Blockchain is set to take the tech world by storm - here's why
Updated 16 November 2016: The UK government could use the blockchain to track money, including student loan and international aid money, according to MP Matt Hancock. Read on to find out more.
Bitcoin has made plenty of headlines since the cryptocurrency first emerged in 2009, but more recently attention has turned to its underlying technology: the blockchain.
Blockchains are a way of storing information (transactions, in Bitcoin’s case) in a distributed way: sharing it between many parties, thus doing away with the need for a trusted central server. See also: what is Blockchain?
The blockchain can only be updated with the consent of the majority of participants and, once entered, information can never be erased, meaning it can provide a definite, verifiable record of ‘digital events’.
The decentralised, distributed nature of blockchains brings a number of benefits: stronger security as the ledger is shared by thousands of computers, transparency as all transactions are publicly recorded and decreased risk. No single authority has control, so if there is a glitch and one of the nodes in the network goes down, the system can still function. See also: Blockchain has its benefits, but can it live up to the hype?
As a result a number of banks, including Deutsche Bank, Barclays and Santander, have started exploring blockchain’s potential to make payments faster, cheaper and more transparent.
However its potential use is vast. It could be applied to almost any form of record-keeping, agreement, contract or register. The UK government is to start exploring how it could use the blockchain for public services. Here are just a few of the ways blockchains are being used or could be used in future.
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1. Smartcard payments
Contactless payment cards that can processes transactions through blockchain almost instantly are almost instantly expected to enter commercial production by the end of 2017.
A successful trial was recently completed that used the to that processed payments for cupcakes in front of 100 Metro Bank customers. They used a contactless smartcard designed by fintech company SETL that communicated with customer identity records and key details through the "Smart Identity" system by auditing firm Deloitte
The technology has the potential to process billions of transactions every day and could provide merchants with a cheaper alternative to the payment services offered by traditional card providers.
2. Supply chains
A British startup called Provenance has developed a platform that uses blockchains to track the origins of raw materials across global supply chains. The company recently completed a pilot project using blockchains to trace tuna caught in Indonesia through mobile phone text messages sent by fisherman in order to discover whether it was ethically sourced and encourage slavery-free fishing.
3. Tracking taxpayer money
The UK government could use the blockchain to track money,including student loan and international aid money, according to MP Matt Hancock.
"We’re exploring the use of a blockchain to manage the distribution of grants. Monitoring and controlling the use of grants is incredibly complex. A blockchain, accessible to all the parties involved, might be a better way of solving that problem.
"Bitcoin proved that distributed ledgers can be used to track currency as it is passed from one entity to another. Where else could we use that? Think about the Student Loans Company tracking money all the way from Treasury to a student’s bank account. Or the Department for International Development tracking money all the way to the aid organisation spending the money in country." (See full transcript here.)
4. Online voting
Online voting adoption has yet to take off, mainly due to fears that it is insufficiently secure. Some argue the blockchain could change that thanks to immutable, transparent nature. In spring 2014 Danish political party the Liberal Alliance became the first major political party to vote using blockchain technology, for an internal election. Organisations have expressed an interest in Norway, the US and Spain.
5. Recording NASDAQ trades
NASDAQ, the world's second biggest stock exchange, announced plans to experiment with blockchain technology in July 2015 as a means of recording trades of shares in public firms listed on the NASDAQ stock market. If successful, expect to see it replicated on other exchanges around the world.
6. Land registries
In May 2015 Honduras announced plans to set up a permanent and secure land title record system using the blockchain, developed by US company Factom. This would help to tackle the issue of corrupt officials altering the list of land titles, according to Factom's president Peter Kirby. Northern Ghana and the Isle of Man are also experimenting with using blockchain for land or company registrations.
7. Smart contracts
Lawyers, watch out: blockchains could be set to shake up your profession, by making it possible to set up binding contracts outside of the traditional legal system. Smart contracts could make it possible to store binding contractual agreements on the blockchain - an idea first pioneered by startup Ethereum launched in 2013.
8. Cloud storage
Thanks to its decentralised nature, blockchain is being promoted as a possible method to underpin cloud storage systems. As it distributes data across multiple servers, that data will still be secure even in the event of a glitch or attack on one of those servers. Free cloud storage system Tahoe-LAFS has operated on that principle for some time, and startups Storj, Maidsafe and Datacoin are working on a similar offerings.
9. Music payment and licensing
Blockchain could underpin instant, transparent transmission of artist royalties, allowing realtime distributions to writers, producers, technology partners and even labels every time a song is played, according to musician Imogen Heap. Heap promised to release her new song Tiny Human via blockchain.
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