A look at STEM: Blockchain technology, a new way of conducting business and record keeping

Two of the principles of my blog are “Creating Ecosystems of Success” and “Long-Term Thought”. While my scientific backgrounds are in the biomedical sciences Pharmacology and Toxicology, it’s imperative for me to keep my eyes on what’s happening in the other Science, Technology, Engineering and Mathematics (STEM)-fields. This allows me to use my platform to help guide others career-wise, and also for investment purposes (see my Facebook and Bitcoin post). I was encouraged to visit and discuss a new technology called “Blockchain” which is the buzz of the investing and technology worlds right now. Blockchain is actually not new for those who are already familiar with it, though it’s still early in its implementation. Not being in the “Tech” sector, I had to do some homework to be able to discuss what blockchain technology is, and I must say that it was well worth the research as it’s going to play a huge part in our lives going forward. As a testament to just how early we are in this technology, I couldn’t find a single book on it on a recent visit to Barnes & Noble.

So what is blockchain technology? Simply put, blockchain is a “Distributed Ledger” technology. Those are the exact words from two more senior gentlemen I overheard discussing it while at a happy hour in Old Town Alexandria recently. Because my mentor had alerted me to what blockchain technology was, I perked up when I heard their discussion. I was able to follow some of what they were talking about, and I eventually butted into their conversation.

They were also discussing “Bitcoin”, the new leading “Cryptocurrency” which runs on blockchain technology, and is currently highly deliberated in investing circles. Some people are skeptical that Bitcoin is an actual investment for numerous reasons. While it’s not clear what the future holds, as of now Bitcoin has turned into a very lucrative purchase for those who were exposed to it four or five years ago. By the way, while Bitcoin is receiving most of the press attention right now, there are other cryptocurrencies which share its similar basic attributes which I’ll highlight later in this post. They include: Litecoin, Ethereum, Zcash, Dash, Ripple, and Monero. Similar to Bitcoin, all of them run on blockchain technology.

Let’s start with a short discussion of how blockchain technology actually works. Again as my background is in the biomedical sciences, this look at blockchain technology is not designed to get into the nuts and bolts of coding and developing, but instead to provide a comprehensive look at what appears to be the next major technological advance, and to give those a chance to participate in it, who otherwise wouldn’t have it.

To understand how blockchain works, first envision a generic transaction taking place involving a group of let’s say nine participants either in one organization, or in different locations around the world – maybe even outer space one day with the way astronomy and space travel are going. The participants or members of the network are involved in the transaction through interfaces called ‘nodes’ which are simply their own individual workstations. Documentation of all transactions is captured using a ‘shared’ or ‘distributed’ ledger. This ledger is ‘decentralized’ and isn’t under the control of any one party. All communication inside the network takes advantage of a ‘cryptography’ to securely identify the senders and the receivers. When one of the nodes wants to add facts to the shared ledger, a consensus is formed within the network to determine if they in fact should be added, and this consensus is called a “block”. A series of these blocks comprise the ‘chain’ which all participants can see, and which no one can change once it’s created.

In terms of concept, an example of how a blockchain would work is the “SharePoint” web-based collaborative platform that ingrates with Microsoft Office. Document sharing technology allows multiple permissioned individuals to craft and edit the same document simultaneously on the same platform in real-time. This technology removes the need to circulate drafts of a document to the members of the team via email making production less cumbersome and giving the authors absolute control over the drafts. Those who have permission to work on the document can also see who else is making edits thereby giving the collaboration transparency. Overall, this leads to increased efficiency, and the saving of both time and resources.

At this point, I’ll summarize the three advantages of blockchain technology. I’ve pulled them from a very informative video by IBM about ‘Hyper-Ledger Blockchain’ technology. Most descriptions of the technology involve these three core attributes:

Creation of a distributed record: All parties involved in a particular transaction or business activity have a shared record of those activities. No one person or organization has ownership of the system.
Addition to the chain is permissioned: All parties must agree on a new record or block being added to the chain. This adds trust to the transactions making them tamper resistant and highly secure.
Transactions are secured: No one can change or delete a record from the chain making it permanent and eliminating the opportunity for fraud. A hacker for example cannot corrupt the records once it’s created.

