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Digital

Blockchain Will Be Worth More Than Cryptocurrency

Boiled Down
  • 2017 was the start of the digital gold rush with over 1,384 cryptocurrencies available.
  • The blockchain technology behind cryptocurrencies is believed to be more valuable as it evolves from a digital currency infrastructure into a platform for digital transformation.
  • It will revolutionise our lives. It records every digital transaction as it occurs, encrypts it so it’s incorruptible, then scatters it across the world, so it can’t be hacked! No-one controls it and a record of the transaction is stored for eternity.

2017 was arguably the start of the digital gold rush, with over 1,384 cryptocurrencies available on the internet on January 7th of this year. One bitcoin (the largest and the most infamous digital currency) was valued at about US $15 in 2012, rising to US $1,000 at the start of 2017. Today, it’s worth around US $15,000!

Bitcoin was the first peer-to-peer electronic cash system and blockchain technology was the fuel that powered it. On October 31st 2008, Satoshi Nakamoto, the unknown to this day father of blockchain, published a white paper introducing the concept, calling it Bitcoin. The Bitcoin blockchain was launched on January 3rd 2009, becoming the first demonstration of blockchain’s capability.

The technology behind bitcoin and other cryptocurrencies is what many believe to be more valuable as it evolves from a digital currency infrastructure into a platform for digital transformation. It’s been heralded by many established institutions, including the Bank of England, as the most disruptive technology since the birth of the internet. Its advocates believe it will enable “an era of radical transparency, frictionless commerce and genuine economic abundance”. Some have even gone so far as to claim it could create global prosperity and fundamentally change the lives of the world’s poor. Huge claims.

What is blockchain technology? A blockchain is essentially a type of electronic distributed ledger that records and verifies large volumes of digital transactions or digital events. These transactions can be cryptocurrency, contracts, deeds, medical records, customer details or any other asset that can be described in digital terms.

It has no central database and is stored and processed simultaneously via a peer-to-peer network of thousands of computers. It’s cryptographically secure, meaning it uses encryption to store permanent and importantly tamper-proof records of transaction data that anyone on the same network can see. There is no central governing authority which means multiple parties can update the data simultaneously. All digital transactions are validated by the peer-to-peer network using a ‘consensus’ principle.

How does it work? Basically, two parties decide to exchange a unit of value and initiate a transaction. This transaction is represented online as a ‘block’. The ‘block’ is then sent to the blockchains network or ‘chain’ of participating computers. The participating computers then evaluate the transaction using complex mathematical algorithms to determine whether it meets pre-agreed upon rules and hence is valid. When a ‘consensus’ is reached, typically amongst 51% of computers, the transaction is then verified and moves between parties and is recorded with a cryptographic numerical timestamp and connected to a previous block. This then creates a ‘chain’ of records that can’t be doctored or falsified unless all the participating computers can be convinced that the tampered data in one block and all prior blocks is true. Currently, perceived wisdom deems this impossible!

Why is it going to revolutionise our lives? It can record every digital transaction, exchange of goods or services or private data exactly as it occurs, encrypt it into blocks of data that are incorruptible then scatters it across the world, so it can’t be hacked! No one organisation such as a big bank, a government or tech behemoth controls the data, and no third parties can act as gatekeepers. The technology has applications across every kind of digital record and transaction and across both public and private industries and organisations. It brings trust to online transactions between humans and machines as all sides can be absolutely certain that what took place actually took place, and that a record of the transaction will be stored for eternity!

How is it already being used?

1. Providing provenance for sustainable tuna

UK social enterprise Provenance focuses on improving the transparency of the supply chain by enabling consumers, companies and certification bodies to trace the origins and histories of products, determining whether products are sourced ethically and sustainably.

Globally, there are about 43 million commercial fishermen, 10-15% of whom are estimated to work in slave-like conditions, primarily in Southeast Asia, where 75% of the world’s fishing fleets operate. This blockchain tracked tuna from Indonesian fisherman through the supply chain to the supermarket. Once a tuna was caught, it was registered by a simple text message and a digital ‘passport’ was created that followed the fish through each business involved in its transport, verifying chain-of-custody and allowing consumers access to the fish’s origins.

2. Providing transparency across the diamond industry

UK-based Everledger enables transparency in markets where provenance matters and where transparency is key to ensuring ethical trade, such as wine or diamonds. The diamond industry is worth over US $80 billion, but is beset by theft, fraud, forced labour and linked to the funding of violence across Africa. This blockchain tracks diamond ownership, facilitating provenance monitoring for both traders and insurers as each registered diamond has its own unique “digital thumbprint,” assisting in the identification of stolen or conflict zone diamonds.

3. Fighting product counterfeiting

Blockverify enables the identification of counterfeit goods, particularly pharmaceuticals, where counterfeiting costs lives as well as vast economic losses. Fake drugs are by far the most profitable sector of the global trade in illegally copied goods, with sales ranging from US $163 billion to $217 billion per year, according to industry estimates. In 2012, the UN estimated that fake malaria and tuberculosis drugs alone are the cause of about 700,000 deaths per year.

Each legal product is labelled with a Blockverify ID tag that verifies the origin of the product as it moves through the supply chain, recording changes in ownership, which can be easily accessed by consumers, retailers, manufacturers and physicians. The technology also supports luxury goods, diamonds and electronics.

4. Protection of intellectual property

Mycelia was created by Grammy winning singer-songwriter Imogen Heap to enable the peer-to-peer distribution of music. Artists lose up to 86% of the proceeds from their music due to illegal downloading. There is no verified global registry of music creative, and their works and previous attempts to create one have failed dismally. The idea behind this start up blockchain is that it will facilitate musicians in selling their songs directly to audiences and provides the ability to license samples to music producers while sharing out the royalties to both songwriters and musicians. The blockchain uses smart contracts to protect copyright and to automate the sale of creative works online, consequently eliminating the risk of file copying and redistribution.

Kodak announced KODAKOne, an image rights management blockchain, and its accompanying token, KODAKCoin, on January 9th this year. The blockchain aims to enable photographers with the registration and licensing of their work, thus giving them greater control of their image rights management. Kodak’s stock jumped 44% at the news!

5. Disrupting the disruptors

Slockit is a German start-up that seeks to enable a peer-to-peer sharing economy where anyone can rent, sell or share their connected property, be that car, house, bike or unused office space without the need to use a middleman. It’s a blockchain-powered locking system that’s controlled by a smart contract on the blockchain and can be embedded in different types of smart objects. Basically, it brings the blockchain into the real physical world. They also provide a platform for any developer to build applications on it if you’re interested.

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