To start, let’s make a distinction between Bitcoin, Cryptocurrencies, and Blockchain. They’re a bit blurry so we’ll define them as such:
Cryptocurrencies are digital tokens that use cryptography to verify transfers and ownership. Some cryptocurrencies are centralised while others are de-centralised. The ones that are decentralised utilise what are known as distributed ledgers to track who owns what.
Blockchain technology is a type of distributed ledger in which transactions are batched into ‘blocks’ and then ‘chained’ together so that one can see the entire history of a token by going through the blockchain. There are other cryptocurrencies that use alternative distributed ledger technologies such as IOTA and MaidSafe which use Tangle and SAFE respectively. There are also public distributed ledgers in which anybody can interact with the ledger and private ledgers in which permission is required to interact with the ledger, such as IBM’s hyperledger.
Bitcoin is the most famous cryptocurrency which uses a public Blockchain as its distributed ledger. It is intended as a replacement for fiat currency and as such, a store of value and/or a means of transaction.
This question, and my anwser originally appeared on Quora.
So, onto stances, working backwards:
Bitcoin has issues. There are plenty of criticisms around the internet, some of which are valid. On balance, I err towards the view that Bitcoin’s shortcomings are real, but not fatal. My view is that Bitcoin will derive utility as the de-facto cryptocurrency in which other cryptocurrencies are traded. Its value is protected by simple virtue of being the first. If it weren’t for that, it likely would not remain. It still may not. If market participants all lose faith in Bitcoin then the house of cards will come crashing down and likely bring down most other cryptocurrencies with it, keeping them down for a long time, but critically, not out.
Blockchain technologies are undoubtedly here to stay, both public and private. We’re already seeing enterprises benefit from cost-savings using private blockchains. They offer a good way for decentralising the storage of data and the real-world applications for this are numerous.
As an extension to blockchain, Cryptocurrencies are where the real future potential lie. There are many comparisons to the internet in the mid-90s and these comparisons are fair. We can already imagine much better platforms based around cryptocurrencies but the real kicker is likely to come from what we haven’t imagined yet–whether that be the impact of what we can imagine or entirely new platforms.
While digital communication was a foreseeable model in the mid-90’s, it was borderline impossible to imagine that Google and Facebook would become the juggernauts they are now. While ecommerce was a foreseeable model, it was difficult to see just how big Amazon could become, or how Shopify and Etsy would emerge.
Like participants on the internet, there will likely be cryptocurrencies of varying scope. Some will be very niche, while other will be platforms, enabling others.
Looking to the future
There are over 1,300 cryptocurrencies in the wild as of now. Some, if not most of these are destined to fail. We’ve got a lot of Pets.coms, a few Amazon.coms, and an entire future of cryptocurrency Google’s and Facebook’s that haven’t been invented yet.
Now, it’s possible that none of this will emerge. But with this much creative, technical, and financial capital being thrown at the space it seems improbable that we won’t get anything of value from this. It’s likely we’ll go through multiple phases of boom/bust cycles but if we can see this out in the long run, we’ll no doubt see massive benefits from the technology.
At the end of the day, consumers of technology don’t care about the underlying protocols. We’re interacting with technology that’s abstracted many, many times from bare-metal. We don’t need to know that we’re using TCP/IP to benefit from the internet. We don’t care what technology stack Instagram or Uber run to deliver their service to us.
In the same way in the future, we might have some notion that the services we use run on ‘blockchain’ or ‘cryptocurrency’ but we won’t care – as long as it’s a better solution. So as long as we can imagine situations where cryptocurrencies provide a better solution, then they’ll be a big part of our future.