It’s important to consider how blockchain will affect all of our lives, and it will do so in multiple ways. Let’s start in the context of banking/business. Anyone who checks their bank accounts as regularly as I do understands that many transactions don’t post/reconcile immediately – checking deposits for example. Money deposited from checks typically doesn’t transfer from one account to the other until the next businesses day – the check has to ‘clear’. In a blockchain transaction, the transfer of funds is instant once it is approved by all parties. Currently in many business transactions, a third party intermediary is necessary which adds costs and additional levels of complexity to the transactions in addition to the potential for fraud. Blockchain technology eliminates the need for these intermediaries, and in addition to making the most mundane banking transactions more efficient, blockchain will also impact more complex transactions like the buying and selling of publicly traded securities like stocks.

My first example involved banking but blockchain’s application potential spans far beyond that. The other major impact will be in industries where it’s important to track ‘supply chains’ for products of all kinds. The IBM video described above highlights blockchains’s application in the supply chains of diamonds.  However the most important supply chains it could impact could be those involving agricultural commodities and other food sources. In instances where there is an E. coli contamination for example, such as the one experienced by Chipotle recently or Burger King before that, blockchain technology would make it much easier to track the sources of those contaminations and pull them out of the market. With my backgrounds in Pharmacology and Toxicology, it can also be used to accurately track supplies of drugs and other industrial chemicals. It’s also currently being implemented into federal and state government agencies to help make their functions more efficient – the distribution of welfare checks for example.

I’ve described two uses for blockchain technology, but its potential applications are vast. Industries that can be impacted by it include:

• Smart contracts
• The sharing economy
• Crowdfunding
• Governance
• Supply chain auditing
• File storage
• Prediction markets
• Protection of intellectual property
• Internet of Things (IOT)
• Neighbourhood Microgrids
• Identity management
• Anti-Money Laundering (AML) and Know Your Customer (KYC)
Data management
• Land title registration
• Stock trading

The demand for blockchain developers is currently high and is increasingly growing. In terms of salary, many developers make over $255,000 per year. Still being in its infancy, those individuals who gain the skills to develop blockchain applications today will be on the forefront of the technology in years to come. They will work within businesses and government agencies where they will act as supervisors and directors. In the private sector they will create and run entire firms and companies similar to how Steve Jobs and Bill Gates captained Apple and Microsoft respectively. For the younger generations, not knowing about blockchain will be particularly disadvantageous in terms of gaining employment and being able to compete in the new global and highly digital world economy.

Where can one learn to develop blockchain applications? Once again, we’re still early the technology, but some universities and companies have responded by offering a range of blockchain related courses which vary from online formats, to traditional lectures, as well as privately run boot camps. Some notable universities offering training include: MIT, Stanford, and Princeton. Companies such as IBM have courses as well. There is also an abundance of blockchain conferences scheduled in the next year in the United States and around the world.

As described above, knowing about blockchain will benefit those who learn to develop it through future employment and through working in the technology. For the lay person, it presents tremendous investing opportunities. Blockchain is only going to continue expanding in terms of its usage and application. It’s thus important to keep an eye on who is using it, and how they are implementing it, as it may lead to a similar phenomenon to what we saw with Facebook and Bitcoin. Those opportunities started off small, but those who were prepared to take advantage of them were greatly rewarded later on.

Understanding technologies like blockchain or just knowing they exist can be life changing. One of the recurring themes of my blog is that I had no STEM professionals in my own family, so I’m fortunate to have landed where I’ve landed career-wise. It was all predicated on someone realizing that I had the aptitude for science, and then encouraging me down that educational path. Thus just as it was important for me to do the research on blockchain to be able to prepare this post, it’s equally important if not more so, for readers to share this information with students and families who can benefit from it, or with individuals who can actively and creatively disseminate it.

A special thank you is extended to my mentor who will remain anonymous, for challenging me to learn about blockchain and also for encouraging me to craft this post on this very exciting and important emerging technology. Thank you for taking the time to read this post. If you enjoyed it, you might also enjoy:

We should’ve bought Facebook and Bitcoin stock: An investing story
Your net worth, your gross salary and what they mean
A look at STEM: What is Pharmacology?
A look at STEM: What is Toxicology?
A look at STEM: What is ADME/Drug Metabolism?

If you’ve found value here and think it would benefit others, please share it and or leave a comment. To receive all of the most up to date content from the Big Words Blog Site, subscribe using the subscription box in the right hand column in this post and throughout the site. Lastly follow me on Twitter at @BWArePowerful, at the Big Words Blog Site Facebook page, and on Instagram at @anwaryusef76. While my main areas of focus are Education, STEM and Financial Literacy, there are other blogs/sites I endorse which can be found on that particular page of my site.

