Last week the high and rapidly changing price of bitcoin brought the digital currency to the top of the news, reaching an all-time trading high, at about $1,150 per coin.
It has since fluctuated considerably; the cause of this being statements and actions taken by the Chinese government. The clear majority of bitcoin trading (more than 95%) takes place in China, giving events there an enormous influence on the price.
The profile of bitcoin (powered by a blockchain network) has often masked the rising importance and relevance of the underlying blockchain technology, but this is changing rapidly.
One perspective is that the blockchain is the ‘second generation of the internet’.
According to an article published on Raconteur, ‘The first generation brought us the internet of information. The second generation, powered by blockchain, is bringing us the internet of value; a new, distributed platform that can help us reshape the world of business and transform the old order of human affairs for the better. But like the internet in the late-1980s and early-1990s, this is still early days.’
The initial paper regarding bitcoin (and blockchain) entitled Bitcoin: A Peer-to-Peer Electronic Cash System (2008) was authored by a mysterious individual, likely a pseudonym, going under the name of Satoshi Nakamoto.
While the original paper was written with financial transactions in mind, blockchain has far wider potential. Time will tell, but it may be that Nakamoto’s paper will have ramifications on a par with Tim Berners-Lee’s innocuously titled 1989 paper Information Management: A Proposal.
In December 2015, the UK government’s Chief Scientific Adviser, Sir Mark Waldport, stated in his report Distributed Ledger Technology: beyond blockchain, that: ‘The technology [blockchain] offers the potential, according to the circumstances, for individual consumers to control access to personal records and to know who has accessed them.’
Canadian writers and researchers, Alex and Don Tapscott, authors of the recent book Blockchain Revolution, believe that the blockchain goes way beyond the second coming of the internet. The pair, like so many others, stumbled across blockchain via the bitcoin association, quickly realising the genie is out of the bottle.
Alex Tapscott observes, ‘With blockchain technology, a world of possibilities has opened and we now have a true peer-to-peer platform that enables personal economic empowerment. We can own our identities and our personal data; we can do transactions, creating and exchanging value without powerful intermediaries acting as the arbiters of money and information.’
The blockchain, essentially a database and a giant network, known as a distributed ledger, records ownership and value, and allows anyone with access to view and take part. The asset database can be shared across a network of multiple sites, geographies or institutions. All participants within a network can have their own identical copy of the ledger. Any changes to the ledger are reflected in all copies, like a Google doc.
The blockchain is currently having its biggest impact in financial services, with the largest changes caused by infrastructures using blockchain APIs, which are delivering in the areas of speed in data processing, transparency (amongst the right people) and security.
But what does the blockchain mean for businesses outside of the financial sector? The answer lies in the areas of – privacy/information control, disintermediation, and business processes.
As mentioned above, the blockchain offers consumers opportunity to achieve greater control over their information. This will impact on most organisations, as they increasingly rely on the acquisition and application of customer data.
The importance of privacy is obviously a sensitive issue. One current solution for consumers is the selection of ephemeral applications like Snapchat and encrypted messaging, but the future might lie in the anonymity of blockchain technologies.
Another change will affect business sectors where there are many intermediaries, for example travel and tourism. Here, the blockchain’s ability to simplify and speed up interactions, will likely lead to a process of dis-intermediation.
Current examples of businesses and categories active in the blockchain include: Peer-to-peer payments (Abra, BTC Jam), internet of things (Chimera-Inc, Filament), collaborative transport (La’Zooz, Arcade City) and online gaming (Auckur, SatoshiDice).
As the number of applications that utilize blockchain technology increases, so will its relevance. Not only will we be selling products through the blockchain, but marketing companies that run off it as well.