While cryptocurrency grabbed all the headlines in the past few years, the blockchain technology that underpins it arguably deserves more attention. Many people see blockchain as merely serving the purposes of Bitcoin and other cryptocurrencies.
In reality, however, blockchain has far more uses. Already, many sectors have adopted it – or at least are in the trial stages of how it can transform the way they perform everyday processes involving data.
Blockchain is an incorruptible digital public ledger that operates outside of a centralised framework. It keeps track of every cryptocurrency transaction, adding more strands (or ‘blocks’) for every transaction made.
Each of these blocks contains a cryptographic timestamp, so they can be easily identified and verified. Blockchain is commonly discussed in a financial context. However, it can be used to record more than just transactions – but virtually anything of value.
The blockchain database is public, so it can be accessed by anyone. However, unlike other public records, it’s not stored in a central location – it’s hosted by millions of computers simultaneously.
As it’s not controlled by a single entity, it has no single point of failure. Each transaction is recorded on a distributed system of registers connected with a secure mechanism. This vastly reduces the chances of hackers manipulating its information, or two users accidentally overwriting the same record at the same time.
Due to its incorruptible nature, the Blockchain database provides a pure record of information which has the highest degree of accountability – as no transactions and exchanges happen without the consent of the parties involved. This ensures there’s no human or machine errors, and helps guarantee the validity of a transaction.
Blockchain carries out an automatic self-audit every 10 minutes, to capture and update the record with new transactions at regular intervals. In this way, the Blockchain network lives in a state of consensus, and is maintained by a vast network of computer nodes that would could only be overridden with an unprecedented amount of computing power.
Blockchains are made up of three technologies:
- Private Key Cryptography – this enables digital signatures to be created by owners of private keys (which are kept secret) and verified by anyone with a corresponding public key.
- P2P Network – a database comprising computer systems that are connected online. Files can be shared between these systems without the need for a central server.
- Program (the blockchain’s protocol) – block records are linked via a predetermined protocol; a program which forms the software backbone of the blockchain network.
Like any piece of technology, blockchain has its limitations. The lack of regulation creates a risky environment in which scams are commonplace. It’s also hugely complex – and users need to understand the intricate ways in which encryption works to appreciate the key plus-points of blockchain. Finally, it can be slow and cumbersome – sometimes taking hours to finalise a Bitcoin transaction.
Of course, blockchain is working on its issues as it hopes to widen its growing user base. Let’s look at how blockchain is making significant inroads into these major industries.
Banking and the financial sector
One of the original principles of cryptocurrencies was to bypass traditional financial institutions acting as intermediaries – so it’s perhaps no surprise that the banking sector is very active in exploring how it could transform their business model. By simplifying and speeding up transactions it has been estimated by Accenture in a special report that it could save up to $20 billion by 2022.
Blockchain can be especially useful in the processing of cross-border payments, because it can avoid the foreign exchange fees charged by an intermediary. It’s is also a reliable hedge against the dangers of money laundering.
“We think identity could be big,” says Simon Whitehouse, who is working with the UN and Microsoft on a blockchain identity system for people with no papers. “We can easily see how you could move this to the massive area of ‘know your client’ and anti-money laundering, where the costs are huge for banks and the costs of messing it up are also huge.”
This may not be one of the first sectors you’d think would be dabbling in blockchain tech but already there is a great deal of interest – particularly because of the competitive advantage that it can offer larger chains.
Walmart has run trials with IBM to use blockchain to trace foods from their original supplier. At a time when provenance and sustainability are more important than ever to consumers, the fact that every stage in a product’s journey can be traced is a great reassurance – not only about the freshness and source of the food that consumers buy, it can also help to identify where waste might be occurring and help to reduce or eliminate it.
Initially, online casinos were reluctant to take on cryptocurrency and blockchain – purely because regulations made them impossible to adopt. In the UK, the Gambling Commission has previously warned players about digital currencies and maintains that operators must adhere to anti-money laundering measures such as identifying and verifying customers and asking for their sources of funds when they’re depositing large amounts of money.
