Beyond the frequent headlines about Bitcoin and other cryptocurrencies, blockchain technology holds promise for a number of applications. Myriad industries — from finance to healthcare, insurance, real estate and other records-based industries — are experimenting with blockchain-based solutions to improve transparency, eliminate intermediaries and speed transactions.
Blockchain is essentially a transaction ledger, but it’s ‘append-only,’ which means you can add new information but you can’t change previous information. Data is saved on blocks, in a chain of blocks (hence, the name ‘blockchain’), but any attempt to adjust, edit or otherwise tamper with a previous block would invalidate all blocks in the chain.
“Think of it as a PDF or Google doc but with rock solid cryptography,” explains Coin Crunch, an open forum for research ideas and blockchain technology.
With Bitcoin and other cryptocurrencies, blockchain is a means to verify the exchange of cryptocurrency between two parties. But anything that requires data to be stored in a secure, verifiable way could benefit from blockchain, which is why initial applications tend to be transaction-based.
Blockchain can be used to exchange assets or smart contracts, for example. This is possible because the ledger itself is decentralized; multiple copies are stored on multiple, independent computers on a decentralized network. In other words, no one controls the ledger.
While there are still plenty of technical obstacles to overcome, companies are putting their ideas to the test. “Companies such as IBM and Foxconn are exploiting the idea of immutability in projects that seek to unlock trade finance and make supply chains more transparent. Such transparency could also give consumers better information on the sources of what they buy — whether a T-shirt was made with sweatshop labor, for example,” according to an article in MIT Business Review.
We’re also seeing the emergence of blockchains that take a more centralized approach through the use of distributed databases, such as ‘permissioned’ or private blockchains, which combine central user authorization with a decentralized blockchain. This approach provides the ability to control which users have access to the blockchain.
One example is JP Morgan’s Quorum, which the investment bank describes as an enterprise-focused version of Ethereum, designed for “any application requiring high speed and high-throughput processing of private transactions within a permissioned group of known participants.”
Essentially, permissioned blockchains will be used where parties need common record-keeping, such as between a manufacturer and its suppliers. And it’s garnering interest from both Fortune 500 companies and tech giants such as IBM and Microsoft; Oracle even launched an autonomous blockchain cloud platform.
With permissioned blockchains, however, “users still have to place trust in the authority granting permissions as well as the consensus mechanism being utilized by the system,” according to an article by Blockchain at Berkeley.
Where that exists, permissioned blockchains have diverse applications. In banking and finance, for example, they can be used for international payments and money transfers. In May, HSBC claimed to have performed the world’s first commercially viable trade finance transaction to Dutch lender ING — a bulk shipment of soybeans from Argentina to Malaysia — using blockchain technology. According to a report from CNBC, the transaction took 24 hours, compared to the normal duration of five to 10 days.
Other applications for permissioned blockchains include:
• Government: Public-sector departments and agencies around the world are exploring the use of permissioned blockchains, from storing digital records to tracking welfare payments and providing secure health records; the technology also holds potential for identity management and verifiable voting systems.
• Healthcare: Permissioned blockchains could become increasingly important as connected medical devices are linked to a person’s health record; data could be stored on a blockchain, rather than keeping it siloed.
• Insurance: Through the use of smart contracts, permissioned blockchains could help eliminate fraud. A claimant couldn’t put in multiple claims for the same accident, for example, since those would be rejected by the blockchain.
From land title registries in real estate to microgrids in the energy sector, the applications for blockchain are seemingly unlimited. Gartner projects the global business benefits of blockchain technology to total $5 billion this year and more than quadruple to $21 billion by 2021. So, while it’s still early days, it’s time to start thinking about how blockchain will disrupt your industry — and your business — and the communications infrastructure required to support it.