Our Future on the Blockchain

How we got here

Digital currencies are not new. DigiCash — an electronic money company — was created in 1989 to allow for anonymous, protected digital transactions. PayPal was created in 1998 and is still used to this day for transferring money. Today you can populate your Starbucks app with money that can then be used for buying your lattes- another form of digital currency (Think of it like the Starbucks Coin). The idea of digital currency has been around for over 30 years, so what makes all of these new currencies different? The Blockchain.

For a good introduction on The Blockchain, check out another Lab Note post by Bryan Zettler: Blockchain — Pandera Labs. I won’t go into the specifics about what the blockchain is (seriously - go read Bry’s post), but the important thing to know is that the blockchain gives us a new sense of trust in the system. When you use your starbucks app on your phone, you’re placing trust that Starbucks is keeping accurate track of your transactions — that they’re not going to lose your money or take your money from you. When you put money in the bank and transfer money through banks you are placing trust that the banks are keeping track of your money properly.

The Blockchain, on the other hand, is a trusted system. It’s a distributed ledger of accounts- every transaction that has ever occurred and every transaction that will ever occur is viewable, traceable, and essentially locked in on the blockchain. Because of that, all transactions are verifiable, secure, and distributed by the nature of the technology. The transactions cannot be modified once they’re committed. We no longer need to trust Starbucks, banks, or government systems. The trust is built into the technology.

The Blockchain Applied

What can be done with a trusted ledger of transactions? The first and most obvious use is for cryptocurrencies, but the possibilities are endless. Any system that relies upon the transfer of data, auditing of data, or coordination of efforts can be improved by blockchain technology. Here’s a few exciting uses of The Blockchain:

Government

As a simple example, look to various government/municipal systems. A very important aspect of local government is Every time a home or property is purchased/sold, a title transfer is recorded in the county recorder of deeds. In this situation, the government isn’t actually enforcing that the title is legally owned by the person selling it, and because of the manual process there are a lot of opportunities for fraud. An entire industry — title insurance — exists to combat the potential fraud in this system. In an all-digital blockchain world, the transfers could happen immediately on the blockchain without the opportunity for fraud. If the data is recorded on a public blockchain, the government data now gains transparency; constituents can get access to the data that they need at any time. This could lead to more efficiency, less fraud, and more transparency in Government (which all seem like really great things).

Healthcare

Another example is in Healthcare, as documented by this article in the MIT Technology Review: [Who Will Build the Health-Care Blockchain? — MIT Technology Review](https://www.technologyreview.com/s/608821/who-will-build-the-health-care-blockchain/). An entire chain of health records could be recorded in a healthcare blockchain- every doctor visit would be documented and a patient’s entire health history could be shared with any other caregivers. Obviously there are a lot of considerations to take into effect when building such a system, but a secure, transferrable system of health records can drastically improve healthcare results by offering insights that were not previously available and allow for improved quality of care across hospitals, physicians, and care centers.

Democracy, Supply Chain, Computing

[Voting](https://followmyvote.com/), [supply chain management](http://business.financialpost.com/entrepreneur/the-internet-of-tomatoes-is-coming-starting-with-boston-salads), and [decentralized computing](https://golem.network/) are among some of the many opportunities on blockchain that are currently being explored. There is a ton of opportunity for improving people’s lives and changing the world for the better using blockchain.

Challenges

Thinking about the possible impacts of Blockchain on the world, it’s easy to overlook some of the current challenges that will need to be overcome before those impacts can be truly realized. One of the biggest technical hurdles to overcome at this point is the amount of time that it takes to commit a record to the blockchain. Due to the crypto processes that occur and the consensus mechanism that’s required, recording a transaction on an existing blockchain (Bitcoin for example) can take on average around 10 minutes, sometimes jumping up above 30 minutes. Transactions are not exactly real-time and although this likely isn’t a problem for many use-cases it can severely limit what is technically feasible to build on top of the blockchain. Consider a traditional shopping experience — if it took 10 minutes to wait for a credit card to be processed at a store people would stop using credit cards entirely. There are solutions that are being built on top of the blockchain that can handle this (see Raiden Network — Fast, cheap, scalable token transfers for Ethereum), but they remove the consensus mechanism and rely on a new centralized trust mechanism.

There’s some other risks to the blockchain- one is the issue of Fragmentation. Fragmentation could lead to a loss of portability in data (technologies are locked into a specific chain), and a lack of commitment in any specific blockchain. Initial Coin Offerings (ICOs) are being used to raise funds for new technologies on top of the blockchains, but there is the good possibility the market has become a bubble. The lack of government regulation is one of the frequently cited advantages to the cryptocurrency market, but because of the difficulty to regulate things like predatory ICOs will continue to be a challenge. Even at its most simple it’s still difficult to spend cryptocurrencies- you can’t buy bitcoin from your local bank, most retailers don’t accept cryptocurrency, and even if they did the price fluctuates so frequently that it’s hard to intrinsically know what the value of it is.

Conclusion

With all of the current challenges facing it, It’s important to remember that the blockchain is a new technology and still needs time to mature. Cryptocurrencies is the most popular use case for the blockchain, but the opportunities for other products that can live on top of the blockchain are endless. Finance, healthcare, property, and technology can all be transformed by the use of the blockchain. Governments can become more transparent and effective. At minimum it will make certain aspects of life better, but at it’s best it may transform our entire society.

Credit:

One of my favorite blog posts on the subject of the blockchain is from Haseeb Qureshi, if you haven’t already go read this post: https://medium.freecodecamp.org/blockchain-is-our-first-22nd-century-technology-d4ad45fca2ce