Over the weekend, I visited one of my friend’s home. I knew that the guy had some weird hobbies, but I never expected to see a living ant colony – a formicarium in his bedroom. A little curious I started to read on how ants colonise a locality and how we can measure the brain power of these little creatures?
An ant has only 250,000 brain cells. They use these connections so efficiently that they build complex nests and create rudimentary agriculture and public health systems. As far as humans are concerned at the age of 5, a human baby has over 1000 trillion neural connections. Over time, it refines itself and transforms the number of neural connections to just over 100 trillion just one tenth of the original quantum. The transformation of these neural connections is the basis of human intelligence.
What does that result in? Intelligence helps us to develop a social network. Have we exploited the power of our social networks yet? I would say we haven’t. Do we trust someone whom we meet on the internet or a social network? I would say considering a few exceptions (that often results in marriages), we do not. But the evolution of super-intelligence and the distributive ledger technologies will change the finance industry works in a few years.
When Satoshi Nakamura in 2008, introduced the concept of the blockchain technology and the corresponding distributive network, it was the personification of Sigmund Freud’s comment about the origin of civilisation – “The first human who hurled an insult instead of a stone was the founder of civilisation.” Here is the era of Super-intelligent block chains – Intelligence built by the intelligent to make decisions. This technology is currently a baby, born with unlimited possibilities to transform the way the business is done. The refinement of this intelligence will be a unicorn in the financial technology space.
I am not a programmer and I do not know how to code. I am a banker who used to run advisory portfolios for clients. I came across the term of blockchain technology, distributive ledger and bitcoin around 4 years back. These technologies are synonymous to open source payment platforms unlike the closely guarded platforms of the banks and payment institutions. If one look at the evolution of the Blockchain technology – bitcoin, it is evolving just like the internet. There were initial comments about the internet that it is of no good other than to distribute porn. But the transformation that the internet brought to our lives is incomparable to any previous technologies.
So how does this work? I will give you an analogy for the block chain. Assume that you have a cake to be distributed among friends. In the old school, you give it to a friend and he may take a fair chunk of cake to get it distributed evenly. In the blockchain concept, you hire butlers. The butlers do not charge a chunk cake and since they are wearing the butler’s gloves, if they eat, you can see that on their gloves. The butler is rewarded if s/he distributes the cake in a fair manner and it is just a small piece of cake, unlike what your friend would take. Such butlers are called miners, a very funny word though in the block chain terminology.
When VISA processes around 18 billion dollar transactions a day, bitcoin, in its infancy, is processes around half a billion dollar transactions daily. But VISA charges around 3% for such transactions. Global remittances move around 800 billion dollars through the payment network and such establishments charge around 10% commission. The revolution of blockchain would trim such fat to less than 1%. Goldman Sachs has estimated the savings that blockchain technologies would bring – It is around a whopping 200 billion dollars.
So what are we expecting out of block chains?