The big question when it comes to blockchain and cryptocurrencies is how far will they go? Will they become the main alternative to stocks and bonds? Will they become the alternative to state-based monopoly money? Will they basically sweep the board clean and reset how people trade and save?

No one knows at this point and just as importantly, the ones who might be in a position to know, sooner or later, are not talking about it. Some say up to 90 percent of banks now have hush-hush blockchain projects. And IBM, which has been very active in the field, now reportedly has 1,000 employees and consultants working on various blockchain projects and has invested $200 million.

What exactly is blockchain? At its most basic level, it is an advanced spreadsheet replicated thousands of times across computers around the world. This network updates the journal of spreadsheets at regular intervals and people can continue to generate transactions that are verified by the network.

Information codified this way ensures the database isn’t backed up at just one location but is available at hundreds and thousands of locations and thus is easily verifiable. Yet hackers cannot corrupt such a database with this distributed ledger technology.

This automatically instills trust in the system. People eventually could do without many of the traditional elements of third party verification, including perhaps contract lawyers, certain brokers and other kinds of intermediaries.

Of course, this takes blockchain to its ultimate, logical conclusion, and few in these fields believe that blockchain and associated methodologies will arrive at such logical conclusions in the very near future.

For now, the extent of blockchain’s impact is not yet fully identifiable, but Jason Bloomberg who writes and consults on digital transformation in the enterprise says that blockchain is an increasingly viable and energetic ledger system with numerous potentialities.

Blockchain by itself could create major social changes, but blockchain does not stand alone. It is supported—and supports—various cryptocurrencies and ethereum, created by a 22-year-old Russian wizard, and funded for millions. It can support a variety of alternatives in all industries.

Bitcoin is now among many platforms including ethereum, which is one reason why over the long haul some people believe bitcoin’s staying power is potentially constrained. Being so versatile, many are choosing ethereum for innovative solutions.

By helping to structure payments between individuals and groups, blockchain truly decentralizes sharing. You can downloads apps that allow you to transact with other companies without transaction fees and various trust measures, However, because of the possibility of outright criminality, personal reputation will become increasingly important.

Advantages Of Blockchain

Blockgeeks.com, among other websites, lists a number of impacts that blockchain could have to a greater or lesser degree in a variety of industries and industrial applications. 

Crowdfunding, for instance, involves peer-to-peer activities and blockchain can help by building crowd-sourced funds. Also elections. Blockchain creates a good deal more transparency to elections, both corporate and public, and thus makes governance a good deal more trustworthy.

Distributed ledgers (the heart of blockchain) increase transparency for what we buy and sell. You don’t need to rely on what a company says about its product if you can look it up.

Decentralizing file storage is a clear benefit of blockchain as is the ability to decentralize websites generally. Meanwhile, smart contracts, using blockchain technology, can protect copyright and help sell works online, thus reducing quarrels over distribution.

Smart contracts automate remote systems, making the Internet of Things a good deal easier to build and monitor. And the ability to identify and offer reliable identification is another blockchain benefit.

Blockchain and smart contracts can help spur real-estate sales by making record-keeping reliable. Blockchain is particularly useful with land registry projects that are not properly codified now.

When it comes to stock trading, blockchain’s facilitation of peer-to-peer trade confirmations is nearly instantaneous instead of a three- to five-day affair. Over time, intermediaries like clearinghouses may be removed from the process. Additionally some companies may choose to issue cryptocurrencies instead of stocks and bonds.

Initial coin offerings are starting to become a good deal more popular because they offer appreciation as well as an ownership in a company’s “money.” Coins may be issued with caps on them to avoid inflation.

Coins may not take over for stocks and bonds, but they may well depress issuance. And over time it is even possible that cryptocurrencies can be issued in tandem with stocks and bonds.

Real-estate and sports are two areas where blockchain can be of significant benefit. Companies can issue tokens that can give people ownership of assets and also make crowdfunding possible.

Alpesh Doshi, founder of Fintricity in London, says that you can “manage the development side of the issue with tokens and take at least partial control of the market when it comes to buying, selling and ownership.”

Central Bank Involvement

With so many apparent private benefits, blockchain and cryptocurrencies have come under scrutiny by banks around the world and also by central banks. Central banks have gone far beyond scrutiny however. Many are working on their blockchain-related projects.

The efforts being made by central banks ought not to be seen as purely exploratory however. As Mises.org puts it, “It’s all about control—about knowing what everyone is up to at all times.”

