Blockchain in real-world applications. It’s not just about cryptocurrency.
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Blockchain technology has been commonly used and popularised by Bitcoin. However, the original concept was simply to create a chain of data blocks that were robust of themselves, containing data within themselves to prove the integrity of the collected information. First seen in the 1990s, it is thought to be the earliest use of what became the blockchain concept to secure lists of information, using a combination of cryptographic algorithms and networks of data hashes. In this blog, James Baker from CDP explores other blockchain applications beyond Bitcoin.
How blockchain works
In a blockchain, each block contains an item of information – for example a certificate, an amount of money or a record of an event – and the identity of what or who this data relates to. The data in the block is encrypted. A hash is also calculated for each block, where a hash is a summary number of fixed length that can be reliably calculated from the block contents, but cannot be backwards calculated to determine those contents. The hash can be examined to determine if the contents have been changed, without knowing what the contents are. Each block also contains the hash from the previous block. This is what forms the blockchain, allowing it to be extended with new entries whilst maintaining its integrity. Each new block contains a hash of the previous iteration of the chain, providing a history of what came before. Often, it is called the ‘public ledger’ of records and provides a verifiable list of events within the chain of information. The sequence of hashes easily shows if any block within the chain is changed or tampered with.
In 2008, blockchain technology hit the limelight, driven by a virtual currency built as an application using the technology. It became known as Bitcoin, but there are now many different virtual currencies available. The architect behind this is known as Satoshi Nakamoto. It’s not clear if this is a real person, a pseudonym, or a collaborative group.
Blockchain is designed to be open, public and distributed, so is ideal to address the challenge of digital trust. The information and process is available and can be authenticated without reference to other sources. It is open to inspection by all, meaning that trust in blockchain is not trust in a single entity or organisation. This is the foundation that enables blockchain to add value in numerous applications, providing an economical and verifiable tool for identity, authentication, records, or duplication which would have been challenging to deploy with traditional approaches. The ultimate promise is to change how business is conducted, guaranteeing digital trust while cutting out many incumbents in the value chain.
At CDP, we see a wide variety of applications where we believe blockchain can help add value, for example:
Traceability throughout supply chains
This challenge exists in numerous markets. In food supply, connecting and verifying foodstuffs as they move between producers, suppliers, manufacturers, retailers, and consumers is the gold standard for traceability. We want to know where all the ingredients in our dinner come from, how they got here, and how old they are. The same challenge exists in all supply chains. Where did these components come from, and are they legitimate? Blockchain is providing traceability and transparency for everything from automotive spares to computer parts, from pharmaceuticals to diamonds. It’s a digital certificate for each item, with an unalterable record of events associated with each item.
Healthcare
Blockchain can support a wide range of healthcare applications, including management of clinical trial data, storage of insurance information and the handling of sensor data in remote monitoring applications. One particularly promising application is in medical records, where blockchain has the potential to allow patients to truly own and control access to their medical records, enabling instant updates and improving access to services as and when required. Modern delivery systems are increasingly becoming connected, so one day they could also update your medical record directly and in real time. When patients truly own and have immediate access to a detailed record of their health and related actions, they can take better control of their conditions and treatments. Blockchain is a building block for digital healthcare and can contribute to the goal of proactive wellness rather than reactive healthcare.
Contracts
Blockchain provides a great tool for authenticating contracts. Can we use it to get rid of lawyers? Maybe not. Once again, it is a digital certificate and a record of interactions between individuals or entities. So called Smart Contracts can be used to ensure that an agreement between parties will deliver what is agreed if the terms are met, as the contractual terms are written, or scripted, in software, which simply executes. We expect blockchain to be used in everything from employment contracts to rental agreements and beyond. One application we haven’t seen yet, for another type of contract, is blockchain marriage certificates. A scary thought: Digital weddings. Drunken Vegas weddings worldwide by app…
Trading
Blockchain can open up numerous trading markets, providing the means to eliminate some of the services traditionally offered by banking institutions. For example, blockchain can streamline ‘Know Your Customer’ verification and speed up trade settlements. But it’s not just about money – Blockchain can underpin the trading of any commodity. A poster child for this is renewable energy trading, seeking to take control away from the energy companies and allow direct trading between micro-producers, such as homeowners. We’ve described blockchain as a ‘public ledger’, and trading, which depends on robust recording of transaction agreements, is an ideal blockchain application.
Circular economy
There is considerable focus on the concepts of recycling, re-use, and the circular economy, as the world struggles to balance consumption with sustainability, and the need to reduce carbon emissions. Blockchain can provide a means to identify and authenticate products and parts through a digital identity and record of actions, and therefore can be a fundamental building block for circularity of use, both for direct re-use of products and for recycling of parts rather than just materials. Think here of reusable phone chargers and packaging. By proving a product’s origins in a transparent ledger we can begin to build the consumer trust that will be vital to behaviour change. With trust and provenance established, circular purchases and behaviours can be rewarded. Going further, blockchain can be used to ‘tokenise’ natural resources, such as trees, fish stocks or oil reserves, giving them a digital identity that can be properly valued and traded.
The time is now
It’s clear then that blockchain is moving out from under Bitcoin, becoming another tool in the innovation arsenal. If there is an aspect of your business that could benefit from traceability, authentication, logging of events, or public verification of information, then blockchain could be one of the technologies we deploy to ensure efficient operations in tomorrow’s global marketplace.
James Baker
Partner