Patrick Schwerdtfeger is a motivational speaker who can cover blockchain technology at your next business event. Contact us to check availability. The full transcript of the above video is included below.
Full Video Transcript:
Hi and welcome to another edition of Strategic Business Insights. Today we’re going to talk about blockchain. What is blockchain technology? What is blockchain protocol? In this video, we’re going to talk about how it works. I’ll tell you exactly how the actual infrastructure operates. And secondly, we’re going to talk about the implications.
But before we get to that, let me just talk about what this is. Blockchain is the underlying technology behind Bitcoin. Now, the jury’s still out on whether or not Bitcoin is going to survive, whether or not Bitcoin is going to continue to exist for years, generations into the future, because of today there are dozens, there are hundreds, there are perhaps even thousands of different cryptocurrencies. So the jury’s still out on whether or not Bitcoin is going to survive all of this and end up being the currency that’s going to exist perhaps decades from now, but the underlying blockchain technology is here to stay. It’s unbelievably powerful. And if you don’t know about blockchain yet, I highly recommend that you do some research, look for other videos, not just this one, on YouTube, educate yourself, because there are many people including me that are saying that the blockchain technology is going to revolutionize our world more than the Internet has. Blockchain is bigger than the Internet.
So what is blockchain? Blockchain is a distributed public ledger of transactions, of things of value. So let’s go back to Bitcoin. Whenever there’s a transaction on Bitcoin it’s recorded one way or another and it all goes into a central what they call a blockchain, and I’ll tell you in a second exactly why it’s called that, but every single Bitcoin transaction is recorded in the blockchain and the blockchain exists not in one place but in hundreds of different places that are called nodes on the network and every single node has a copy of the blockchain. So this is a distributed network of information and in every individual node you’ve got a ledger of every single transaction that’s ever taken place. What does that mean? It means it’s impossible to hack this. You can’t hack it because it exists in hundreds of different places. So if you manage to get into one particular location and hack that version, all the other versions are going to stay as they were before and it’s going to be found out immediately.
Inevitably, this distributed public ledger is a way of recording transactions in a trusted environment. See, today, whenever transactions are made, you always have some sort of intermediary that records the transaction. So if you make a purchase, for example, then your bank records that transaction or perhaps your credit card records that transaction. Or if you purchase a piece of real estate, then the mortgage company records the transaction and also the transaction is recorded usually at the county clerk’s office. And if you’re voting in a democracy, your vote, that’s a thing of value. Your vote is a thing of value, which means blockchain could affect voting. I’ll tell you about that in a second. But if you have votes, how do they verify your name there against a huge roster where you have to register the vote, then they cross your name off? That’s an incredibly arduous and dilapidated system from decades and decades ago that really hasn’t been updated at all.
And all of these intermediaries, all of this recording of transactions, it’s incredibly inefficient and it takes an enormous amount of resources, which means that the cost of these transactions goes up and it gets a lot more complicated. So what if there was an automated way of recording all of these transactions in a way that everybody could trust and it would cost nothing because it would all be an automated system that would happen over the Internet? Well, immediately you would take enormous costs out of the system, efficiency would go way up, and all sorts of transactions would exist or the possibility of transactions would exist that really are impossible today. And in particular, I’m referring to small transactions because when you give a small transaction, today the fixed costs associated with those intermediaries and that system of recording is so inefficient that they have these fixed costs, and so what they call micropayments are not easy to do today. But with the benefit of blockchain technology, things like micropayments or recording a single vote in a democracy are all of a sudden possible.
So let’s talk about how it works. Again, in the Bitcoin universe, all the transactions that take place with Bitcoin are recorded, and all of the different notes get copies of all of these transactions and so they accumulate, and every single node has a copy of all of these transactions. Then, the next person who successfully mines a Bitcoin, and mining Bitcoin is a process of solving very complicated mathematical equations and if you do it successfully then you can submit that and get a Bitcoin, a new Bitcoin which has value, today it trades for about 200 dollars, so that’s something of value, so the next—and by the way, right now, a new Bitcoin is created roughly once every 10 minutes. It will change over time, but today that’s roughly how often a new Bitcoin is successfully mined. So every time a new Bitcoin is mined, the person who has successfully created that Bitcoin by solving the mathematical equation can submit their record of all the transactions since the last Bitcoin was mined. They can submit the new ledger of all the new transactions as a new block, which gets added to the blockchain, because it’s a series of blocks. Every time a new Bitcoin is mined, the new block of the latest transactions get added to the blockchain. And the person who adds that block has a financial incentive to do it correctly because they get their Bitcoin in exchange for this. They get the Bitcoin when they upload their block of the latest transactions, so they have an incentive to do it correctly, a financial incentive to do it correctly.
But then there’s even a check on that. There are checks and balances in the system. So as soon as that block of new transactions is uploaded, now all the other nodes that also have all the blocks of all the previous iterations plus the latest transactions can crosscheck to see if it’s been done correctly, which means that if anyone tried to upload an incorrect transaction or some sort of fraudulent activity, it would be found out immediately by all the other nodes, and what happens is the majority of the nodes, so 51% of the nodes that are out there, have to agree that the latest block was accurate. And if they agree on that, then the block becomes part of the blockchain, the person who mined the Bitcoin gets their Bitcoin, and we move on to the next block coming, which means that perpetually as time goes on, you always have a trusted public ledger which is distributed across hundreds or thousands of nodes that everybody agrees that these are all the transactions that have taken place in the Bitcoin universe. Imagine the level of trust that this creates.
