Beyond Bitcoin: Blockchain Technology and the New Industrial Revolution
Bitcoin and other virtual currencies are made possible by blockchain technology but banking and payments aren’t the only industries that could be changed; a medium of exchange is only one of many possible applications. Simply explained, a blockchain is a decentralized and distributed digital ledger used to record transactions across a peer-to-peer network. This may sound simple, but it has the potential to reshape modern society. It feels like something we experienced before: an “Industrial Revolution.”
Something began happening in Great Britain around 1760 that completely changed our world: a transition from hand production methods to mechanical ones, leading to new chemical manufacturing, improved iron-production techniques and the rise of the factory system. That turning point in history was called the Industrial Revolution.
In a similar fashion another series of developments in computer science that started in the late 60s and early 70s resulted in something called ARPANET, where multiple separated networks were joined into a single “network of networks.” That was the beginning of something big we now call the Internet.
In early 2009, an anonymous programmer, or a group of programmers using the alias “Satoshi Nakamoto” introduced something called Bitcoin, the first implementation of a concept called “cryptocurrency.” It caught the attention of other programmers and started a community that has since grown exponentially. But the Bitcoin protocol is not just about sending money between two peers; it has many features and has opened many possibilities that we are starting to discover. The innovations introduced by Bitcoin are the equivalent of a new Industrial Revolution. Blockchain technology is the next big step for the Internet and will rewrite how people do business and interact.
Features of Blockchain Technology
Immutable: When a new block of transactions is verified and validated by the network it is practically impossible to modify it. Public blockchains achieve this through a decentralized consensus mechanism called proof-of-work. Changing an entry in the database would require modifying all of the data that comes afterwards—on every single node of the network.
Distributed: Distributed means that computation is spread across multiple nodes instead of just one. Blockchain is a distributed ledger, meaning a database that is independently maintained by each participant (or node) in a large network.
Decentralized: Public blockchains such as Bitcoin are decentralized, meaning that no government, corporation or party controls it. This means there is no central authority.
Secure: The security of a blockchain rests on its use of cryptographic keys. Combining a public and private key creates a strong digital identity reference based on possession. A public key is how you are identified (like an email address); a private key is how you express consent to digital interactions. Cryptography is what allows a public blockchain to stay secure.
Industries Blockchain Could Transform
Counterfeit and Adulterated Products
The business of counterfeit goods is one of the largest underground industries in the world. The impact on the global economy is in the billions of dollars. But beyond economic loss there can be other harmful effects like drug adulteration or contaminated food. A recent case of that was the 2008 Chinese milk scandal, where no less than six babies died and thousands were affected.
Suppose manufacturers had a way to incorporate identity into their products and register them on a public blockchain. Each movement of the product would be registered on the blockchain, from shipping and storage all the way up to retail stores and consumers. If consumers had a way to identify the product, they could track the entire supply chain and be assured that the product was unaltered and came from the right manufacturer.
A Chinese company called Walimai already has a working secure anti-counterfeiting system that uses blockchain to solve this problem.
Another business affected by counterfeited goods is luxury products, in particular, designer clothing and accessories. One project working to solve counterfeited luxury goods (among other problems) using blockchain is called VeChain, based in Singapore.
People around the world are more than willing to give and use their money to help others. But trust in charities is at an all-time low.¹
“ The public wants to see charities account better for how they spend their money, they want to see ethical fundraising, and they want to know that charities are making a positive difference to their causes. The more people know about the good work of individual charities, the more their trust and confidence in charities generally increases.”¹
Blockchain’s characteristics makes it the ideal platform for people to donate and keep track of their donation, a feature that would allow charitable foundations to regain people’s trust.
Certain foundations like Wikimedia already accept bitcoin as a way to donate to their organization. The BitGive foundation wants to improve philanthropic impact through the use of blockchain. They created a platform called GiveTrack that allows people to donate with cryptocurrencies and keep track of the specific project they donated to.
Transparency is a key element for any credible election. For such an election you need the possibility of scrutiny by all participants: political parties, election observers, government agencies and voters. It is clear that democratic elections have several flaws, and in order to provide public trust in the process, all participants need to rely on central authorities. But what if central authority were not needed anymore?
Recording votes on a blockchain would require complex mathematics that would make tampering with them after the fact practically impossible; this would make the platform ideal for democratic voting. Add a verifiable audit vote record, potential anonymity and decentralization, and you have the perfect solution for a complete electronic voting system.
Estonia and Switzerland have had electronic voting before but they didn’t used blockchain. Estonia is working to move their e-residency platforms to blockchain technology. There is a proposal from the Plymouth University to use blockchain technology for an electronic voting system, and there are some platforms like Follow My Vote already using blockchain. Another system called Sovereign is being developed by the Democracy Earth Foundation.
Supply Chain Management
The World Bank has defined supply chain inefficiencies as the biggest obstacle to economic growth. Despite the advances of our digital world many participants involved in the shipping industry still use archaic systems or even manual control with tons of paper. The possibility of a transparent immutable tracking system provided by a blockchain would completely change this industry in the same way email did with traditional postal services.
By using blockchain technologies this industry could turn the current paper nightmare into an all-digital paradise. In particular, the use of “smart contracts” could allow all the related parties in each transaction like buyers and sellers of cargo, ship owners, charterers, banks, agents, customs, port authorities, etc., to communicate by using a public ledger in a secure and efficient way.
The high number of intermediaries in this industry, however, represents a challenge to this revolution in terms of global adoption of blockchain. This adoption can’t really occur if everyone’s using a different blockchain system. Some standard is needed.
In March 2017, Maersk and IBM announced a partnership to create an industry-wide cross-border supply chain solution using blockchain. Their joint venture is already creating value for this industry as described by the Chief Digital Officer for Maersk Transport & Logistics, Ibrahim Gokcen in his presentation at the Business of Blockchain conference.
Ticket resellers, better known as scalpers or ticket touts, have existed since the beginning of ticketing. This is so common that an entire secondary market has formed around it. Even big names in the industry like Ticketmaster allow you to resell your tickets. This is where blockchain technologies can help. The purpose of blockchain projects is to give power back to the consumers, by avoiding unnecessary intermediaries through keeping an immutable and verifiable history.
By utilizing blockchain technology, this industry could keep sales transparent by allowing artists to sell tickets directly, without the need of intermediary services. As a result, we could expect fees to be reduced and counterfeit tickets to be eradicated.
“Owing to the benefits of blockchain technology, when a smart ticket is issued, its origin and pricing can be tracked from the very moment of issue that is registered in a smart-contract, up to the redemption at the door. Even if a ticket is resold, there is no way to copy and resell a duplicate, or override resale rules specified by the promoter, unlike it often happens with conventional forms of tickets.”²
Scalability is another common problem when a lot of people try to buy tickets to a massive event through a centralized intermediary. Is it rare for a centralized system to handle so many requests without issues. The decentralized nature of a blockchain solution would naturally fix this problem, too.
Blockchain’s unique features make it possible to transform many more industries. Ultimately, the possible uses of a decentralized, transparent, verifiable register of transaction data are practically endless. On top of that blockchain operates without requiring any central supervision, while still remaining resistant to fraud. The industries listed in this article are just a few that are being transformed by this new “Industrial Revolution.” In future articles, we will discuss even more applications of blockchain technology—stay tuned!
²blog.crypto.tickets, Is there a way to stop ticket scalping and control the secondary market?, Julia Kosterova