You have probably heard of Bitcoin at this stage, the cryptocurrency that has been shaking up the currency markets for the last couple of years.
Bitcoin gained notoriety in recent years as it became the currency of choice for criminals on the dark web, who use it to pay for anything from drugs to hitmen. But you may not have heard of the underlying technology that makes Bitcoin work; it’s called blockchain.
It is not known exactly who invented blockchain. It first appeared in an online document in 2008 that unveiled Bitcoin. The document was published by Satoshi Nakamoto, however this name is believed to be an alias, so who the originator of this technology is remains a mystery.
To try and explain blockchain simply, it is a data structure that creates a digital ledger of transactions, and shares it among a distributed network of computers. It uses sophisticated cryptography to allow each participant on the network to alter the ledger securely, without the need for a central authority or financial institution.
While you don’t need to understand the underlying technology and cryptography of blockchain, you should understand that it is very likely that it will become more and more prominent in our everyday lives in the near future. Here are four uses of blockchain to look out for:
Cryptocurrency
While the blockchain cryptocurrency Bitcoin has gained popularity in recent years, it has yet to go mainstream. Bitcoin has become popular because it allows users to complete transactions with complete anonymity, hence its popularity on the dark web. It became the currency of choice on a digital black market called The Silk Road.
The Silk Road is a marketplace where you can find all manner of illegal goods and services, from prescription drugs to guns. The Silk Road has had a rocky few years, with the arrest of its creator Ross Ulbricht (known online as Dread Pirate Roberts) in 2013 and its subsequent closure by the FBI.
Its second incarnation Silk Road 2.0 was shut down by Interpol the following year, however it is believed Silk Road 3.0 is still operating. The anonymity of Bitcoin allowed this marketplace to thrive, and its users could trade in illegal goods relatively safely.
Until recently, the only way to use your Bitcoin was to store it in your digital wallet, and transfer it online via the blockchain. But it is slowly emerging offline, with Bitcoin ATM machines now growing in popularity, and I have even seen bars and restaurants that accept Bitcoin payments.
Watch this space, because cryptocurrencies such as Bitcoin will start becoming more and more prominent in the coming years.
Contracts
Another area where we could see the rise in blockchain is the notion of ‘Smart Contracts’, with a startup called Ethereum heading up this movement.
The world of contracts is still awash with paper. Invoices, agreements, manufacturing contracts etc. are all still printed on paper and a massively inefficient. That could all be about to change. Smart contracts use the blockchain to keep everyone accountable without the need for the traditional signing of a contract.
Take this example: You are a company who sells PCs. For you to sell a PC you have to rely on a number of third parties. Let’s say you have manufacturers in three different Asian countries. You want to ensure that the quality of the components is up to scratch, and you also want to make sure that it is shipped to you on time.
You have your own distribution company, who must deliver to your customers on time. And you want to make sure that everyone gets paid on time. In the past this would have required multiple contracts with everyone involved in the process.
Smart contracts aim to use the blockchain to eliminate this. Specific actions can be verified by third parties, and then trigger other events. All this gets recorded on the secure blockchain, and can never be altered after the fact. This allows for accountability for every step of the process.
Cloud Storage
Blockchain may also be about to have a big impact on the world of cloud computing. Contrary to popular belief, storing data in “the cloud” doesn’t mean it is floating around in those fluffy white things in the sky.
It is actually stored in massive data centres that are patrolled by armed guards and attack dogs. But blockchain technology could be about to change that. Blockchain technology would allow for an encrypted distributed storage network.
It is similar to the P2P music sites that were popular in the early 2000s such as Napster and Limewire, where users could download files that were stored on the computers of other users. Blockchain would allow people to store their data in a distributed cloud network based on highly secure blockchain technology.
The very nature of blockchain means that no one else in the chain would be able to view or tamper with your data while it is distributed out to millions of PCs around the world. This would contribute to a massive drop in storage costs, and while it would probably not be the end of the datacentre, it would certainly put a dent in the amount of datacentres popping up.
While it is likely that high end enterprise would still retain datacentres, for average Joe’s like you and me it could mean slashing our storage costs, and trading in our Dropbox account for something like a Storj account, a startup who is at the forefront of blockchain based cloud storage.
Voting
There has been a lot of talk recently that blockchain based voting could be utilized in elections. The so called ‘e-voting’ would have great benefits over the current system, as it would completely eliminate any possibility of tampering with votes, and would also eliminate the need for votes to be counted manually.
Followmyvote.com is a startup that is involved in this area, and they aim to bring e-voting to the masses in the coming years. Indeed it is an interesting proposal. Instead of taking yourself to your local polling station, you simply download the voting app to your preferred device. You verify your identity through the app, and then place you vote in a blockchain based ballot box.
The voter can go into the ballot box and verify that their vote was cast as intended, and they can also audit the other ballots in the box, to ensure the results are accurate. Sounds too good to be true, but it could be coming to an election near you sooner than you think!
Summary
While blockchain has been around for a few years now, it has stayed relatively underground. However, it is likely that we are going to see a sharp rise in prominence of this emerging technology in the coming years.
With people becoming more and more apprehensive about their data online, blockchain seems to be a secure solution with an array of uses. So don’t be surprised if sometime soon you are prompted to ‘sign’ a contract via the blockchain, or download an app to vote in your next election.
If you want to know more about the future impact of blockchains, this Ted talk is a great start:
Hey mate. I thought this was a good review of the future of blockchain. I just read about it in the Economist a few weeks ago and it seems to hold a lot of promise for the future.
Any thoughts about when the tipping point of it becoming a common protocol will be?
I think we’ll have to wait and see which specific blockchain based protocol comes into prominence. The next few years will be critical and very telling – but I believe the revolution is unstoppable at this point.
Thanks for your comment.