Blockchain, decentralization, and the future of money

You have heard of Bitcoin in the news but never really understood the hype. You wonder how an "internet money" reaches tens of thousands of dollars of valuation. The euphoric bull-runs and wild price-swings continue to baffle you. Most reputed sources of news call Bitcoin a passing fad, or a giant pump and dump scheme. If you belong to this category of people, rest assured, you are not alone.

In addition to being the fastest growth assets of our times, Bitcoin and cryptocurrencies are easily the most misunderstood financial asset in the world.

The creation of digital scarcity in the form of Bitcoin was only possible with the invention of the decentralized ledger. The decentralized nature of a blockchain-based ecosystem is one where there is no single party controlling the network and instead, a collection of nodes maintains the entire network. The ledger is visible to everyone and as a result, the aspect of forgery by a central controlling party is taken out of the picture. Power is not concentrated in the hands of a single party as a result of decentralization.

Needless to say, this technology has far-reaching implications for humanity. Its adoption and extensive usage has the potential to entirely reform the idea of money. Decentralized systems have the potential to eradicate centralized control-systems. As the rest of this decade plays out, it will be exciting to watch how blockchain-based technologies influence our lives.

"The 'secret sauce' of the technology is the way it fixes and time-stamps blocks of data by consensus and records any changes by adding new blocks in the chain. This promotes transparency and trust."

- Dr. Wayne Visser, Professor of Integrated Value, Chairman of Sustainable Transformation at Antwerp Management School

Blockchain provides a complete monetary system to the online world & bitcoin is the biggest use-case in this regard. It provides a fabric of trust to the users in the form of an open-ledger. Its investment value has grown along with its utility, outperforming the most recognized benchmarks of our times by a large margin.

The S&P measured in Bitcoin terms - 2011 to 2020

This ledger contains the record of all the happenings of a network and as a result, every transaction taking place on the network becomes visible to everyone. This happens due to the decentralized nature of a blockchain-based ecosystem where there is no single party controlling the network and instead, a collection of nodes maintains the entire network. The ledger is visible to everyone and as a result, the aspect of forgery by a central controlling party is taken out of the picture.

"While TCP/IP helped be the foundation of the internet, it was the enabling technology to share data online. Blockchain in a similar way will help be the layer of technology that enables accounting, accountability and the record of transaction for digital."

- Paul Neto, Co-Founder and CMO of Measure Protocol

Every technological innovation takes time to settle and find its niche. Blockchain is going through the same phase of becoming more mature and finding it’s real-world use cases. For the last decade, Bitcoin has delivered on its promise of storing and transferring value on its decentralized ledger. Its growth has overshadowed every other asset class we know of.

Bitcoin Returns vs Returns of the Most Popular Asset Classes - 2010 to 2020

Despite being a new technology, at Neel Capital we believe blockchain has the potential for disrupting traditional ways of working and organizing ourselves as humans. We believe that it will become a prime component of online financial frameworks, providing the advantages of transparency, immutability, and trustless interactions.

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