There’s a good chance that when you read the word ‘blockchain’ your mind turns to cryptocurrencies and financial services. If that’s the case there’s a very good reason for it: a massive hype bubble built up around blockchain and cryptocurrencies around 2018, when the price of Bitcoin peaked at $20,000. The subsequent crash caused public interest in blockchain to virtually evaporate as quickly as it had formed. This all happened before many people really understood what kind of fascinating applications that the underlying technology could have in areas way beyond cryptocurrencies.
When the person (or persons) known as Satoshi Nakamoto was developing Bitcoin they needed a method of reliably recording and authenticating currency transactions. Nobody would trust an online currency if you couldn’t guarantee that every transaction was legitimate. What prevented someone digitally copying a Bitcoin, like you could copy an MP3 file, for example? The original blockchain white paper was written with the intention of certificating cryptocurrency activity (with this in mind, it is unsurprising that blockchain remains wedded to cryptocurrencies in the public mindset). It has taken some time for many people to see how this capability for authentication can be utilized elsewhere.
The internet and e-commerce struggle with the fundamental challenges of trust. An enormous industry has developed around safely facilitating online payments, led by companies like Paypal and Stripe, but this principle is not limited to financial transactions. Blockchain is a way of facilitating accountability in any form of data, thereby unlocking the vast potential that comes with guaranteeing the provenance of information.
One of the best ways to ensure the integrity of data is to distribute it.
Any type of information that can be stored in a traditional database can be stored in a blockchain (or distributed ledger). The ledger can be public, private or a mix of both, and is a secure method to store, distribute, authorize and move digital transactions. Because data in a blockchain cannot be deleted or overwritten (a blockchain is, by design, immutable) it obviates the requirement for trust. All participants can clearly see the path of the data and can be confident in its reliability, without relying on any intermediaries or escrow agents.
Is blockchain as a narrow solution for focused applications or an internet game-changer?
From a technical perspective, there isn’t much you can do in a blockchain that you can’t do already with a conventional database, but the business opportunities that are opened up by blockchain are far wider. Take this abstract example: I arrive at work and notice that my car is low on petrol. I could stop for some on my way home tonight, but I’ll be rushing to beat the traffic and I could do without the hassle. What I’d really like to do is hand over the car to somebody who has a bit more time on their hands to fill it up for me, in exchange for a small fee. But I would really hand over my keys to a complete stranger?
Of course, I wouldn’t — not without being certain I could trust them. I’d be afraid that would be the last time I’d see it in one piece. You can’t know who you’re dealing with, after all. But if we imagine this as a digital transaction then blockchain makes this potential piece of business credible. If every step in the agreement is recorded transparently and immutably then there is no issue of trust.
Taking control of data
Blockchain can have benefits for virtually anything that requires a digital record. It can democratize information and facilitate individuals taking greater control of (or even monetizing) their own valuable, personal data, without giving it up to 3rd parties. Here are some of the areas where we might see blockchain make a big impact in the coming years:
Finance: a unified payment platform can involve a whole host of interested parties in a transaction, such as government agencies or other service providers. Blockchain technology means that this is secure and confidential. This functionality is hugely important, for instance in supply chain management where every transaction needs to be recorded meticulously, often painstakingly on paper and rubber stamps today. It also means that financial institutions do not need to be involved in the transaction.
Media: In the Fake News era we need to constantly challenge the veracity of stories we see online. At the moment the best we can do is evaluate the source of the story; is the publisher trustworthy? Blockchain could record precisely where a story originates, making it much easier to appraise and evaluate its reliability.
Education: If I want to prove my credentials to a prospective employer or educational institution I need to present a copy of my university transcript or certificate. A properly regulated blockchain would allow me to store this information digitally and share it safely with whomever I choose.
Healthcare: Any record that requires many parties to view and sign documents can be simplified and made more reliable with blockchain. Patients’ medical records, such as admissions and prescribed medicines, or any sensitive information that requires verification could be stored on a blockchain.
Politics: In the digital age it is not necessary for elections to consist of paper ballots cast inside a physical polling station. The vast majority of people have access to digital channels; a blockchain used for the purpose of verifying voter identity would permit voting via a smartphone app for those who choose to do so.
Intellectual property: Any object created in the real world can be linked to virtual blockchain to prove ownership or origin. This can mean any authored work, including music or video. It can also prevent fraud and forgeries, while smart contracts can ensure that artists get paid when their work is accessed and consumed.
Crowdfunding: ICO — Initial Coin Offering — is a type of fundraising using cryptocurrencies, particularly attractive to startups and other smaller businesses.
Personal Data: Today we happily exchange our personal data — our browsing history, our up-to-the-minute location, our spending habits — for web services like social media applications or map software. Many people regard this as fair trade; after all, I’m not doing anything with the data myself, right? Well, with blockchain you could do something with this data. You could even sell it on yourself for something much closer to its real value (we can assume that Google and Facebook are getting much better value for your data than you are right now).
“The best thing to happen in this space was the collapse of the hype. We finally have regulations around initial coin offerings and don’t have a rush to get money as funding.” — Sheila Warren, World Economic Forum Head of Blockchain, Digital Currency and Data Policy
After a major hype bubble in the early days of Bitcoin, we are seeing a more settled landscape as patient builders develop the underlying technology and explore new applications.
One feature of blockchain that could facilitate these kinds of arrangements is the smart contract, a very clever protocol that facilitates verification, negotiation, and execution of a conditional transaction. It is not a legal document; rather, it is a self-enforcing piece of code that can allow anything of value to be exchanged. For instance, a smart contract may comprise a series of contingent payments that automatically execute only when certain criteria have been met. This eliminates the potential for fraud, or parties reneging on elements of a deal.
Protocols like this could facilitate the next big disruptive phase of the internet by legitimately guaranteeing the provenance of information. This has implications for the very building blocks of the web, which could lead to the disruption of older protocols, like HTTP, to be replaced with a new ‘smart-web’ or ‘Web 3.0’ based on blockchain infrastructure.
“We have to start rethinking the foundational building blocks of the tech stack and the way we allow interactions to happen using blockchain.” Sheila Warren, World Economic Forum Head of Blockchain, Digital Currency and Data Policy
Gartner has listed blockchain as one of the top ten strategic technologies for 2020, expecting the technology to overcome scalability and interoperability issues by 2023.
This is indicative of a corner being turned by a technology that has been much maligned after a huge initial burst of excitement. Many within the industry believe that blockchain will be adopted in a significant way in financial services and data security in particular. Once the technology has proved its worth and functionality I believe we will begin to see it fulfil its early promise.
The Oracle for Startups program has collaborated with a number of businesses working in this area in order to maximise business opportunities and foster a cycle of innovation. Examples include Automalous, who are using blockchain to construct technological solutions for gene therapy and personalised medicine, and Finweg, who focus on services for financial services (you can listen to our conversation with Finweg’s CTO on the CurioCity podcast here (Spotify) and here (iTunes)).
If you’d like to learn more about how blockchain works from a technical perspective there’s a great video explainer here, or you can check out this article written by a couple of erstwhile colleagues of mine.
I’m on LinkedIn if you’d like to say hello. All views expressed above are my own.