By Teeka Tiwari
Quietly duplicating a trade that changed 400 years of history in four hours…
and why its death has been predicted 129 times already
On a cold and rainy day in October 1971, Ray Tomlinson sent the first-ever e-mail.
At the time, he didn’t think much of it. Nobody told him to do it… He just thought it was neat.
Tomlinson was a programmer working on a secret government project called ARPANET… a network of computers that could “talk” to one another.
It took two years before people realized just how powerful Tomlinson’s invention was. By then, e-mail had gone from virtually nothing to 75% of all ARPANET traffic.
Today, 2.5 million e-mails per second are sent on ARPANET’s successor – the Internet.
More than four decades after Tomlinson’s invention, e-mail is still the single most-used application on the Internet. It was crucial to the growth of the web.
In the early days of the Internet, e-mail was the primary draw for users. There was no YouTube, Google, or iTunes Store.
E-mail birthed some of the earliest Internet success stories… Pioneering online-service providers like Prodigy, CompuServe, and America Online were all built on providing convenient e-mail access.
We are on the brink of a budding new technology trend that is on the same scale as e-mail and the Internet – possibly bigger.
E-mail has been called a “disruptive technology.” Its use is so widespread that it’s putting the U.S. Postal Service out of business… E-mail has contributed to a 35% drop in first-class mail over the past decade.
Early investors in e-mail support technology got rich, turning tiny investments into millions and millions of dollars today.
It’s easy for us to dream what it would have been like to make that sort of fortune from an investment. If we had the right information back in the 1980s and 1990s, would we have invested? Would we have committed those dollars?
Today, we are on the brink of a budding new technology trend that is on the same scale as e-mail and the Internet – possibly bigger. But this one will revolutionize the way we transact and do business… in the way e-mail revolutionized communication.
It’s happening right now with only a few people watching…
A New Revolution in Trade
On September 7, Barclays facilitated a $100,000 trade of cheese and butter between Irish food company Ornua and the Seychelles Trading Company.
This small trade will be just as revolutionary as the first e-mail sent.
When two companies in different countries want to buy and sell from each other, they use a bank to guarantee the transaction… It’s called “trade finance.”
According to consulting giant McKinsey, about $2 trillion is conducted in trade finance each year.
For more than 400 years, trade finance hasn’t changed much. Banks act as intermediaries between trading partners. They use letters of credit to guarantee everyone gets paid. Part of the due-diligence process has always involved collecting a mass of paperwork.
Both sides have to prove that they truly own what they say they own. They also have to prove that the goods they are selling are of the size, quality, and quantity that the bank is guaranteeing.
As you can imagine, trade finance involves sending mounds of paperwork across oceans. Missing a signature? Sorry, please resend the package. It’s a time-consuming process desperately in need of change.
Even in today’s digital age, it takes 10 days on average just to handle the paperwork. Sometimes, it can take up to a month.
But all of that just changed on September 7.
That $100,000 trade for butter and cheese concluded in less than four hours. That’s a huge time-saver that will significantly reduce the price of international trade.
Here’s how the deal was done…
Barclays Bank used a new technology called the “blockchain” to transact the trade.
The blockchain is a digital ledger that is tamper-proof. No single party has the power to change the records. Instead of sitting in one central location, the ledger lives on thousands of computers that automatically update.
The blockchain also has a built-in electronic record-keeping and transaction system. Both trade parties are able to track all documentation via a secure network. That means no third-party verification is required.
Barclays’ global head of trade and working capital, Baihas Baghdadi, said that the blockchain will be a game changer:
We’ve proved the reality of this technology and the client, Ornua, has asked us when they can do the next transaction in this way, which proves how user-friendly the entire process was.
Think about that for a second…
Trade finance hasn’t changed since the 1600s. More than $2 trillion a year is conducted via trade finance, and it’s still done with bits of paper flying across the world’s oceans.
The first-ever trade deal done exclusively on the blockchain is as big as Ray Tomlinson’s first e-mail.
A Whole New Way to Do Business
I predict that in a few short years, most international trade will be conducted through a blockchain… just like most of the world’s communication is done via e-mail.
But the blockchain won’t only change trade… Think about real estate. Real estate transactions have been done basically the same way since the Middle Ages. It’s a cumbersome, paperwork-heavy process that takes months.
In a few years, the blockchain will allow you to qualify for a loan, conduct a title search, and close on a house in a single day. It’s not that far off.
It’s not every day you get to see a life-changing trend happen right before your eyes.
In a few short years, the word “blockchain” will be as commonplace as e-mail. And it will spawn entire new industries.
Barclays has proven the blockchain works to conduct business… And it won’t take long before this technology becomes widespread. Remember, e-mail took off just two years after its first use.
