Forget Bitcoin as a technology. As a pure cryptocurrency it’s primary purpose as a replacement for other currencies is somewhat flawed. As a pure technology it would never stand the test of time as a currency if protecting your wealth against inflation is an argument. What happens when another better technology comes along. There are currently over 1400 other cryptocurrencies and tokens out there some offering improved utility over Bitcoin so it’s just a matter of time before the speculative bubble in Bitcoin (and other cryptocurrencies) bursts and valuations come back down to reality, which in the case of some ICO’s (Initial coin offerings) and crypto’s will unfortunately be zero. Also, as a technology it’s just a matter of time before another technology comes along that makes it obsolete. The argument that Bitcoin will protect against inflation just doesn’t stand up. It’s more likely that a gold backed cryptocurrency will emerge (there are some already) that offers the best of both worlds, gold to protect against inflation and a crypto-token to make digital transactions fast, secure and transparent.
The current speculation in cryptocurrencies has however highlighted that current systems of clearing and managing data have become antiquated. The underlying technology of Bitcoin and most other cryptocurrencies is the blockchain and it offers numerous opportunities to make doing business more transparent and efficient.
Blockchain is essentially a distributed database of records or public ledger of all transactions that have been executed and shared among participating parties. This means that there is no requirement for a central clearing mechanism which is subject to error and fraud. If every block on the chain holds encrypted details of every transaction they all need to be in agreement for transactions to take place. Any block that is not in agreement has been altered in some way and is rejected. Blockchain therefore makes it very difficult to commit fraudulent transactions and it also speeds the process up by eliminating the middle man clearing mechanism.
There are many systems that we use in day to day life that the blockchain can potentially impact and improve. Systems such as:
Insurance – Blockchain technology can provide a shared and transparent record of industry-wide contract and claims-related information, improving efficiency and transparency. The Zurich insider article below demonstrates how the insurance industry is looking into opportunities to use blockchain technology: https://insider.zurich.co.uk/risk-management/blockchain-insurance-industry/.
Contracts and smart contracts – An electronic contract that contains an if/then statement which executes a rule based on pre-set conditions is a potential application of the blockchain. This is currently being used by AXA and the airline industry using an Etherium based solution to trigger flight delay payments as soon as a two hour period has passed. Read here for more information: https://www.coindesk.com/axa-using-ethereums-blockchain-new-flight-insurance-product/
Real estate – If you live in the UK you will be well aware of the time consuming and frustrating process involved in buying and selling a house. Blockchain has the potential to completely overhaul this process through property ownership records, mortgage details, land searches and contract exchange. Property technology outlines how this might work in their article here: http://propertytechnology.co.uk/2017/09/blockchain-technology-can-revolutionise-property-industry/
Stocks and shares – Buying and selling shares, providing contract notes and maintaining a record of who owns shares. The Nasdaq exchange has been experimenting and completed their first use of a blockchain stock transaction recently, read the Telegraph article here: http://www.telegraph.co.uk/finance/markets/12075825/nasdaq-blockchain-share-trade-bitcoin-technology.html
Asset backing – Asset ownership is often a heavily paper based affair with a paper title denoting ownership and transfer of the asset. Blockchain can provide a distributed ledger of ownership, with no single central point of failure risk, allowing transparency in the ownership of any asset, in particular traded commodities, where ownership changes frequently. Diamonds are one of the latest assets to use blockchain technology to improve transparency and eliminate blood diamonds entering the legitimate diamond market. Forbes outlines how this technology is being applied here: https://www.forbes.com/sites/pamelaambler/2017/09/10/how-blockchain-is-fixing-the-diamond-industrys-rampant-ethical-issues/#4435638225bc
Personal records – There is the potential for national insurance data, licenses, health records and personal financial records to be stored on the blockchain, reducing the risk of data breaches from central databases and identify theft, also improving efficiency across government agencies. The Harvard business review highlights the current risks and potential opportunities with the blockchain here: https://hbr.org/2017/10/smart-ledgers-can-help-us-reclaim-control-of-our-personal-data
Healthcare – As well as personal health records, blockchain could be used in clinical testing, medicines records and supply chain management. Innovatemedtec provides an overview of the various opportunities here: https://innovatemedtec.com/digital-health/blockchain
There are so many potential uses of the blockchain, not just in major applications but also with gift cards, loyalty tokens, ebook publishing and gaming. The opportunities are endless. The real question is how can your business benefit? There could be blockchain opportunities if the following conditions apply:
- Data verification is required.
- Multiple parties share, exchange and make changes to data.
- Fast transactions are required and delay can create cost implications.
- Central management and control adds risk and complexity, such as with legacy databases.
Beyond the blockchain
As a technology even the blockchain has it’s issues. Transaction speeds, even though faster than using a central authenticating authority, can be slow as the entire public ledger needs to be updated with every transaction. The larger the ledger gets, the slower transactions become and the more bloated the network becomes, using more energy to process transactions.
Although blockchain encryption is said to be uncrackable, at some point in the future computing power will exponentially increase to a sufficient scale that almost anything will be crackable and encryption will need to evolve with computing power.
Already there are alternative solutions emerging that use a different solution to achieve the same distributed ledger objective. Hashgraph uses different protocols making it much faster than the blockchain and achieving the same objective. It’s likely that there will be numerous Hashgraph backed crypto applications emerging in the near future so it’s worth keeping an eye on it.
For a technological overview of how Hashgraph works in relation to Blockchain you can visit the Hashgraph website here: https://hashgraph.com/.
Bitcoin and other pure cryptocurrencies will be around for a bit longer, but it will be innovative applications of the blockchain and/or hashgraph that will really drive business value in the near future. Indeed, the way we manage data today will probably seem as obsolete as the steam engine in a few years time as distributed ledger technology becomes a more acceptable way of doing business.
Richmond Innovation can tailor workshops and courses to help your business understand the blockchain and it’s implications to your business.
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