The blockchain is an essential part of how most major cryptocurrencies work, including Bitcoin. But it’s also esoteric and can be hard to understand. Even when you think you’ve got it, it can still trip you up.
In its most distilled form, the blockchain is a chronological ledger of every transaction that ever happened. Records are stored in cryptographically-verifiable chunks, called “blocks”, which are then “chained” together. Ergo, the blockchain.
This ledger is shared between people on the Bitcoin network, which essentially prevents people from spending coins they don’t have. It also prevents coins from being spent twice.
But while Bitcoin has yet to become a mainstream currency — and probably never will — the concept of a blockchain is having success in other fields, such as e-voting and finance. In many ways, the blockchain is more successful than Bitcoin ever will be, and it’s certainly going to impact your day-to-day life in the near future.
For Electronic Voting
Electronic voting hasn’t caught on outside of the United States, largely because it’s a terrible idea. It’s extremely difficult to guarantee the integrity of the results, which is bad when you’re trying to decide on something important, such as electing your next representative.
With paper voting, you just have to count all the ballot papers and add up the results. But with electronic voting, people’s choices are mere bits and binary digits, and can be surreptitiously altered, thus changing the outcome of an election.
Blockchain technology might be the solution to the problem of e-voting. The logic goes, if the blockchain does a good job of securely tracking financial transactions, why can’t it do the same for votes? Thus, a few proofs-of-concept are now being developed, the most interesting one being BitCongress, which runs on the Ethereum platform.
Of course, the blockchain is no panacea. There are still some major problems that need to be addressed, such as how to prevent people from having their votes stolen or tampered with by hackers. I imagine it’s hard physically steal someone’s ballot paper, but as we’ve all seen with the MtGox fiasco, it’s all too easy to part someone from their Bitcoins.
Until these hurdles are overcome, until the technology proves capable of delivering accurate vote numbers with no room for failure, until it’s shown that votes can’t be discarded or modified, e-voting won’t be a thing. But if anything has the ability to make it happen, it’d be the blockchain.
For Intellectual Property
Every day, terabytes of content are posted online. Photos. Videos. Music. Blog posts. Even Tweets.
Content creators have to balance between sharing their works and potentially losing control over them. The Internet is an intellectual property Wild West, and only the largest media companies have the resources and motivation to defend their copyrights, trademarks, and patents.
But the blockchain looks set to change that. Right now, there are a number of startups that are working on tools to record ownership of a property (intellectual or physical) onto the blockchain, like Tieron, Monegraph, Colu, and Ascribe.
Of these, Ascribe is the most finished. It’s been in development since 2013 and launched in 2014. Ascribe allows the owner of an intellectual property to record and transfer ownership, to license their work, and to even issue limited digital editions of a work. You can see the founder explain the principle behind it in the video above.
There are also startups aiming to record ownership of physical products. Take EverLedger, for example, which aims to make it easy to record the ownership of diamonds. This is a field which the blockchain lends itself quite well to, since it’s virtually tamper-proof and permanent.
For Banking Integrity
Banking technology tends to be rather conservative. Many of the systems that handle transactions and accounts were built in the 1950s using archaic languages like COBOL and run on steam-powered mainframe systems. These programs haven’t been thrown away because the costs of modernizing them would be astronomical.
Banking, it seems, is inherently resistant to change. As a result, you can assume that whenever a large financial institution experiments with a new technology, it’ll be for the long-haul.
Right now, forty of the worlds largest banks, including Barclays and Goldman Sachs, are experimenting with the blockchain for trading fixed-income assets. Fixed-income assets are the least exotic financial product available. Essentially, it’s where somebody borrows money, and is then obliged to pay back fixed amounts by fixed dates. Any interest is likewise fixed.
The advantage of the blockchain is its instantaneousness. With it, banks can process large numbers of concurrent transactions almost instantaneously. Previously, it would take days for transactions to be settled.
Perhaps another major draw for the banks is the fact that the blockchain is inherently secure. Each transaction made through the blockchain is recorded, and the records are distributed to each node on the network. These records cannot be modified or tampered with, massively mitigating the risk of fraud.
But while the blockchain’s adoption by major financial institutions is extremely exciting, the endgame is even more so. Ultimately, it will lead to “smart contracts” being commonplace, which will automate huge parts of the banking process, which would have been previously been done by a human.
The fundamental idea behind smart contracts is that a piece of code could automatically check that the terms of a contract have been met by a third-party. Once that’s happened, it would record it against the blockchain and close the contract.
For Many Other Fields
While the blockchain is having the biggest impact in digital democracy, finance, and IP management, it’s being successfully applied in other fields.
One promising area is in the Internet of Things (IoT), which is already having a transformative effect on our lives. Blockchain technology could allow IoT products to become more autonomous and to conduct financial transactions on their own. This was imagined in a white paper by PostScapes:
Imagine a vending machine that can not only monitor and report its own stock, but can solicit bids from distributors and pay for the delivery of new items automatically — based, of course, on the purchase history of its customers.
Or a suite of smart home appliances that can bid with one another for priority so that the laundry machine, dishwasher and robo-vacuum all run at an appropriate time while minimizing the cost of electricity against current grid prices.
Or a vehicle that can diagnose, schedule, and pay for its own maintenance.”
Another novel use of the Blockchain is as a distributed file storage mechanism. Take Storj.io, for example:
This uses blockchain as a core component in its cloud storage service. Files are encrypted, uploaded, and distributed to other people’s computers, which are running the Storj DriveShare application. Those offering storage space are compensated.
Blockchain technology is still young and under-explored, but all of these examples highlight one truth: the blockchain is finding its way into a lot of stuff, and this is only the beginning. It’s safe to assume that you’ll be seeing more applications of the blockchain in the future.
Have you found any other uses of Blockchain? Are you a blockchain-skeptic, or a blockchain-enthusiast? Tell me about it in the comments below.