We should’ve bought Facebook and Bitcoin stock: An investing story

“Over your lifetime, you’ll actually miss more deals than you’ll catch onto.”

Two of the principles of my blog are “Long-Term Thinking/Delayed Gratification”, and the teaching of “Financial Literacy” as money and investing are topics that I ponder and study quite a bit these days.  I wasn’t taught a lot about them as a youth and strive regularly to fill that space in my personal toolbox.  Learning about investing money is actually critical for all employees who are responsible for saving into their own “Defined Contribution” plans.  A third principle of my blog is “Creating Ecosystems of Success” – helping others to be successful.  This particular story involves all three principles and focuses on two investing opportunities from years past – both of which could have drastically changed my life today if I had been in position to take advantage of them.

This post was inspired by two people.  One is a mentor who has literally adopted me and whom I regularly meet with to talk about the content of my blog, economics, current events and everything else under the sun.  Everyone should have a mentor like this.  The second individual is a long-time friend from our hometown of Buffalo, NY.  He worked in the banking industry, and has always had a bit of an entrepreneurial mind.

Instead of diving right into the story, for context I’ll go back to my brief high school basketball career – one of the best times of my life.  One of the things our coaches tried to stress to us was “boxing out” on defense.  That is putting a body on your man once a shot went up from the opposing team.  By committing to boxing out as a team, any team almost certainly could position itself to get the rebound and limit shot opportunities for the opponent no matter their height or leaping ability.  It was a simple and effective technique if used consistently and for our young minds, that was the hard part – doing it consistently.  All it took was being mentally alert, and positioning oneself at the right time.

Okay, let’s talk about Facebook and Bitcoin.  I’ll start with a reading assignment my mentor gave me about three months ago.  One of the topics we discuss regularly is investing money – something he is very experienced at and has taught his kids to do – something I’m playing catch up on.  At the conclusion of one of our mentoring sessions, he gave me a book to read titled “How To Turn $100 Into $1,000,000: Earn, Save and Invest by James McKenna and Jeanine Glista with Matt Fontaine, the creators of Biz Kid$.  When he first handed me the book, I made a comment about it being a, “Children’s book,” to which he quickly snapped back at me, “Do you know everything thing in this children’s book?”  Eager to know more of what he knew, I didn’t take offense, but instead appreciated his coaching.  He tasked me with reading the book prior to our next mentoring session.

As I read through the book, the initial chapters started with basic money lessons youngsters should have – ways to legally earn money such as through doing chores or eventually getting a job, and also planning and goal setting – some lessons many children aren’t taught at an early age.  Later the book delved into investments in a very simple and digestible way – charts, diagrams, pictures and all.  One caption that stood out for me was something on page 106, which told the story of Facebook’s Initial Public Offering (IPO) back in 2012.

“We should all pool our money together and buy Facebook stock,” my friend described earlier said enthusiastically.  It was the holiday season up in our hometown of Buffalo, NY.  He had worked in the banking industry for a while and had knowledge of investment vehicles that myself and my brother, and probably most of his family didn’t have.  We were all at his grandmother’s house where his relatives gathered to fellowship as they did most years.  I watched as he floated around his grandmother’s upper unit telling everyone, “We should pool our money and buy some Facebook stock.  They’re about to have an IPO.”

At that point, Facebook had completely eclipsed Myspace as the number one social media site and most everyone was on it.  While most everyone was using it to reconnect, share the most intimate details of their lives, and other unscrupulous things, its creator Mark Zuckerberg, was cleverly devising ways to monetize his creation through selling advertising space.  It never occurred me, and I would guess the majority of the users, to invest in it.

A mischievous guy at times, I thought this was just another one of my friend’s bright ideas that he was trying to suck us all into.  But was it?  As described in How To Turn $100 Into $1,000,000, Facebook’s initial stock price in 2012 opened at $38 per share.  Shortly thereafter the stock price decreased to $17.55.  When I heard that the stock price went down, I laughed internally at the prospect of all of us “pooling” our money to buy this Facebook stock, and the fact that my friend was lobbying so hard for us to do it.  But that was just the beginning.

Facebook’s stock rebounded over the next five years from that $17.55 per share drop and eventually appreciated to around $100 per share in 2015 when How To Turn $100 Into $1,000,000 was published.  Just before crafting this piece, I checked the business section of the Washington Post for stock prices and to gauge the health of our economy – a regular exercise now.  There I saw that Facebook’s stock is now trading around $170 per share, that’s right $170.  It’s also now considered one of the “Four Horseman” of technology stocks – the other three being Amazon, Apple, and Google.

