My friend William Mougayer has done extensive research on Bitcoin and the Blockchain. Today he published a post about Blockchain being the new website. I suggest that you read it and other posts he has written if you want to understand Bitcoin. I think that it’s important to think beyond Bitcoin as a payment mechanism.

William makes a great point, the blockchain decentralizes trust. If you grew up in the 1980’s, you know the Reagan quote “trust but verify”. He was referring to treaties with communist Russia. Blockchain is a way to spread trust and verify that the trust is warranted.

If you start to think about the topic of trust, where is trust centralized and ruled by hierarchy? Those centralized silos can be exploded by the blockchain.

For example, NASDAQ announced they were going to allow the use of blockchain for stock ownership transfer. Currently, when you buy and sell shares of stock they have to go through a highly centralized clearing mechanism. It’s called +3 clearing. There are so many shares running around that it’s impossible for the current clearing mechanism to have a handle on them all. I remember a friend of mine that had a business in the 1980’s which only had one purpose; investigating the trail of transactions to prove who owned the shares.

Banks and other intermediaries earn a nice easy profit clearing. CME and ICE earn a nice profit clearing commodities. Options Clearing Corp earns a nice monopoly profit clearing options trades. It is going to be possible to set up all kinds of private markets that allow for more efficient hedging and risk transfer than centralized marketplaces. Blockchain is coming for them.