It’s pretty clear that decentralising a network allows us to do a lot of things that weren’t possible until now. Your life is going to change in many ways, you could even say that the balance of wealth and power will be tipped back in favour of the average person. By removing the need for trust, we can now trade directly between two people with no risk or strings attached. You could get loans without a bank, handle legal disputes without paying lawyers, and even have a direct democracy for government (instead of electing a representative and relying on them to actually meet their promises). Let’s go into a little more detail about the specifics.
When most people think of blockchain (and cryptocurrencies more specifically), the immediate use case that comes to mind is peer-to-peer transaction processing. After all, if you have a digital currency, the first thing it needs to be able to do is allow transactions to occur. As we described in the first two pages on blockchain basics and consensus, the original purpose of blockchain was to allow digital currencies to be transferred between two users, without the need for a central validator and without the risk of double spends. However, there are a few other more specific use cases to consider.
Firstly, it’s possible to make these payments totally private. Every user will still have their own public key and private key, but blockchains can be designed to hide transactions and address data, allowing for anonymous payments and private account balances. There are quite a few different approaches that make this possible, from stealth addresses to homomorphic encryption, and new approaches are being invented all the time; we’ll have an article up in the blog section about these eventually! As anonymity is introduced, there is the possibility for such things to be used for nefarious purposes, but an argument could be made that every person is entitled to their own privacy. It seems unlikely that these privacy coins will ever go away regardless, as the decentralised nature makes them very hard to track or ban.
In the future, we will also start to see the creation and transfer of digital assets. The possibilities here are endless, but there are two main types of digital asset (in addition to typical cryptocurrencies) that could theoretically be traded over blockchain in the future. The first group are non-fungible tokens, or NFTs. A fungible commodity is one that can be replaced with another identical item; for example, 1 Bitcoin can be traded for another Bitcoin, as they are essentially the exact same thing. Non-fungible tokens on the other hand would all be unique, and therefore tokens would not be interchangeable. This allows them to be used to represent unique digital items, such as crypto-collectables or even video game assets. Each token would therefore have its own unique value and property, and there can be no question about the asset’s authenticity.
The second type of digital asset refers to any asset that could be stored as electronic data. Easy examples would include digital images or music files, but this could also be extended to include digitized versions of typically non-electronic data, such as property deeds. This means that one day, you could theoretically buy a house or car over blockchain, allowing you to leverage the decentralised, trust-less and traceable nature of the technology to make sure the trade is transparent, fair and free of intermediaries such as real estate agents.