Now, of course, all these transactions add up to an enormous file size, and that’s one of the enabling technologies of blockchain, is the fact that the cost of data storage is dropping. In fact, the cost of storing a petabyte of data in 2010 for one month was 80,000 dollars. Eighty thousand dollars per month. In 2020, just 10 years later, the cost is expected to drop to four dollars. From 80,000 to four dollars. Imagine that difference. So the cost is dropping like crazy, which means that it’s more and more possible to store gigabytes or terabytes or even petabytes of data and it’s not going to cost much money. That’s an enabling technology of blockchain because all of these nodes can carry this entire blockchain file easily and it doesn’t cost them much money and it allows the system to operate in a trusted environment which is constantly being crosschecked, constantly being crosschecked, which means that hacking is no longer a problem. There are enormous implications of this. Let’s get to that next, the implications of blockchain.
Lower costs. The intermediaries are basically being squeezed out of the picture because they’re no longer necessary. Imagine, for example, a country like Mexico or even the Philippines. Let’s talk about the Philippines. A sizable percentage of the Philippine economy is transfer payments of their nationals which are now living in other countries. So let’s say people from the Philippines who are living in the United States, they send money home. That’s culturally done with many developing nations and is certainly true with the Philippines. Well, the Philippines is actually looking up blockchain technology as a way of providing financial services, effectively a banking infrastructure, which doesn’t require any actual banks. They’re looking at blockchain technology to provide that level of financial services to their own population.
In Africa, in the recent time Africa has what they call leapfrogged the traditional wired phone connections, hardwired, when you have a landline, what they call a landline, a phone that’s actually in your home. Here in North America, in most developed nations, we put up wires all across the entire country to allow people to have phones in their homes, but of course with wireless technology none of that’s even necessary anymore. And since Africa never got to a point in many of the communities where they even had landlines, they were able to leapfrog beyond that technology and go straight to wireless, which means they don’t have to install those wires ever. All they have to do is install those towers and now they have phone service and they leapfrog the technology. Well, the Philippines is looking at doing the same thing, leapfrogging over the traditional financial institutions that have been the hallmark of Western society for a hundred years, two hundred years, and they’re considering leapfrogging right over top of that technology using blockchain protocol to provide financial services to their population. You see, if you look around the world, only roughly one-quarter of adults have real financial infrastructure. Like for example, how many people could actually do an online transaction, buy something online? Only about one-quarter of the adult population of the planet has the capability of doing that because it requires a credit card or it requires a PayPal account or it requires some sort of a bank infrastructure to allow you to make that financial transaction. So countries like the Philippines and many others are looking at blockchain technology as a way of creating something on the Internet with virtually no hard costs and no buildings to create. It’s all online digital infrastructure which would allow them to deliver financial services to their populations.
So this could spread very quickly, and the innovation will probably not come first from the developed countries – it’ll come from the developing world because they have a larger financial incentive to put it into practice. So what I said before is also true. When you have less expenses, lower overhead, it means that the fixed costs associated with a platform are much, much lower, which allows for things like micropayments. So if this continues to evolve, and there are millions of dollars being funneled into different startups here in Silicon Valley where I live, and also in tech centers all around the world a lot of people are experimenting with blockchain technology and trying to figure out where can they make it work and what are the different applications of blockchain technology, and as it comes out and it gets out rolled out—see, everything starts off a little bit slow. It’s developing right now and maybe you’ve heard of it, maybe you haven’t even heard of blockchain technology yet, but believe me, the infrastructure is being built right now, and once it gets to a critical mass where the infrastructure is largely in place, we’re going to see an explosion and it’s going to exist in many, many different places very quickly. There are going to be a lot of people caught off guard by that transition.
That’s what this video is about, is to give you a head start so that you know that this is coming and it’s coming faster than you might imagine. And once it does, we’re going to see things like micropayments for content online where you can give someone five cents or 10 cents or the equivalent of five cents or 10 cents, whether you’re paying in Bitcoin or some other cryptocurrency, but micropayments are going to be increasingly possible using blockchain technology. And also, as I mentioned before, voting in countries like the United States could one day take place using blockchain technology, and the way they would do it is everyone would get effectively a token worth one-millionth of one penny or some tiny amount that you can take that token and give it to any candidate you choose. So you can give it to the Democratic candidate or the Republican candidate or an independent candidate. That’s how you would cast your vote, is you would take the token, the digital token that you’ve been given, and you would give it to whichever candidate you wanted to win. And the financial implications of giving them one-ten-thousandth of a penny or one-one-millionth of a penny, it doesn’t matter, it’s inconsequential, but it would be a way of recording that entire voting system in a trusted environment that can’t be hacked. That’s the key.
And so this blockchain technology has implications in the real estate business. It has implications in certainly any financial transactions. It has implications in the insurance business. It has implications in voting. It’s virtually limitless. Anything that is a thing of value where a transaction is reflecting something of value, those types of environments, and there are countless environments that involve things of value, all of those things could be revolutionized by blockchain technology in the years ahead.
Make sure you educate yourself. This is a big one, and there are, as I said, many people who think blockchain is going to be more revolutionary and have a larger impact on our economy and our way of life than the Internet has so far.
Thanks so much for watching this video. My name is Patrick, reminding you as always to think bigger about your business, think bigger about your life.
Patrick Schwerdtfeger is a keynote speaker who has spoken at business conferences in North America, South America, Europe, Africa, the Middle East and Asia.