Blockchain is the technology behind cyrptocurrencies such as Bitcoin, Namecoin and Titcoin. These currencies work as any other currency in terms of spending them, but their creation is a little differently and relies on cryptography,
When I first heard about bitcoin I was working for a financial services company, and the person telling me was gleefully announcing it would be the end of banks. Lots of things have been touted as the end to banks over the years, this was just the latest. I admit I had a bit of a mental block about it, I couldn’t see how value was encapsulated in the bitcoins – which is probably exactly how people felt when paper money started to be issued by national banks.
It’s a little complicated so here’s the best explanation I’ve been able to find on the internet so far.
(Want to know more? Here’s an even more detailed version from the same expert.)
Blockchain is a distributed decentralised ledger recording transactions. At its heart it provides a mechanism to encode the trust on each side of a transaction.
It’s that documenting of trust that has led to further consideration of the blockchain technology starting with central banks themselves. Blockchain solves two problems for established banks and central banks (1) transactions become faster (2) transactions become more secure. Because the transaction is recorded in a distributed manner, and because the transactions form a sequence, it’s extremely difficult to create a fraudulent transaction.
There are other areas where documenting trust is important, The Economist reports on changes coming to the land register in Honduras that will use a form of blockchain. By distributing the land register in a blockchain system the country will finally have a single land register. IBM is part of a consortium working on a “hyperledger” that will allow private use of an open distributed ledger to track a variety of transaction. They note that a transaction dispute can take 40 days to resolve, but with an open ledger that time should be reduced.
Using Blockchain to verify contracts, sometimes called “smart contracts” could have uses in multiple industries. In this podcast from the BBC’s “Click” programme they explored the idea of using blockchain in the music industry to codify ownership of music, and enable simple payment.
MIT (who else?) have been looking at using blockchain as a certification mechanism on qualifications and memberships. They’ve written on the background and purpose of this project. If you’re a nice honest person who never lies on their LinkedIn profile you might struggle to see why this is important, however there are lots of CV ‘exaggerations’ out there and it is important to be clear about what qualifications, experience and memberships a person holds when they apply for further education, a job, or enter public office. In the future our CV may come with blockchain codes to verify our statements.
Lastly governments are examining the potential of blockchain. The UK Government released a report on blockchain technology this year in which they state the potential power it has in government business;
Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.
In fact Estonia is there already, their digitally-savvy president, Toomas Hendrik, has overseen significant use of blockchain technologies in securing identity and health records within his country and he’s working for a closer integration with outer countries across Europe. There’s a broad vision Estonia’s digital programme, and the implementation has simplified a great many processes for its citizens.
In the future some form of blockchain technology will be behind how you access government and financial services. It will be more secure, more able to protect your privacy, and less likely to disruption or loss of data.