No matter which experts you talk to – whether those in the tech, software or finance industry – everyone says that blockchain is a game-changer. This new technology could, they say, potentially eliminate old-fashioned gatekeepers and allow users to exchange with each other trustlessly, with full security.
The concept seems like magic – and when you don’t quite understand how it works, it certainly does. But there’s a lot of technical brilliance behind the idea which, so far, is working in many applications around the world.
People often associate blockchain with bitcoin – and that’s an important application – but there’s so much more to the technology than that. Blockchain has the potential to disrupt practically any traditional system that relies on a trusted party.
Think about the implications of that. Currently, society constructs itself around institutions that people trust. Banks, governments, schools, high-profile firms – they all play a central role in human affairs.
But now imagine if there was a technology that could deal with the basic trust issue that these organizations purport to solve. That would be a game-changer. In the future, it could mean that we see a wholesale rethink of how our society works – everything from doing online shopping to whether we even need a government at all.
The applications of blockchain are many – too many, in fact to discuss all of them here. However, in every case, they are extremely powerful. Blockchain is revolutionary in the way that electricity was revolutionary. It will fundamentally alter the structure of society and, hopefully, do away with the need for expensive, corrupt and controlling institutions that currently dominate our lives.
Imagine if you were able to send a cross-border payment with zero trust. Until recently, people would have laughed at the idea. Without an international banking system in place, it would be virtually impossible to ensure that you debited your account and credited somebody else’s. Instead, you need a banking intermediary.
The job of the bank is to ensure that the transaction is fair. So, for instance, banks make sure that the amount debited from one person’s account is the same as the amount credited to another.
The process for doing this is actually quite complicated. Domestic banks must communicate with foreign banks to arrange the transfer of funds. They must then both agree on the amounts debited and credited before carrying out any actions.
Not only is this approach costly, but it’s also expensive. Some of it is done by computers today, but in the past, banks did it manually – and charged their customers high fees for the privilege.
Blockchain is going to change this. Instead of the bank ensuring the correct debiting and crediting, the blockchain network itself takes over the task. All members of the network agree on the amounts exchanged and then create an immutable ledger, distributed across all machines. This process prevents any fiddling of the numbers and ensures fairness for all parties involved.
Supply Chain Improvements
We’re also likely to see blockchain technology making an appearance in the supply chain based on a similar system. At present, supply chain firms use specialist software (or Excel) to track the movement of goods through their facilities. They then sometimes share this information with upstream and downstream suppliers in an attempt to get the entire system working better (It doesn’t usually work very well).
Operatives on the ground then scan data into local systems that the business can use for its projections, demand planning and so on. The problem with this approach is that it is not secure, nor industry-wide. It is hard to track where goods came from, their source of origin, or whether somebody has tried to tamper with them.
Unlike the banking system, the global supply chain doesn’t have a central authority that it can appeal to. So there is no way to reconcile differences between what was expected, and what actually happened on the ground.
The issues of blockchain technology are virtually limitless in the supply chain. Currently, the main idea is to use it to ensure supply chain integrity – a major issue in some industries, such as food and medicine. Suppliers are looking for ways to tag their goods with tamper proof identifications that operatives then scan, uploading data into a blockchain network. The goal is to ensure that end-users can track the origin of every product they consume and see exactly where it has been. If there is evidence of tampering, any agent in the supply chain can reject it at any time, undermining criminal activities.
Proving your identity presents similar problems to proving that you are the owner of a sum of money. However, as we have seen with cryptocurrencies, blockchain is more than capable of solving this problem.
Individuals and businesses can sometimes struggle to maintain control of their identities. Nefarious actors are always looking for ways to steal them – and profit as a result.
However, with blockchain-linked security systems, this becomes far more difficult. With the blockchain, a user can store all of their identity information immutably on the network. Any criminal attempting to use that information for their purposes would have to gain the agreement of the network, which is almost certainly impossible. They would have to submit themselves to verifications which they would fail.
Blockchain is also a valuable tool for preventing voter fraud. States could use it to hold voter information immutably, preventing anyone from tampering with whoever is on the electoral roster. The blockchain would create new blocks every time somebody was added or removed, without the need for a central, corruptible agency to oversee “fair play.”
It is likely, therefore, that blockchain will change the world. However, it depends on organizations, governments and individuals adopting the technology. Blockchain has been around more than a decade now, but it still isn’t mainstream. It’s hard to understand and many people don’[t genuinely appreciate the value it offers. What’s more, there are many vested interests who stand to lose out if blockchain becomes a roaring success, including the government itself.