- There’s a lot of confusion with cryptocurrencies and blockchain right now, especially since it’s been acting like a bit of a gold rush, causing people to spend a lot of money on something they may not know much about.
- Applications and the blockchain are very complicated to understand, but there is a lot of potential with what can be done with them in the future.
- Investing in things like Bitcoin and other cryptocurrencies must be considered very carefully, as they may not be around in the future.
Remember the 1850s through 1900, when people travelled west to California, then ultimately to the Klondike to search for gold and strike it rich? Very few of them ended up finding enough gold to make any money. Most of them went bust and had a pretty rough time. This is kind of what is happening right now with cryptocurrencies, and blockchain in particular. There’s a lot of confusion, and there is money to be made, but very carefully. So, let’s break it down a bit.
The Birth of the Internet
If you remember back in the 1990s when the Internet first came out, you had dial-up, and you were surfing the web. Well, the first thing you had to do was select a search engine. There were a lot of choices, like Alta Vista, Web Crawler, Ask Jeeves, AOL Direct, Yahoo, and a bunch of others. You basically just clicked on any one of them without really thinking too hard. And now all we do is what? Google.
So, Bitcoin: Is that like Google? Will it rise to the top of the hundreds of other cryptocurrencies, or will it consolidate like the search engines of the 90s? It’s something to think about.
The Railroad Rush
Next, if you remember your history, back in 1827, railroads started in the United States. By 1871, many of them went bankrupt. This happened because little lines showed up across the country with different track gauges, different kinds of train engines, and it all got sorted and standardized after the Civil War. It ended up being just a handful of big companies left.
Think of that from the standpoint of applications of things on the blockchain because there’s lots of ways to apply different things out there. In fact, I have a list of 30 or 40 of them, but that’s just one company’s list, and there are thousands of applications being tried right now.
What’s an application? I’ll give you an analogy.
You’ve heard of ride-sharing. You can take your smart device and call up a car through Uber or Lyft, and they will show up at your location, you’ll get in the car, and they’ll take you wherever you want to go. This all happens through the application that you have on your phone. When you’ve reached your destination, seamlessly, the money you owe is collected from your credit card, and you’re all set.
How does all that work? You have the ride-sharing company, you have the driver, and you have yourself, three parties. You pay money directly to the ride-sharing company, they take their cut, and they pay the driver, so the ride-sharing company acts as a middleman.
How would this work in blockchain? Think of blockchain as a trust-less system. What that means is that it goes from “me” to “we”. We all agree, and we all know it’s 100% reliable. Nobody can get in and steal our money, our identity, or other information.
So if that’s true, why would we need the ride-sharing company? Why not just call up a driver ourselves and pay them directly from our digital wallet with cryptocurrency and cut out the middleman? It would cut down on cost and make it even more simple. That’s what blockchain can do on an application. But let’s go further.
Do we really need a driver? Think about the future of autonomous cars. Just call up an autonomous car, pay, and reduce the cost further. But let’s go even deeper.
Have you ever noticed how, if you have a dog, they seem to know exactly when you are going to take them for a walk? They see you walking around, gathering the gear you use to walk them, they know the patterns, and they are watching your behavior. Guess what? AI is now doing that, and there will come a point where AI will know you’re heading for the door ready to leave, and it will call up an autonomous car for you. Not only will it know that, it may know that you are tired because you had a bad night’s sleep, so it will call up a car with a bed in it, so you could sleep on the way to wherever you are going.
The opportunities and situations for these applications with blockchain are endless.
Investing in ICOs
If you are looking at investing in an Initial Coin Offering (ICO), utility token, or securities token, recognize that these are applications on top of the blockchain, and they may be akin to the railroad that formed in Southern Utah that was 40 feet of track and became nothing in a matter of years. You have to be very careful about where you decide to invest your money with these applications, as they may not be around in the future.
The even bigger thing at issue right now with these applications is that many of them don’t even work on the blockchain. Anything of substance does not work well, if at all, right now.
A lot of people are calling cryptocurrencies “crypto-commodities” because they are acting like gold in the way they are wildly going up and down in value all the time. So again, be very careful when investing in these applications, and if you need to find out more, contact us, we’ll be happy to help you think through the options before making a bad investment.
Until next time, enjoy.
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Gary Klaben is in our Glenview, IL office and serves our clients who are now located all over the country. He has over 30 years of experience and is the author of Changing the Conversation, The Wealth Sanctuary and co-author of The Business Battlefield. Whether advising his clients, mentoring his team, or coaching entrepreneurs, he is always simplifying complexity and motivating others to take the next action that’s right for them.
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