In the world of cryptocurrency, everything is anonymous – so that makes it impossible for them to be used to gamble. The Gambling Commission is not afraid to rob operators of their licences for flouting the rules – so it’s in their interests to stay firmly away from cryptocurrency. Visit a reputable site such as 888 online casino and you’ll only find established means of payment.
However – Edgeless casinos are shaking things up by embracing the world of cryptocurrency gaming. At the heart of the currency itself is a token that has been specifically developed for casino use as it allows for transparency and eliminates the casino’s “edge”, maximising potential payouts for players. Players sign up to smart contracts – effectively a contract made between two people or entities that don’t need third-party validation. Among the gaming benefits for players are:
- Transparency – blockchain technology carries a standard of fairness, and players can access all the data held by the casino.
- Peer-to-peer gambling – through smart contracts, players can gamble with others using a betting exchange with rules of their own choosing.
- Fairer stakes – in the absence of transaction fees, players don’t have to pay as much on top of depositing or withdrawing money, which they can do instantly.
- Value appreciation of EDG tokens – the currency, like Bitcoin, can potentially earn players more cash. Since March 2018, EDG token have increased 500% in value.
Anyone who’s ever bought or sold property will know exactly how complex it can be involving real estate agents, attorneys, councils, land registry and countless other interested parties. This makes the process complex, expensive and time consuming – even in the simplest and most straightforward transactions. So the real estate sector is actively exploring just how smart contracts could act to bring all these elements together in order to simplify things greatly.
In an ideal world, it would just take a digital signature from the buyer and seller and the property to be registered on a centralised system. Then all the other elements needed for the sale to proceed could be generated automatically. This would save time and be a completely secure method of property transfer – so it’s perhaps inevitable that land registries are trialling it.
Governments need to be accessible, accountable and open – so blockchain has a number of specific roles to play here. For example recent elections have proved to be controversial – no more so than the mid-terms, where in Georgia alone there were 100,000 missing votes. Many governments are actively looking into the use of using the secure blockchain system to avoid issues like this occurring in the future – which can greatly affect their mandate and ability to govern. A further advantage would be the speed with which votes can be received and counted under this system.
Governments also have a huge amount of so-called “open-source” data. This covers a multitude of topics including health reports, commercial data and even weather analysis – all of great use to everyone from parents to farmers. Through the use of the blockchain as a public ledger, there is the potential to make this information permanently available.
The complex field of healthcare is another area in which the blockchain is being used to make operations more efficient. This ranges from the secure storage and transfer of confidential medical records, to the invoicing for medical treatments and services as well as liaising with insurers responsible for their payment.
The digital blockchain ledger can play an important role in general practice management, the handling of test results, compliance with regulations and the prescription and ordering of medicines.
Patientory is one of the firms currently developing a blockchain-based platform to store health data for patients and providers. Blockchain technology underpins its app, which provides patients with an easy way to track their hospital visits, medical bills and treatment.
Our final category is the wide-ranging field of insurance. One of the biggest challenges it faces is in the identification of claims that are false or fraudulent. In fact, it’s estimated that these cost the worldwide industry $80 billion a year. But using a blockchain digital record of insured items, policies and claims in an encrypted and transparent way will make them impossible to hack or forge, reducing fraud levels at a stroke.
On a broader level, the transfer of contracts and policies will also be made simpler, quicker and more secure, even when the insurance is being arranged for other parts of the world. Insurance firms increasingly find themselves overwhelmed with data they need to handle. Blockchain can properly manage, share and monetise large amounts of data – that’s just one of the ways blockchain is useful in the sector.
So while these are undoubtedly early days for blockchain technology, its potential is almost infinite, especially with the Internet of Things advancing at such a high pace. As to whether it will make all more traditional forms of transaction obsolete, many are watching with great anticipation and interest.