So let’s put this all in perspective.  What occurred to me when I read that passage in the book was that if I simply had $2,000 lying around and ready to invest in 2012, I could’ve purchased just 100 shares of the Facebook stock for a total value of $1,755 (plus the cost per trade).  Holding onto that stock for another five years, those 100 shares would have appreciated to a total value of $17,550 which could either be cashed out for another purpose, or held for more appreciation.  There would of course be the potential of loss too as with all investments, but Facebook has become a very strong company.  But if you were positioned to get into the game at that point, you would’ve been rewarded later on.

I’ve come to realize that life is all about positioning similar to the way smart basketball players position themselves to get rebounds when a shot goes up, as opposed to simply leaving things to chance.  When I look back to where I was in 2012, I honestly wasn’t in position to safely buy stock of any kind.  I was still lugging around a considerable amount of debt from school, and from mistakes made shortly after starting my federal career – paying too much money for some real estate investing trainings (discussed in another post).  I was recently out of a tumultuous relationship where money was an issue – my not spending enough.  I further had no emergency fund (see Dave Ramsey), and I hadn’t started funding my government retirement plan at least up to the point where I would get my 5% matching contribution – something all employees should position themselves to do if employers offer it.  What’s more is that I didn’t understand much about the stock investing game other than you want to “buy low” and “sell high” whether or not you get into an opportunity when it’s first offered, or if you find something of value at a discounted price and chances are it will appreciate – stocks, real estate, whatever.

But there is so much more to it than buying low and selling high.  There are lessons which take time and commitment to learn – this is part of positioning one’s self.  Furthermore, there are often sacrifices to be made to have money to invest – sacrifices such as not buying a car if public transportation and Uber can be used, taking one’s lunch to work more often times than not, and not “Turning Up” at the club on a regular basis.  As a man, another position might be not having a girlfriend for a while, or at least finding one who isn’t high maintenance.  These are examples of the positioning one must do to be ready to take advantage of the next Facebook if and when it ever comes around.

My friend was right in that it would have been good for us to take advantage of the Facebook IPO.  Coincidentally a couple of years later, he came back to us and told us that we should take advantage of something called “Bitcoin”, a new cyber-currency which I thought was another one of his silly ideas.  He was very enthused about it, but one of the issues was he couldn’t clearly explain to us what Bitcoin was and why it was important going forward.  This brings up another very key point.  A very important investing rule of thumb is that one should never invest in something they don’t understand.  It turned out though that he was right again.  Two to three years later, Bitcoin seems to be paying off for those who positioned themselves and invested in it when it was dirt cheap.  See the recurring theme here?

This post is not about buying Facebook or Bitcoin today in 2017 per se.  Those ships have arguably sailed, and you’d have to have enough money readily available even just to buy 10 shares of Facebook stock today.  In terms of getting into these opportunities early when they’re affordable, you have to position yourself, and that’s the central point.  Either you’re in a position to take advantage of an opportunity when it’s presented to you, or you’re not.  This involves knowledge and resources – studying your investment of choice, minimizing your debt, saving for emergencies, and then allocating money to invest – money you won’t be adversely affected by the if investment doesn’t work.  If you’re not in position to take advantage of a particular opportunity, you can always position yourself for the next one, and the one after that, and then the one after that.  It’s all about foresight and positioning.  Before starting discretionary/speculative investments, it might also be worthwhile to see a trustworthy financial planner (or someone knowledgeable whom you really trust) to make sure you’re on sure footing.

For the people who were in position to get into Facebook and Bitcoin, it wasn’t magic.  They had the resources and they were probably spending time studying those opportunities so that they were able to strike at the right time.  It all takes some time and effort, and how you spend your time will determine if you’re in position to take advantage of the next Facebook.  In closing, I highly recommend How To Turn $100 Into $1,000,000 to youngsters who have the aptitude for money and finance, and for adults like myself who’ve needed to play catch up.  I’ve personally started sharing copies with those in my inner-circle.

Thank you for taking the time to read this post.  If you’ve found value here and think it would benefit others, please share it and or leave a comment.  To receive all of the most up to date content from the Big Words Blog Site, subscribe using the subscription box in the right hand column in this post and throughout the site.  Lastly follow me on Twitter at @BWArePowerful and on the Big Words Blog Site Facebook page.  While my main areas of focus are Education, STEM and Financial Literacy, there are other blogs/sites I endorse which can be found on that particular page of my site.