With the price of Bitcoin going parabolic during 2017, the underlying technology, blockchain, has been a hot topic this year too. For those unaware, a blockchain is an ever-growing list of information which is cryptographically secured.
They behave like a database only they require no trust from those using the network. Typically, with ledgers and databases, trust needs to be instilled in a central authority by all those wishing to use the information stored. However, a true blockchain is decentralised.
This means that anyone with the correct equipment can join the network and act towards securing it and validating additions to the ledger. For a change to be made, it needs to be accepted by the entire network. This removes the necessity of trusting a single entity and those using the ledger instead rely on the rest of the participants to ensure that all the information is correct, and no rules have been broken when adding new data.
These Are The 5 Industries Likely To Be Revolutionised By Blockchain Technology
This is just beginning of a massive disruption and revolution:
A full explanation of how blockchains work would require an article many times the length of this one. For those interested in the specifics, a great starting point is the work of Andreas Antonopoulos. He’s a big believer in the power of blockchain and has been for many years. Finally, it seems the rest of the world is beginning to catch up.
For the time being, all you really need to know is that blockchains can’t be altered without a considerable time and financial burden, and they are checked and secured by an entire network, rather than a single trusted entity. This means that members of the network can join or leave as they please and the chain of information will continue regardless.
The first application of blockchain tech has been digital currencies such as Bitcoin, Ether, and Monero. However, as the technology matures, additional use cases are being discovered. In the world as we know it today, there are all kinds of middlemen that sponge a living by providing “trust”. Weirdly, we believe that these entities won’t betrayal us even though they routinely do. Take the 2008-9 financial crash. People across the globe trusted central banks without question. The speculative behaviour that bankers engaged in using the cash of millions to finance dubious practices crashed the global economy in a way not experienced in almost a century. It was these very events that spawned the very first use and most famous use case of blockchain technology – Bitcoin.
No discussion of the revolutionary power of blockchain would be complete without mention of finance. The first widespread use case of the technology has been to provide the security necessary for a viable digital alternative to cash. The most famous application to the day remains Bitcoin. The original architect of Bitcoin, the anonymous Satoshi Nakamoto, designed it in such a way that value could be transferred globally without ever needing to communicate with a central authority.
Think about how we traditionally transfer money globally. You give a bank some cash with the instruction to send it to another account in whichever country. They’ll then take a sizeable portion of the amount as payment for handling funds and start the process. Eventually, after several banks have communicated with each other over the course of a week or two, the recipient should receive the money. That is, of course, so long as none of the entities handling the money betray the trust both you and the receiver were forced to have in them. When you break it down like this, the whole thing seems insane.
The process requires both parties have access to banking facilities, and a lot of trust. It’s also expensive. Bitcoin removes these middlemen entirely. All you need is the recipient’s wallet address, an internet connection, and some Bitcoin (plus a comparatively small transaction fee). All they need is access to the internet to check that they’ve received the funds. Provided the sender has the amount of Bitcoin required to make the transaction and the receiving address is valid, the transaction will be accepted in the next block in the blockchain with sufficient space (usually takes around 20 minutes). Clearly, the implications of this are massive. Apart from trusting in mathematics (which is, after all, provable) there’s no further trust involved whatsoever. Mathematics simply cannot be a “bad actor”, however, a corrupt banker somewhere certainly can. Using Bitcoin each party can check that the transaction was indeed sent using a service like blockchain.info and there was no intermediary needed.
Another industry that stands to see great upheaval thanks to blockchain technology is gambling. There are several ways that the blockchain is set to revolutionise casinos. Firstly, using blockchain to underpin a payment method such as Bitcoin has several advantages for any industry that requires deposits from many users. Bitcoin is already becoming prevalent as a banking method at online gambling sites. Traditionally, online casinos would have to pay extortionate fees to payment processing services. These substantially eat into the casinos’ profits and their expenses are, of course, passed onto the customer by way of reduced return-to-player ratings. With Bitcoin, the burden of the fee is on the sender. This means that transactions aren’t free for the player themselves but thanks to the low cost of fees faced when using Bitcoin, the convenience of removing the element of trust entirely is worth the lowly contribution to the network. What’s more, withdrawals take considerably less time to hit the player’s Bitcoin wallet than they do when using traditional banking deposit methods. This creates a different dynamic between the player and the casino. Users of the service no longer feel compelled to keep large bankrolls on centralised services. They can finish their session, and withdraw their funds back to their wallet within less than an hour. If they feel like playing the next day, they can make another deposit, followed by a withdrawal when they’ve had enough. Therefore, they need have far less trust in the casino since the amount of value they’ll be protecting for players is substantially less.
However, it’s not just payment processing that will be improved by blockchain technology. Services like vDice on the Ethereum blockchain are entirely decentralised themselves. They don’t require the player send their funds to any third party at all. Instead, they are played directly from an Ethereum wallet that only the player knows the details of. Using smart contract technology, a bet is placed, and any winnings go directly to the wallet that sent the funds. Whilst the game is a simple one for now, several developers are working on ways to bring this kind of trust-less functionality to other casino classics. It won’t be long until there are entirely decentralised casinos operating online. The gamblers of tomorrow will find it insane that people ever sent money to a random internet company in the hope that they’d play fair with it.