But here’s the thing… The technology is run using cryptocurrencies such as bitcoin.
You can use cryptocurrencies to protect your wealth and privacy… But they also act as “shares” in the burgeoning blockchain industry.
As more people use the blockchain, these “shares” increase in price. Unlike hedge funds that require you to be an accredited investor (with a net worth of more than $1 million), you can buy “shares” in a blockchain’s technology by purchasing its cryptocurrency.
Of course, that doesn’t mean buying bitcoin is an easy trade… or one for your rent money.
Bitcoin Has Been Called ‘Dead’ 129 Times
On June 20, 2011, Forbes wrote “So, That’s the End of Bitcoin Then.”
On January 16, 2015, USA Today wrote “Bitcoin Is Headed to the ‘Ash Heap.’”
On May 5, 2017, The Daily Reckoning wrote “The Death of Bitcoin.”
Since 2011, bitcoin has been declared dead at least 129 times. Newsletter writers, journalists, and academics have called it a “Ponzi scheme.”
Others like the idea in theory but have doubts. They are convinced the government will shut down bitcoin and render it worthless. If it were 2013, I would have agreed with them.
From 2009-13, bitcoin rallied from a fraction of a penny to more than $1,100… and then spectacularly crashed 85% to $185. It looked like a classic “pump and dump” to me. That’s why I ignored it.
But then something very interesting happened. Instead of collapsing back to pennies, bitcoin found support in the $200 range. Even after the bubble popped, bitcoin was still worth billions.
This intrigued me because true Ponzi schemes have zero value when they crash.
The fact that bitcoin was still attracting buyers even after the onslaught of negative news… an 85% price crash… and universal scorn… said something to me.
It said that maybe this asset had real value. At the very least, it told me that more investigation was needed.
Lessons From the Dot-Com Bubble
I’ve seen skepticism like this before…
Back in May 1997, Amazon went public at the split equivalent of $1.30.
Amazon shot up to $113 during the dot-com bubble of the 1990s. When the bubble popped, Amazon crashed 94%, to the split equivalent of $5.97.
But again, something interesting happened…
In the depths of the dot-com hatred, Amazon started quietly climbing in price. Back then, I made the mistake of dismissing this action. My error was buying into the prevailing belief that dot-com stocks were dumb and worthless. I listened to the narrative instead of digging deeper into the Amazon story. That was a mistake of lazy thinking.
Bitcoin has rocketed from a low of 75 cents to more than $3,000 at its height – an astronomical 400,000% gain.
So when I saw the same thing happen with bitcoin, I decided to do something different.
Instead of listening to the skeptics, I asked myself: “Why are people still buying this supposedly worthless asset?”
That’s when I did a deep dive into bitcoin.
I traveled all over the world interviewing experts, development teams, and venture capitalists. I wanted to understand why bitcoin had value.
Even Governments Are Embracing Bitcoin
Just as important, I wanted to know what would stop the U.S. government from banning it.
How would the currency outgrow its widespread reputation as a form of “black money” used by criminals?
What I found out was this: At its core, bitcoin is just a way to send and receive value without the need for a trusted middleman.
Bitcoin has no central location. That means no government (including the U.S. government) can ever shut it down.
In fact, several countries have already tried to ban bitcoin and found that it was impossible. At least two of them (Russia and India) have decided to recognize bitcoin as money.
Governments are realizing that it’s better to have a hand in how bitcoin is shaped and regulated than try to destroy it (which they can’t).
Think back to when the U.S. government finally realized that prohibition was unenforceable. Better to regulate alcohol and tax it.
Where’s the Future Value?
The real strength of bitcoin is the underlying network of highly secure computers that support it (called the blockchain).
This is where much of the value creation will come from.
As I write, software developers across the world are building applications designed to piggyback off this network.
Over the next three years, we’ll begin to see a slew of new applications emerge for bitcoin and the network that supports it. They will support everything from asset tracking to recording land registries. And much more that we can’t even think of yet.
That’s why bitcoin will continue to grow in value.
Since those obituaries started popping up in 2011, bitcoin has rocketed from a low of 75 cents to more than $3,000 at its height – an astronomical 400,000% gain.
The next time you find yourself being scared out of owning bitcoin by a negative article, do yourself a favor… Read the last 129 times bitcoin was declared dead.
And finally, consider that bitcoin is like the “reserve currency” of all cryptocurrencies…
As the values of other fiat currencies are measured against the reserve currency of the dollar, the values of other cryptocurrencies are measured against bitcoin.
You can’t swap your dollars, euro, or yen directly to buy other cryptocurrencies. Often, you need to first swap your dollars for bitcoins… and then exchange your bitcoins for other cryptocurrencies.
Bitcoin’s “reserve” status means it deserves a home in your portfolio.