1. Digital Gold

Bitcoin has proved to be a bearer digital asset that can be transferred but not duplicated (i.e. it can be spent once, but not double-spent). Scarce in digital realm as nothing else before, bitcoin is digital gold with an embedded settlement network. More a crypto-commodity then a crypto-currency, bitcoin aims to be a world reserve asset.

If one thinks about the role of physical gold in the history of civilization, money, and finance, then it becomes clear that the digital equivalent of gold could be disruptive in the current digital civilization and the future of money and finance. Bitcoin is the groundbreaking achievement by Satoshi Nakamoto, not the so-called blockchain technology.

2. The Misunderstanding About Blockchain

Blockchain is just an append-only sequential data structure: new blocks (of bitcoin transactions) can be appended at the end of the chain, to change a block in the middle of the chain all subsequent blocks need to be changed. As such, it is very inefficient compared to a relational database.

Blockchain requires an intrinsic native digital asset to solve the double-spending problem, i.e. to provide the economic incentives for the so-called miners (the blockchain back-office) to be honest. Miners compete to validate a new block of transactions: the winner providing proof-of-work of a new block finalization is rewarded with the issuance of new bitcoins in a special coinbase transaction, included in that same block. This economic incentive induces miners to reject double-spending attempts and only finalize valid transactions; otherwise the block would be deemed invalid by the network and rejected, removing it (and the included coinbase reward) from the transaction history: ultimately, the winning miner would have just wasted his work.

Without an intrinsic native digital asset providing seigniorage revenues, a blockchain would need to select and appoint its back-office operators, ultimately resorting to central governance. If this is the case, then why use a blockchain, i.e. a subpar data structure, instead of an efficient relational database?

3. Blockchain Beyond Bitcoin: notarization

There is no blockchain without bitcoin; anyway, as Andreas Antonopoulos said, there is blockchain beyond bitcoin: time-stamping and notarization.

A generic data file can be hashed to produce a short unique identifier, equivalent to its digital fingerprint. Such a fingerprint can be associated to a bitcoin transaction (of irrelevant amount) and hence registered on the blockchain in a block generated at a given time. Therefore, the immutability of the bitcoin transaction registered on the blockchain implicitly provides time-stamping, proving the data file existence at that moment in time in that specific status.

Here, the blockchain is used as notary service, ensuring that documents cannot be backdated. Please note that notarization cannot guarantee validity, correctness, or accuracy of the content being time-stamped.

A single transaction can timestamp an unlimited number of documents: the process has been standardized to allow for third party auditability and it is suitable for regulatory prescriptions. What jewelry is for gold, notarization is for bitcoin: not essential, but effective at leveraging its beauty.

4. Financial Services for Crypto-assets

Finally, even if interested only in genuine technologic application of blockchain, the most promising field is the development of tools and practices for financial services involving crypto-assets, primarily custody for institutionals and high net worth individuals.