Originally known only as the underlying technology for the digital currency Bitcoin, blockchain has rapidly seen its reputation grow as a potentially disruptive technology whose applications lie far beyond the crypto-currency and the financial markets.
“It’s such early days for blockchain – most early investors in the original internet tell me we are in the equivalent of 1991-92, at the most,” says Jamie Smith, Global Chief Communications and Marketing Officer of The Bitfury Group, and co-chair of the World Economic Forum’s Global Futures Council on Blockchain. “But they all say this technology is moving much more quickly toward global adoption. I believe that in a few short years, we will be living in a world where it is being used but no one thinks about it: they just like the ease of use, the low cost and the security – the great trifecta.”
The fundamental principles behind blockchain technology explain its attraction. It is essentially a “distributed ledger” that shows all the members of a particular network every transaction that was verified on the network. The transactions are collected in blocks, which are then secured approximately every 10 minutes in a mathematical process called “mining”, and must be verified by other members in the network before they are confirmed.
“Every 10 minutes, any transaction that has happened around the world is put into a block. All of the computers around the world then fight to verify those transactions within that block, ensuring that they happened, they were secure, that all the math lines up. So all these computers are competing to solve this giant math problem. Whoever solves it actually wins 12.5 Bitcoins. So, for the first time ever, we have a system where there is a financial incentive to ensure security,” says Smith. “Simply put – security is the lifeblood of the Bitcoin blockchain… [and] security isn't a part of the system; it is the system.”
The advantages of using blockchain in the financial industry are obvious. Blockchain can solve the myriad regulatory and fraud issues that afflict most systems, as well as make operations much smoother and more efficient. In an August report by Deloitte Consulting and the World Economic Forum, “The future of financial infrastructure: An ambitious look at how blockchain can reshape financial services”, experts asserted that blockchain technologies have received $1.4bn in investments over the last three years and predict that about 80% of the world’s banks will have initiated projects on blockchain by next year.
“Financial services is about to change again – but this time, change is coming from several converging technologies. They include biometrics, robotics and machine learning. Cloud, cognitive and quantum computing are in the mix as well. Together with [blockchain], they’re a set of tools that the industry will use to build its next infrastructure,” the report’s authors write.
But many are looking far beyond the financial industry, and already blockchain is being applied in some unlikely places.
The Bitfury Group is working on a project with the Republic of Georgia’s National Agency of Public Registry to design and pilot a blockchain land titling project. Renowned Peruvian economist and President of the Institute of Liberty and Democracy (ILD) Hernando de Soto, who is advising the project, has said land titling could help save globalization by allowing much of humanity to participate effectively in their national economies.
“The problem is that 5bn people around the world are not documented in national ledgers in anything approaching an organized manner. Under these conditions, it is impossible for the majority of humanity to participate effectively in their national economies, much less the global one. Without any means of participating in the process of producing high-value combinations, people have no chance of seizing some of the surplus value created,” de Soto wrote in September. “Last year, ILD began, with pro bono support from Silicon Valley firms, to determine whether information technology, and specifically blockchain… could enable more of the world’s population to get in on globalization. The answer is a resounding yes.”
The Bitfury Group is also taking blockchain technology into the professional services sector, with a deal announced on November 7 with Ernst & Young to provide blockchain software services to EY and its client network involved in the areas of technology, media, telecommunications, energy, pharmaceuticals and public service.
The medical professions are also looking at blockchain. MedVault is carrying out a proof-of-concept that would allow patients to record medical information on the Bitcoin blockchain, which could anonymously store medical records. “[We're] giving the patients control over their own medical records and the decision to make certain aspects public or private, while still being stored in a distributed global manner,” a MedVault developer told Coindesk.
Blockchain’s uses even extend to the oldest of contracts: marriage. In December 2015, the government of Estonia, in partnership with an organization called Bitnation, became the first state to officially sanction a marriage using blockchain when it registered that of two Spanish-born residents of London, Edurne Lolnaz and Mayel de Borniol. The marriage will not be recorded by a specific state jurisdiction; instead, it will be part of a global blockchain jurisdiction.
Finally, blockchain pilots are being created to address the social good. The Blockchain Trust Accelerator, an initiative founded by The Bitfury Group, New America and the National Democratic Institute, was created to support and launch blockchain pilot projects that reduce corruption and work for social good. The accelerator will announce more pilots in the coming year.
“There are so many possible applications of blockchain. You can literally transact anything. It could be used for welfare distribution, or for secure voting, land title transfer, music, movies – you name it,” says Smith.