3. Real Estate
Blockchain is already making big moves in the real estate industry. Traditionally, if you wanted to buy or sell a property, a huge amount of paperwork, and a lengthy (and costly) legal process would ensue. Both parties must trust an intermediary with cash and the deeds. However, thanks to services like Ubitquity, ownership can be logged, stored, and transferred without the need of a middleman at all. This allows sellers to receive a greater portion of the eventual price of their property and most likely results in savings for the buyer too.
In October of this year, a developer sold a flat using a smart contract programmed on the Ethereum blockchain. It’s believed to be the first case of a sale taking place entirely on the blockchain and required far less legal arbitration than in a traditional real estate sale.
4. Voting and governance
Another aspect of life which requires a lot of trust is voting. In democratic nations, we’re told that all voting is fairly conducted. To ensure that this is the case, we trust watchdogs to check up on the process of counting votes and ensuring that all who participated were eligible to do so, and that there were no ballots cast twice.
Future elections might not need such a great level of trust at all. By using a blockchain-based system instead, the number of people required to ensure a fair vote would be substantially decreased. This would result in a system that benefits from dramatically improved efficiency, as well as making electoral fraud virtually impossible. Platforms likeaim to make this a reality.
By creating a blockchain for voting, and considering every vote as transaction, a system of direct democracy could occur. Voting would be fast and efficient allowing for votes on a larger number of issues to take place. Rather than elect (and trust) a political party to serve the people, every decision could be put to the people themselves. Even the most trivial things could be put to a countrywide referendum. Should we increase the speed limit to 100 miles per hour on highways? Instead of relying on centralised sources of power to decide for us, why not decide amongst ourselves? The votes could be automatically tallied and within hours of the close of voting we’d have an answer that was achieved through genuine democracy, rather than the charade we currently reserve the term for.
5. Music Streaming
The music industry is already undergoing a huge upheaval. Thanks to streaming services, more people have access to the music that they love than ever before. They simply load up YouTube, or Spotify, and can instantly get their favourite artists’ entire back catalogue, B-Sides and all. However, whilst this has been great for consumers and the middlemen providing the streaming services, it’s not fantastic for artists. Often the creators of our favourite tracks are the last to be compensated if they are at all.
Blockchain-based streaming services could change all that, however. Using smart contracts and some variety of pay-per-play model, artists could receive payment for every time someone hits play on one of their tracks. For simplicity’s sake, let’s imagine that the streaming service of tomorrow charges 5c every time an album gets played. We’ll also presume that there are four members of the band, and one producer. A smart contract between users of the service and the artists represented on it could be signed guaranteeing that each of the contributors receive 1c for every time the album is played. This payment wouldn’t occur behind closed doors, it would happen on the blockchain and every person responsible for bringing the product to the ears of the eventual consumer would be compensated for their troubles. There’d be no need for management, a record company, or any other such industry vultures preying on the art of others. The relationship between the listener and the performer would be direct. This would allow those in smaller, lesser known bands a greater shot at getting their music heard, and if people like it, they’d be afforded a better opportunity to create more thanks to themselves being in a better position financially.
Services like MYCELIA, and Musicoin are already working hard to bring a platform like the hypothetical one described above to the mass market. With reduced middlemen in an industry like music, artists would be able to dedicate more time to producing their craft and be compensated accordingly. It’s hard to imagine anyone saying that that the old system is better. Who listens to their favourite album and thinks: “I’m really glad a man wearing a suit, sat in skyscraper in LA received 30% of what I paid for this music”?
Dr Daniele Bianchi, of Warwick Business School said: “Despite fears about the Bitcoin ‘bubble’ bursting, the price of the new digital coins is going through the roof. Indeed, the increasing demand pressure from investors and speculators makes the case for an even further increase in Bitcoin prices in the near future.
“As the supply of Bitcoins is kept fixed by the underlying protocol, price increases are essentially due to increasing demand.
“Bitcoin is becoming more like an asset class rather than a method of payment. This is something that the public and regulators should realise to fully understand the price dynamics of Bitcoin.
“In a sign of accelerating demand pressure, the number of active Bitcoin wallets has grown almost five-fold over five years. Similarly, the number of exchanges has been increasing exponentially since early 2017, partly driven by the explosion of the Initial Coin Offering (ICOs) as a funding strategy to set new marketplaces, and partly driven by increasing margins and profitability due to increasing Bitcoin prices.
“Demand pressure is essentially driven by two things. Firstly, the increasing awareness by both the public and investors that cryptocurrencies are here to stay, and secondly, the increasing professionalisation of cryptocurrency trading.
“A clear sign of this is the announcement by the Chicago Mercantile Exchange (CME) group, the world’s leading derivatives marketplace, to launch futures contracts on Bitcoin by the end of 2017. CME already publishes both a Bitcoin reference rate and a real time index.”