Blockchain … from geeky Bitcoin technology, to a revolution in everyday processes
February 23, 2016
Blockchain has become the tech buzzword of our time, well at least of recent months. Whilst it was initially conceptualised as the way in which digital (crypto) currencies like Bitcoin work, it has become more than that, with incredible potential. I wanted to make sense of it, and to understand the opportunities it offers for revolutionising almost any type of process.
Origins: from crypto-currencies to wider applications
In 2008, Satoshi Nakamoto published a paper describing “Bitcoin” and how it could be used to digitally send payments between any two willing entities without the need for a third-party financial institution. Each transaction was recorded on the “blockchain” ledger, the newest block tied to the ones before it using a digital signature. To ensure trust in the ledger, participants on the network ran complicated algorithms to verify those digital signatures and add transactions to the blockchain.
The next few years for Bitcoin were tumultuous, including the collapse of the high profile Bitcoin exchange, Mount Gox, and an increasingly sour reputation as the currency feeling the underground online drug bazaar Silk Road. But many companies saw opportunity in the underlying technology – the blockchain – that made Bitcoin’s existence possible.
Definitions: a distributed way of managing transactions
It’s easy to get lost in the technological language. So here, from a variety of sources, are some definitions and perspectives on “blockchain”:
Wall Street Journal: A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to manipulate the ledger in a secure way without the need for a central authority. Once a block of data is recorded on the blockchain ledger, it’s extremely difficult to change or remove. When someone wants to add to it, participants in the network verify the proposed transaction. If a majority of nodes agree then the new transaction will be approved and a new block added to the chain.
PwC: At a very high level, the blockchain is a decentralised ledger, or list, of all transactions across a peer-to-peer network. This is the technology underlying Bitcoin and other cryptocurrencies, and it has the potential to disrupt a wide variety of business processes. If the Internet is the foundation for digital innovation of all kinds, blockchain technology is the underpinning of a radical rethinking of how we pay for things—as well as how we verify who owns what and who has the right to buy and sell it.
IBM: Blockchain is a technology for a new generation of transactional applications that establishes trust, accountability and transparency while streamlining business processes. It is a design pattern made famous by bitcoin, but its uses go far beyond. With it, we can re-imagine the world’s most fundamental business interactions and open the door to invent new styles of digital interactions. It has the potential to vastly reduce the cost and complexity of cross-enterprise business processes. The distributed ledger makes it easier to create cost-efficient business networks where virtually anything of value can be tracked and traded—without requiring a central point of control.
Blockchain Institute: We should think about the blockchain as another class of thing like the Internet – a comprehensive information technology with tiered technical levels and multiple classes of applications for any form of asset registry, inventory, and exchange, including every area of finance, economics, and money; hard assets (physical property); and intangible assets (votes, ideas, reputation, intention, health data, information, etc.). In fact the blockchain concept is even more, it is a new organising paradigm.
Applications: transforming finance and much more
Here are just some of the categories where blockchain could have a revolutionary impact on almost every walk of life, through effective innovation of technology, business models and customer experiences:
Currency: Bitcoin began as a P2P electronic cash system. Anyone can hold bitcoin and pay anyone without a middle man. Examples include Bitcoin, Litecoin.
Payments: Using Bitcoin to send money around the world is slightly different than using bitcoin as a currency. Uses include merchant processing and remittances. Examples include BitPay, Abra.
Digital Assets: The blockchain can be used to create digital assets such as stocks, bonds, land titles, and frequent flyer miles. Examples include Chain, NASDAQ.
Identity: Companies offer blockchain IDs that can be used to sign in to apps and websites, digitally sign documents, or even create the future of passports etc. Examples include Onename, Keybase
Verifiable data: Create a verifiable record of any data, file, or business process on the blockchain. This includes the future of reviews and endorsements. Examples: Tierion, Proof of Existence.
Market Makers: Creating the future in your own vision
The vision and potential of applying blockchain to almost every type of transaction, and therefore every industry, is immense and diverse. Like the early days of the internet, there is no common view or coordinating structure. It is future being shaped as we sit here. Who will be the “market maker”? Who will define the future playing field, bring the relevant standards, simplicity and serious commercialisation to blockchain? And how will emerge and evolve?
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