First emerging a few years ago, blockchain has quickly become synonymous with the digital currency Bitcoin and financial sector. Blockchain’s association with Bitcoin stems from its role as a foundation concept of the original Bitcoin paper. Blockchain is used to secure Bitcoin transactions without the need for a governing body or trusted intermediary, such as the FCA in the UK, the SEC in the US, or a bank.
Due to the absence of governing bodies or intermediaries, Bitcoin quickly gained popularity to pay for illegal services and goods. However,as Bitcoin has developed to provide more and more legal payment uses, the focus has moved away from the currency towards the underlying technology itself and its potential use in other sectors.
Blockchain’s structure and automation capabilities makes it attractive to banks, such as Barclays, with the aim of reducing transaction costs and simplifying processes. A study by Santander found that Blockchain technologies could reduce banks’ infrastructure costs by $15-20 billion a year by 2020. However, the reality is that blockchain has applications far beyond currency and banking. The technology – a mutually distributed digital ledger that uses encryption to make entries tamper-proof and permanent – is now attracting organisations from a range of sectors, such as agriculture, insurance and logistics. The biggest appeal of blockchain is the way it supports the accountability, auditability, availability and integrity of the data it records.
Public vs. Private Uses of Blockchain
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It’s important to realise, however, that blockchain comes in two varieties – public and private.
The main difference is that data on a public blockchain can be accessed by anyone, while a private blockchain is closed, and individuals or businesses need permission to see the data. Public blockchain is commonly associated with cryptocurrencies, while private blockchains are utilised by businesses due to their control over access to the data.
One of the main characteristics of public blockchain is that it is easily accessible, and can be anonymous. It enables individuals to come together, conduct transactions and then disperse again – without ever knowing the identity of each counterparty. For certain transactions, anonymity and accessibility will continue to be attractive qualities. One common example would be the process of reporting criminals to law enforcement, through services such as Crime stoppers. Another interesting example could be high value art auctions where bidders often don’t want people to know who bought art but the auction house knows the purchase was made.
Despite this, the vast majority of future blockchains are likely to be private. For most business use cases and applications, it is necessary to know the individuals involved. This means that blockchains need to be ‘permissioned’, and a central authority – or committee – needs to run an identity and authentication service to verify the users.
From agriculture to insurance fraud, and everything in between
Blockchain – and its ability to establish distributed trust – is a useful characteristic for many use cases and industries. From a commercial perspective, finance and insurance organisations can streamline the processing of financial transactions and back office functions through blockchain. However it is blockchain’s potential applications within other industries that show the most promise.
Some businesses operating in the agricultural industry, for example, are trying to establish a blockchain-driven ecosystem which handles the registration, payment, and transport of crops and agricultural produce. This system enables buyers,such as supermarkets,to verify that the produce they are receiving is exactly what they paid for. With every step of the supply chain process recorded on the blockchain. Claims that coffee beans are ethically sourced from Colombia can easily be confirmed, and the blockchain would be able to trace the journey from farmer to coffee shop, alleviating concerns about produce quality.
Another growing area of blockchain use is to combat insurance fraud and as a platform to prove the provenance of high-end products. Chronicled was founded to track the provenance of high value fashion items.Starting with shoes and expanding into medical devices, the start-up is focussed on protecting high value items whose provenance might be reliant on paper certificates and receipts that can easily be lost or tampered with. By digitising a large amount of data about each shoe or device, they create a multi-layered digital fingerprint on a blockchain which cannot be tampered or changed. This helps guarantee that items are not stolen or fraudulent, as insurance agencies can easily check the blockchain ledger.
The future is blockchain
With blockchain technology, a world of possibilities has opened up to both businesses and consumers. Blockchains, both public and private, provide an accessible peer-to-peer platform that enables economic empowerment, greater efficiency, and secure and tamper-proof information distribution. What’s clear is that the blockchain is the start of a digital turning point, and a crucial step in the way value and opportunity are created and distributed.
In the future, we may see IoT devices at home, such as heating systems or entertainment systems, use a private blockchain to make decisions.More companies will begin to use private blockchains to work with their partners and suppliers. These could provide selective data to a public blockchain that is used to collect economic data (supply chain usage) and consumer data (entertainment systems).
It’s clear that the applications of blockchain far surpass the financial industry, and it is time for businesses to embrace the technology in order to stay ahead of their competition. Blockchain is more than a buzzword. It is the future of distributed security.