Peer-to-peer transactions didn’t begin with Bitcoin. They became popular in the early 2000s with shared music and movie files. Napster and BitTorrent sites took heat for cutting out enterprise. However, did they really cut out enterprise, or did they simply shake up the industry and create startup opportunities?
Today we have blockchain, poised to shake up the financial status quo, just as peer-to-peer file sharing shook the music moguls. Moreover, to Bitcoin’s credit, ordinary people are now staking personal interests in digital currency—as they did more than a decade ago with digital music.
By 2013, Overstock.com and the NBA’s Sacramento Kings were already accepting payments in Bitcoin. Today, features developed for the Bitcoin protocol offer real opportunities for decentralized financial services, covering:
- Personal loans
- Stock distribution
- Lease agreements and sales contracts
- Mortgage loans
- Escrow or shared financial management
- Time-released transactions using digital payments for trusts
- Binding arbitrations
- Transactions contingent on real-world events, automatically discoverable by search engines
Loans Without Banks, Stocks without Brokers, Contracts Without Lawyers
A group of developers connected with the Mastercoin Foundation are meshing blockchain technology into complicated asset transactions. They’re striving to enable us to create new asset classes. They want to introduce automated, digital contracts that lower the risks of loss and avert traditional fee schedules.
Also interesting is the development of new methods that will enable hedging crypto against fiat. Distributed hedging could offer three key benefits: (1) keeping Bitcoin’s value up, (2) buffering volatility, and (3) repelling scams. With peer-to-peer transactions, there’s no central repository to breach.
Then there’s the smart property concept, a long-term yet highly promising idea proffered by Nick Szabo. Consider smart cars that can read the blockchain and are programmed to keep running only as long as loan payments are made in a timely fashion.
So, Are the Days of the Broker Numbered?
Yes and no.
On one hand, our legal concept of contracts is based on the lack of trust between parties, so smart contracts are a massive break with tradition and the legalities we’ve always associated with transactions.
But brokers are not becoming extinct because of blockchain. Coinbase aside, it can be difficult to exchange Bitcoin for national currencies in a quick, reliable manner. Financial institutions won’t be abolished, but they will have to adapt. In fact, we see digital assets working in combination with traditional financial institutions to audit the conversion of currency. (Think Ripple.)
And where old skin is shed, invigorated life arises and flourishes. The commitment of major players to blockchain’s progress as an enterprise technology is already well underway, as we’ve previously discussed.
The Future of Peer-to-Peer Transactions
IBM Blockchain VP Jerry Cuomo predicts that we’ll move beyond one blockchain network into multiple networks, requiring the creation of systems—perhaps a common system—to communicate and cooperate. This would be transformational, and we expect it to happen.
In addition to new forms of currency, blockchain technology offers a future of transactions with unprecedented security, reliability and potential.