for the technology, and if they keep the pressure up, it’s really just a question of when—rather than if—the tools will become commonplace.

The power to revolutionize how we store and transfer information is right there. It is just a matter of how badly we want it.