A lot of people in the global tech community are getting very excited about something called “the blockchain”, and see it as the real power behind the Bitcoin throne. If you don’t know what it is, you’re not alone, but know that its applications are predicted to be many and profound. In short, the blockchain is an ever-growing decentralised and permission-less public database ledger of each and every bitcoin transaction conducted since its inception. With each computer, or “node” connected to the bitcoin network having a copy of the blockchain, it serves as permanent proof of what’s gone before it, detailing addresses and values.
When a block – the current part of the chain – is completed, recording recent time-stamped batches of valid transactions, it is added in linear, chronological order (just like a chain, hence the name), after which a new block is created. Bitcoin’s star has significantly waned in recent years, and so financial and intellectual investors are increasingly looking at the engine underpinning it, namely blockchain as the real innovation story here, and the route to making big bucks. Originally conceived to address the challenge of creating digital property without the need for a central register recording all ownership details, the beauty of blockchain technology is the fact that it leverages the power of the whole network and removes the middle man.
“It would be no exaggeration to say that it’s potential to deliver is immense, since anything that can be recorded digitally can be written on a blockchain.”
While bitcoin may have been the first to use it, it’s not hard to see how this underlying technology could act to revolutionise other industries such as banking, the stock market and the music industry, drawn by its permission-less state of being. Moreover, it has the capacity to catalyse digital access for the poor. While bitcoin may be experiencing something of a renaissance right now, in the aftermath of the vote to leave the EU, it has not proved to be the safe haven many had hoped for, and so there is the hope that blockchain’s fortunes will prove to be less volatile.
It would be no exaggeration to say that it’s potential to deliver is immense, since anything that can be recorded digitally can be written on a blockchain. Perhaps its greatest attribute, however, is its truly peer-to-peer quality, which elevates it above and beyond political and institutional control, as well as those who would seek to wreck its fortunes out of malice.
With modern cryptographic methods making the dream possible in real-world terms, one could forgive the more zealous among us from believing they’ve struck upon the holy grail blend of complete transparency and security, where risks associated with downtime, third-party interference, fraud or censorship have been eliminated.
The trust this engenders is of incalculable value. A product’s provenance and subsequent journey can be recorded and tracked all the way to the end user, a real asset for retailer and consumer alike. Meanwhile, stocks can be tracked in what New York’s NASDAQ market describes as “a natural digital evolution for managing physical securities”. This is sure to benefit both clients and the wider global capital markets.
As the landscape around the blockchain takes form and a variety of essentially disparate commercial needs develop, the narrative will come to be about a number of blockchains, rather than one, where the recording of information will be just one aspect of what the network can be used for. The Russian-Swiss owned Ethereum Network, for example, features smart contract functionality that can execute peer-to-peer contracts using a cryptocurrency called ether.
The platform is still in active development, and has not been without its teething problems, particularly in respect of a flagship smart contract called the Digital Autonomous Organisation, which essentially amounted to a crowdsourced hedge fund. It seems there was a chink in its armour, and this was fully exploited by an unscrupulous party to Ethereum’s detriment. However, the principle of the network is undeniably sound, while the concept fully subscribes to the zeitgeist of today.
It being so trendy, the many merits of the blockchain are being bandied about left, right, and centre at present, in the belief it makes those seeking backing for a particular project appear more pioneering and credible. In truth, half of them don’t know what they’re talking about, while one also has to accept that applications for the blockchain are not infinite. Another problem, some speculate, is that the blockchain is incredibly wasteful and energy-intensive due to its ever-increasing state, where each block includes the hash of the prior block. While this binds and reinforces the chain and is the root of its strength, it also has implications for storage and synchronisation
Nonetheless, the blockchain, predicated as it is on the power of trust, people and network, retains the potential to be a truly transformative thing.