George Gilder, perhaps the leading futurist of our day, predicted the rise of the Internet, the decline of television and the explosion of the smartphone.
Now he’s predicting another giant step forward – an innovation potentially as consequential as the Internet itself. It is called blockchain technology, and it has begun to challenge the way we buy and sell things.
This is happening at the infrastructure level of the Internet. “The existing architecture of the internet is bankrupt,” Gilder said on a recent visit to “The Bill Walton Show.”
“It can’t preserve anybody’s information. It can’t keep a credit card number secret. It can’t inter-operate between the different walled gardens – Apple’s walled garden, Google’s walled garden, Facebook’s walled garden, the Chinese Communist government’s walled garden, the Iranian walled garden.”
For the last 12-13 years, cloud technology has ruled, but Gilder thinks it’s obsolete. It is too centralized, too inflexible.
“It consists of these gigantic data centers with huge air conditioning equipment on their roofs to [fend] off the heat, implanted by hydro electric bands and near glaciers to cool them off and near great rivers,” Gilder said. “We’re moving toward dispersing the clouds and opening to sky computing on the blockchain, which is a major development in the industry. It’s the most important breakthrough … since the Internet itself.”
Blockchain technology means we control our own profiles on the Internet. We purchase a crypto-currency, such as Bitcoin, and conduct the transactions with it.
“The key thing,” Gilder said, “is that it’s a new security model that ends this crazy scheme where hundreds of millions of credit card numbers and social security numbers and mothers’ maiden names and favorite dogs and beloved songs are all constantly spewed across the world. And if you can’t have security, you can’t really have transactions.”
Blockchain takes all the passwords out of the transaction. “It changes everything to essentially a cash transaction,” Gilder said. [The transaction] is recorded in a ledger, which is published all across the Internet, rather than having the record of transactions all encrypted and put in some data center where a hacker can gain access to millions of personal data points. So you can’t change anything or steal anything or copy anything, without attacking all the nodes on the network.”
The implications go far beyond secure transactions and essentially represent a return to cash-based business, transparency and the gold standard on a personal if not governmental level.
It also means entrepreneurs need not turn to the stock market to raise capital. Already, Bitcoin has conducted more than 1,000 ICOs – Initial Coin Offerings, the Bitcoin version of an IPO – and raised $2.5 billion in the last six months. Companies sell not only ownership shares but pre-sell their products and services.
This addresses what is becoming a huge problem for our economy. The stock market is shrinking – from 10,000 public companies down to 5,000 in the last 15 years.
The Securities and Exchange Commission’s regulations have “extinguished IPOs essentially for technology companies,” Gilder said. “So the big technology companies buy up their rivals and invest $30 billion a month in their own shares, which shrinks the stock market, which means we don’t really have a stock boom.”
What we have is a system that in many ways discourages trading. It is hard to pay for products through the Internet because of the security concerns that relate to cloud technology. It is hard to raise capital because of problems with the stock market.
And in this age of astounding technology, it is a return to the most primitive ways of paying for things – via blockchain – that promises a new economic deliverance.