Blockchain technology a ‘revolution’ in the storage of data
Bitcoin may be the best-known application of the blockchain, but it is only the start
Bitcoin: For many, the big deal is not the world’s best-known digital currency, but the platform it is based on.
Cryptocurrency-watchers the world over have their sights trained on the Winklevoss twins. If you’ve seen The Social Network, you’ll know them as the US internet entrepreneurs who fell out with Mark Zuckerberg. This time around they are in the news for an initiative which, if it succeeds, could make Facebook look like small change.
At the time of writing, Cameron and Tyler Winklevoss are awaiting approval from the US Securities and Exchange Commission to begin offering their Bitcoin-based exchange-traded fund (EFT). For many, however, the world’s best-known digital currency is not what is attracting attention – it is the platform the EFT is based on.
The “blockchain” is set to disrupt all aspects of business in ways not seen since the advent of the internet itself.
The best way to think of the blockchain is a database in which information is stored on multiple machines rather than just one. As such, it is an online, distributed version of the old-fashioned ledger.
According to the Blockchain Association of Ireland, set up last year to help businesses, educators and policymakers discover ways in which the technology can be applied, the blockchain presents no less than an “imminent revolution” to a host of sectors, including finance, insurance and regulatory compliance, as well as to healthcare, real estate, supply chain management, government and retail.
Bitcoin may be the best-known application of the blockchain, but it’s just the start. Others already developed include Ethereum, a decentralised platform for smart contracts that run as programmed, without any possibility of downtime, censorship, fraud or third-party interference.
UK-based Everledger creates blockchain-based solutions to help banks, insurances and open marketplaces to reduce incidences of fraud. This ledger tracks and protects valuable assets, collecting each one’s defining characteristics, history and ownership to create a permanent record on the blockchain. This digital incarnation, or thumbprint, is used by various stakeholders across a supply chain pipeline to verify provenance and authenticity.
Just like Bitcoin, these apps run on a custom-built blockchain – a shared global infrastructure that can move value around with, so its proponents argue, total transparency.
Whether it is to create markets, store registries of debts and promises, or move funds in accordance to instructions, the blockchain can execute everything from someone’s last will and testament to futures contracts to proof of ownership of a house. It is a single source of truth that does away with the need for a middleman.
Referred to as the second generation of the internet, all this disintermediation presents a revolutionary opportunity to get a whole range of things done with vastly reduced complexity – and at significantly reduced cost.
The implications for payments are clear as well. At present, one of the core functions of a bank is to act as a clearinghouse for the execution of payments. What the blockchain offers is a way to do away with all transactions that involve mirror entities, such as bank reconciliations, which would help to lower costs and reduce the risk of money laundering.
The technology provides for new kinds of payments in the construction industry, with large, consortia-based projects run on the basis of all parties having accurate, up-to-date, verifiable information in relation to the supply of various construction processes and the execution of staged payments.
Instant money transfers
Though it seems counterintuitive, banks also stand to gain enormously from advancements in blockchain technology, not least because it enables the instant transfer of money. This not only reduces risk but reduces costs too both by hedging against that risk and in saving in administrative costs.
“Things are changing so fast on this front, it’s hard to remember that internet itself wasn’t really used 20 years ago, and iPhones weren’t really used 10 years ago,” says Richard Morrissey of Moneycorp Ireland. “Now the blockchain is emerging, and it is something that all the big accountancy firms are working on” – a clear indication of its importance,
While the efforts of the Winklevoss twins may change things dramatically, for now the blockchain appears to be of more interest to Irish businesses than Bitcoin. “We are keeping a watching brief,” says Eric Horgan, Ireland country manager at Elavon.
As a provider of merchant services, Elavon is currency agnostic, he says. “But we are the biggest payments company in Ireland, and we have yet to have a customer enquire about digital currencies.”