In fact central banks don’t intend to let consumers fully choose the kinds of money, let alone the amount, that is available.

As the New York Times observes, “For the central banks, the promise of the technology is that it would allow them to track every pound or renminbi on every step of its travels through the financial system in real time—something that is impossible now.”

According to central banks, the goal is to make currency safe, secure and transparent. But central banks have a money monopoly—at least they did—and thus whatever central banks do will involve a compelling element.

China, for instance, is experimenting with its “ChinaCoin,” a digital renminbi, or RMB. Chinese authorities want the digital RMB to help the Chinese central bank strengthen oversight and prevent financial crime. In reality, what this means is that China will track all digital RMB’s created, and attempt to know at any time exactly what they are being used for.

At the Federal Reserve, technology director Lael Brainard is quoted as saying. “We are paying close attention to distributed ledger technology, or blockchain, recognizing this may represent the most significant development in many years in payments, clearing and settlement."

Janet L. Yellen, questioned about the new technology, said that, “innovation using these technologies could be extremely helpful and bring benefits to society.”

The Fed, however, is on the record as supporting increased oversight of money, just as China is, and thus Yellen’s remarks can be interpreted as furthering the eventual centralization and tracking of blockchain-related technology.

Doshi points out that this affects inflation, government debt and how all this issued and managed. Thus the question remains: What affect does this have on the issuance of new stocks and bonds, especially bonds from the central bank point of view.  

Cambodia’s central bank has signed a deal to develop blockchain technology. Co-CEO Makoto Takemiya explains that the central bank has agreed to go beyond "just studying" applications. Meanwhile, the Bank of England and De Nederlandsche Bank have also announced efforts to “investigate” blockchain’s potential.

Non-central bank banks have been investigating blockchain for a while, though non-central bank efforts are distinctly less ambitious than central bank efforts. Perhaps the largest group entity is R3, a consortium of banks mostly out of Europe who are putting together a distributed ledger system that will allow member banks to look at various kinds of accounting and consumer investments all at once—a true blockchain set-up though is one that will be private rather than public. 

The R3 consortium has lost some members in the recent past. This includes Goldman Sachs who went off on its own, presumably because there were too many banks involved in R3, and thus it was difficult to ensure the proper direction from Goldman’s point of view.

The War Is Ongoing

Truly a quasi-silent war is taking place. At the highest level are the central banks and biggest commercial banks that intend to do a lot more than create distributed ledgers. These banks and their governments are determined, it seems. to create full-scale alternative, digitized currencies that can fully track how a person spends his or her money.

India is another country that is removing paper currency from consumers without replacing it, thus forcing middle classes, especially, to adopt a digital approach. Supposedly, India was going to replace old currency with new, but the new currency has not yet appeared and India’s banks are caught in the middle.

Much of the research into blockchain and cryptocurrencies has been kept secret. One reason, of course, is that people don’t want a good idea to become widespread before they can bring it out. But a good deal of what is taking place has to do with the idea that blockchain and cryptocurrencies are secret so that the largest central banks don’t have to get into a prolonged discussion about who controls money.

It is much better to have such a discussion once you have created a currency than beforehand. Besides, in the modern era, the war over public (government) money and private money was supposed to have been settled. We all use government money now, supposedly, and alternatives are not looked on with great enthusiasm by governments or their agents.

“My view is that ultimately governments are going to have to rethink some of what they are doing,” Doshi says. “They can continue to make new forms of money illegal but people may still use it on their own.” And he asks “Shouldn’t we have an open discussion now rather than later?” 

In reality, the private versus public battle will probably continue to be waged and will grow a good deal more heated over time. If central banks issue cryptocurrency with infinite inflation, controlled by monopoly interests, there will surely be pushback. People will turn to gray or black markets to conduct their business, and this in turn will set up further difficulties as such possibilities will be most difficult to control.

Of course, it could be that blockchain and cryptocurrencies will prove to be nothing more than a flash in the pan. A recent professional investor who had met with hundreds of hedge funds interested getting into the field said that a good many of them were more talk than action.

Even funds with money for coin offerings didn’t have any place to put it. But with so many groups taking them seriously and moving ahead, the chances are that blockchain-related technology, in one form or another, is here to stay.

Additionally central banks themselves seem to want the technology so long as they can control it, so this is another reason why the new technology will be adopted and will spread.

We may not agree with everything that is going on, but finance, especially, is in the throes of “disruption” that (possibly) has hardly started yet. Stay tuned.

Mark Fadiman is a journalist working on both blockchain and cybercurrency issuance.