Most people, if they’re familiar with the term ‘blockchain’ at all, associate it with the cryptocurrency bitcoin. It is the infrastructure for using bitcoin so that’s certainly not wrong, but there is a growing group of people that believe blockchain can be applied to many other business issues that involve exchanging and managing a digital asset.
Blockchain is an elegantly simple set of technologies providing a distributed, transparent, secure ledger database platform that leverages nodes on a network as the method of recording and tracking anonymous transactions quickly. As designed it removes the need for a three-party payment handling in a bitcoin exchange, providing an alternate method of establishing ‘trust’ between the two parties that are making the exchange, even though the parties identities are never divulged.
In other words, it replaces the need for a bank, auditor or payment processor, establishing a verifiable peer-to-peer transaction instead. The platform was developed for use with bitcoin but operates completely independently, and thus can be used in other applications that would benefit from a fast, transparent, trustworthy, secure, distributed ledger of transactions.
Nearly any type of transaction between entities could use a blockchain platform and by doing so, greatly improve the transaction process.
Not to get very geeky, I’ll keep the explanation very simple and avoid trying to work through a bitcoin transaction, which isn’t that complicated but always comes out sounding that way anyway. The blockchain platform provides the ledger, or the block, and the way to verify the transaction, or the chain. The block publicly records whatever transaction is being conducted, and then the block is chained together with other blocks in the ledger across the nodes on whatever network you are using, public internet or some private set of servers and network.
The transaction is recorded and then an algorithm is used by each node or computer on the network to verify the transaction. This all happens in real time. The entire ledger is maintained on each node, thus providing an ‘audit’ trail of all transactions in multiple places on computers owned by different entities around the world.
There are many potential use cases for the blockchain platform for businesses and individuals. Moving general ledgers (GLs) to a blockchain platform, for example, would provide a real-time and extremely secure GL that would simplify the recording of transactions and the necessary accounting processes like closing the books.
In certain industries, the use of the platform would be transformative. Stock trading today is a complex process that takes days to clear. Using a blockchain platform would change the process to real time, and do it much more securely while lowering costs. Real estate transactions could be moved to a blockchain platform, drastically simplifying the transfer of property, eliminating the need for multiple people in the process and, again, lowering costs significantly. Nearly any type of transaction between entities (individuals, businesses, governments, etc.) could use a blockchain platform and by doing so, greatly improve the transaction process.
Microsoft and Accenture announced a partnership this week around a prototype system they co-developed for managing legal ID documentation for people around the world who have difficulty doing so today, including some 7 million refugees. The project was previewed this week as a part of the 2nd ID2020 summit, a public and private consortium supporting the United Nations 2030 Sustainable Development Goal of providing legal ID for everyone. The ID would use biometric identifiers like fingerprints and retinal scans, maintained on a blockchain platform and used through a mobile app.
With the app and a smartphone, the individuals could gain access to countries, as well as government and private provided services like health services, education and aid. The system is designed so that only the individual can grant access to their own data, and it is protected by the blockchain ledger.
These use cases are only the beginning, and many more disruptive applications will likely be developed. The level of activity is growing rapidly around the platform, and will continue to accelerate over the next three-to-five years as many new uses are defined.