The post originally appeared on LinkedIn and we republished with permission from its author Marquez Comelab.
Internet connections were once too slow for people to stream movies from Netflix. Instead, they borrowed videotapes from Blockbuster to watch at home. In September 2000, after months of trying to set up a meeting, Netflix co-founder Reed Hastings and CFO Barry McCarthy finally got together with Blockbuster CEO John Antioco. Netflix was in trouble. It was on track to lose $50 million that year while tens of other internet-based companies just went bust in the dot-com crash. Blockbuster on the other hand, after having just raised $465 million through an IPO the previous year, was doing very well.
Reed and Barry hoped to work with John. They could develop and grow the online arm of Blockbuster, while John and his team maintained its stores. The Blockbuster team presumed the Internet hysteria was overblown, so they were not interested in such an arrangement. Instead, they asked how much it would cost for Blockbuster to buy Netflix. When Reed and Barry asked for $50 million, John Antioco was struggling not to laugh. One of his team members claimed that online business would never make any money. The meeting ended, and Reed and Barry drove quietly to the airport, disappointed. Ten years later, Blockbuster filed for bankruptcy.
Blockbuster represented an old way of thinking: that we can only buy, rent or sell things we can touch and hold. It took a leap of imagination to consider consuming music and film without their physical manifestations like CDs, tapes or DVDs. When the internet came along, streaming and Netflix showed the world another way.
Today, Internet connections are much faster, and millions of people around the world watch movies, TV shows and documentaries through Netflix. In 2018, Netflix reported earning $1.2 billion Net Income and had $5.2 billion in Net Equity!
The lesson here for any business in any industry is to guard against hubris: Let us never be overconfident, no matter how strong we are in our current positions. New trends, new players and new ideas arise at any time and bring with them new opportunities. If we laugh at or dismiss these opportunities too quickly, it could be us who gets toppled down. We will have nothing and nobody to blame but our own arrogance and unwillingness to listen to new ideas, and reject them without first understanding them.
The lesson here for any business in any industry is to guard against hubris: Let us never be overconfident, no matter how strong we are in our current positions. New trends, new players and new ideas arise at any time and bring with them new opportunities.
I feel the payment industry now stands on the same precipice where the video rental industry once stood. Made up of banks, central banks, financial institutions and their regulators, the payment industry represents the thinking that money can only be issued, managed and guarded by institutions we are supposed to trust. This mindset was challenged ten years ago when Satoshi Nakamoto published a whitepaper about Bitcoin, a digital cash system that allows people to transfer value peer to peer (direct from one to another), without the need for banks, central banks and other financial institutions.
The payment industry now stands on the same precipice where the video rental industry once stood.
For a business model like Netflix’s to succeed, a problem needed to be solved: How can we send large amounts of data from a server hosted in one part of the world and simultaneously distribute to computers all over the world, fast enough so people can watch movies or listen to music in real-time? Once that problem was solved with the introduction of broadband internet access, the Internet flourished with large amounts of video and audio content that people consumed every minute of every day.
For Bitcoin, the problem it faces is that of what is called ‘scaling’: How can the Bitcoin network process more than an average of 7 transactions per second if it ever hoped to be used as digital cash for the world? In comparison, Visa processes around 1700 transactions per second [1].
In 2017, the Bitcoin network was so congested that it sometimes took days to a week to wait for transactions to complete. The solutions posted on social networks and forum sites was to pay miners a higher fee to process your transaction for you. Ridiculous! At the time, I reluctantly thought Bitcoin was over-hyped and I did not believe it could ever be a global currency or a payment system, unless something changed.
In attempting to solve the ‘scaling’ problem, the once-united Bitcoin community split into different groups. There are now three (3) versions of Bitcoin: BTC (Bitcoin / Bitcoin Core), BCH (Bitcoin Cash) and BSV (Bitcoin Satoshi Vision or Bitcoin SV) [3]. The difference between these is primarily their approach to ‘scaling’ Bitcoin.
To keep this article shorter, I will avoid any techno-babble or discussions of the ideologies of these three groups or the history of how they split. What matters at the moment is this: the Bitcoin SV (BSV) project has upgraded its network to handle around 14000 transactions per second. Furthermore, if we take a look at the cost of transacting, it is very low compared to any existing payment systems being widely used today. It costs about 0.17% (ie 0.0017) of the total amount of a transaction! [4] As great as these numbers are for users, they are expected to further improve on 4 February 2020, when BSV will upgrade yet again to increase the number of transactions that can be processed, as well as reducing the transaction fees even more!
The Bitcoin SV (BSV) project has upgraded its network to handle around 14000 transactions per second. Furthermore, if we take a look at the cost of transacting, it is very low compared to any existing payment systems being widely used today. It costs about 0.17% (ie 0.0017) of the total amount of a transaction!
These numbers ought to capture our attention. If Bitcoin, in the form of BSV, has indeed found the solution for it’s scaling problem, the consequences can be massive. I understand that current payment systems provide a level of convenience and a sense of assurance for merchants, start-ups and entrepreneurs and yes, I get the skepticism. We have heard it all before: Bitcoin was going to take over the world. And yet, ten years since its inception, it has not even come close to any level of adoption to threaten any industry.
However, if the proponents of Bitcoin SV are correct in their approach of scaling Bitcoin and the BSV network continues to offer low transaction and operational costs as well as faster, more efficient transactions with less administration and bureaucracy, then it can possibly over time, erode the dominance of the functions currently served by power brands in Fintech and the payment industry.
At the height of their dominance, the leadership team of Blockbuster came face to face with a technology that would disrupt their industry. They could not imagine the possibility, and yet it took only ten years for the transformation of their industry to complete, and they came tumbling down when the market rendered their function useless. Could many businesses in the Fintech and the payments industry be facing the same fate?
Marquez Comelab was literally knocking on business’ doors telling them how their businesses should not be left behind with the changes the Internet will bring when he started his web design business in 2000. He sees the same potential for Bitcoin (in the form of Bitcoin Satoshi Vision, BSV) to transform the way business is done in the future. It is both a threat and an opportunity to Fintech and the payments industry as well as all retailers, merchants, start-ups and entrepreneurs.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
