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Most people have heard of Bitcoin, a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Some technical experts have even suggested that Bitcoin led to the birth of ransomware, rogue software which encrypts data on your hard disk and demands payment in Bitcoin to restore it.

Craig Williams, Senior Technical Leader of Cisco Talo, says:

“The ability to demand payment in bitcoin, a difficult-to-trace virtual currency not controlled by any country, was 'basically the birth of ransomware' and has helped drive its success since the currency's introduction in 2009.”

 While bitcoin has made headlines, few have heard of Blockchain, the technology that underpins Bitcoin. Recently Blockchain has hit business headlines as major banks, global companies and start-ups are investing millions into exploring the possibilities of developing this new technology for their own purposes. They have realized that the technology can be used for more than just a currency as any kind of data can be shared on the ledger.

What is Blockchain?

Blockchain is a database or ledger that maintains a continuously growing list of data records or transactions.  It has special qualities that make it better than traditional databases as seen by this chart by Autonomous Research (An equity and research firm focusing on banks, insurers, diversified financials, and fintech stocks) featured on Business Insider.

In theory, ‘the middle man’ would be removed from many types of transactions, ranging from settlement and clearing houses which act between major financial institutions, government registries which confirm transfers of land, to lawyers who confirm and settle contractual arrangements.

Blockchains can be used to replace anything that needs authentication or a signature.

This means the emerging technology has the potential to transform or disrupt entire industries, and in some cases, some industries will shrink or disappear entirely as they are no longer needed.

Developing Practical Uses of Blockchain

• Smart contracts: Smart contracts are not contracts in the “legally binding agreement” sense, but rather a software tool that replaces part or all of a contract.Smart contracts are already widely used, for example, with Digital Rights Management (DRM). When we buy and download a song from iTunes, we have a contract with Apple.A copyright license.Since the license only allows the song on a specified number of devices, the software will block any attempt to breach the contract.
• Bank & Financial Institutions: R3 (R3CEV LLC) is a blockchain technology company bringing together 45 financial companies in research and development of blockchain usage in the financial system. In February 2016, JPMorgan announced it was launching a trial project with the blockchain startup led by former executive Blythe Masters. Her company, Digital Asset Holdings, has secured funding from Goldman, Citi, ICAP and others.
• Supply chain transparency, IP & Privacy: For those industries where counterfeiting is a problem, blockchain technology may provide a solution.Provenance is an enterprise developing a prototype that uses blockchain technology to address this issue. In their whitepaper, they describe the prototype as being able to provide a digital ‘passport’ for every physical product to that proves authenticity (Is this product what it claims to be?) and origin (Where does this product come from?), creating an auditable record of the journey behind all physical products.
• Music industry: As recorded music is mostly digital, blockchain could protect the artist from a loss of revenue due to piracy and streaming services.Blockchain could become a potential distribution channel allowing the artist to secure their product.

 “We are at an amazing point in history for artists.  A revolution is going to happen, and next year it’s going to take over.  It’s the ability of artists to have the control and say of what they do with their music at large.  The answer to this is in the blockchain.” – Imogen Heap, Artist, Grammy Award winner.

 Blockchain technology has the potential to disrupt the legal, financial, governmental industries to simply name a few. It is an important technology to keep a pulse on, particularly if you’re in an industry where the technologies efficiency can displace your current position.  I find it fascinating to watch this emerging technology development on the various industries, and will continue to write about it as it evolves.

If you would like to read more about blockchain, check out my Pearltrees (thank you Tara Taubman for reminding me what a useful curating tool it is). I'll continue to curate pearls on the topic.