What if there was a technology that could simplify healthcare, prevent media piracy, improve banking, and even stop child labor abuses? Blockchain technology has the ability to do all of this, and it is only expanding. It has the capacity to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. Essentially, Blockchain is a database. If you are unfamiliar at this point as to what Blockchain is, it is the technology behind cryptocurrencies that was first seen through Bitcoin. Still unfamiliar? Maybe the best way to describe it is to imagine a world without it, the one that for the most part we are living in.
Without Blockchain, we keep separate records for all transactions. Banks, hospitals, investment firms, etc., all keep separate records. Blockchain is being looked at by financial institutions, the music industry, and others looking to simplify record keeping. For example, you want to write your friend a check; after you do so, you balance your checkbook and your friend does the same when he deposits his check. Initially, each bank has no way to know right away if either person has enough money in their bank accounts to cover it. Enter Blockchain. With Blockchain, instead of two separate checkbooks with two records of debits and credits, both you and your friend would look at the same ledger of transactions, a ‘block’, as it would be called. It is private and decentralized, so it is incorruptible. Neither of you control the ledger, but every party is involved, in this case you and your friend, can access it. If both you and your friend agree upon the block, it gets added to the chain. This chain is protected, and cannot be changed after it is completed. This is because Blockchain operates on a new concept known as ‘smart contracts’. Everyone involved looks at the same contract, and no one can change it without the permission of others. This means that the more parties are involved, the more secure Blockchain becomes, because more people would be agreeing upon the common information.
Blockchain becomes especially intriguing to pay attention to when you look at investment activity. Bitcoin and Blockchain investment activity among venture capital-backed companies has risen from $1 million in 2012 to $474 million in 2015. The main reason Blockchain technology is growing quickly is because of its ability to streamline processes and increase efficiency. According to a report by Santander, Blockchain could cut costs of financial firms by up to $20 billion annually by 2022. This is why Goldman Sachs, JPMorgan Chase, Bank of America, and others have signed onto R3, a startup company based in New York that is trying to set up an industry-wide body for Blockchain.
Financial firms are not the only ones that stand to benefit from Blockchain. Paul Brody, Ernst & Young’s global Blockchain leader, says that on an assembly line, workers could be required to scan their ID badge each time they complete or work on a product. This would be added to the Blockchain and everyone involved in the production of such product would be able to see it, thus preventing any labor violations such as child labor abuses overseas.
Healthcare providers could use Blockchain to check and see if a procedure is covered under someone’s insurance plan, the insurance company could verify the exact procedures being done, and the patient would be confident that their medicals records are stored in a secure place. Additionally, if follow up appointments were necessary, those would simply be added to the ‘chain’. Musicians and record companies have been looking into Blockchain lately to ensure that the only people buying music are people that have the rights to play the track. This means only people that buy music legally will be able to access the song, and would also mean that the money would go directly to the musician or company. Blockchain could even be used to maintain property records. Each time a property is bought or sold, the history would be updated on that respective Blockchain. The possibilities of this technology are endless.
Despite all of these reports and possible benefits of the enticing new technology, many experts believe we are far from widespread adoption, and there are three main reasons why. The first and most glaring issue with the new technology is that, well, it’s new. Blockchain regulation has not been established, and while larger financial companies are starting to research and experiment with Blockchain, such as UK’s Financial Conduct Authority and Singapore’s Monetary Authority, most have not. This leads to the second reason, which is that in order for companies and/or banks to start using Blockchain, someone has to be the first to try it out. So far, due to Blockchain’s infancy, there is no established way to go about setting up a system. An industry-wide standard, something large banks like to look for, doesn’t exist yet. Frederick Voss, VP of Blockchain innovation at Nasdaq, thinks that “the network effect here is important”, and that the more companies that use Blockchain, the more valuable it is. The third reason Blockchain is far from adoption is the security issues. While one of the best benefits of Blockchain is its privacy and security, this hasn’t stopped hackers from getting past the technology. Even Bitcoin was hacked this past August, with hackers stealing $72 million. Other detractors of the new technology say that it could cost billions before a proper industry standard is set up, and that if it were used it would take away jobs because of its lack in need of an actual person recording data.
All in all, Blockchain is a fascinating new concept that is still being developed and perfected. While Blockchain in its current state may not be implemented outside of cryptocurrencies anytime soon, it is no coincidence that companies like Goldman Sachs are paying such close attention to it. Blockchain technology is something everyone in the business world should pay attention to.