Tech Talk: Blockchain Technology: Uses Beyond Bitcoin and Cryptocurrency
Blockchain has been closely linked with Bitcoin in the news, but there are endless uses for it beyond cryptocurrency. It has the potential to disrupt industries of all kinds, from traditional sectors such as financial services and healthcare, to more obvious ones such as technology and retail. Josh Miller, Senior Software Engineer at Method, discusses how blockchain could unlock opportunities for your business and change the way we all make transactions and maintain records.
Ever downloaded music from Napster in the early 2000s? Shared files with Bittorrent? Taken a vacation using Airbnb? Shopped on Craigslist? Then you’ve gotten a taste of the blockchain digital commerce experience. However, most online marketplaces today are brokered by a central authority like Amazon. That’s what’s different about blockchain: the lack of centralization.
You can think of blockchain as a virtual farmer’s markets or flea market. Rather than selling produce, handmade jam, or refinished furniture, vendors in the blockchain sell data or services. Anyone can publish services that leverage the blockchain, and those services can be consumed by other participants for a nominal fee.
Blockchain is unique because it’s:
People can exchange data directly without a middleman.
The database is spread across multiple sites, countries, and institutions, rather than having one central source or administrator.
Other people using the blockchain help verify its data. All parties can review previous entries and record new ones.
Because each transaction and change must be verified by multiple people, no single person can tamper with the data.
- If it seems like you can’t go anywhere without hearing about blockchain, you aren’t alone. That’s because the technology is poised to change the way many industries operate, from financial services, to retail, to government, to healthcare, and everything in between.
How Blockchain Works
The most common use of blockchain today is cryptocurrencies like Bitcoin, Ethereum, and Litecoin. Unlike traditional currencies, which are backed by a government or tangible item of value, cryptocurrencies are intangible and have no backing. Think of them like airline miles. They have value, and you can accumulate them, trade them, and redeem them for goods and services. However, they’re digital, they don’t exist in a tangible form, and they aren’t owned by a government or institution.
To understand how blockchain works at the simplest level, let’s take a closer look at a Bitcoin transaction.
Let’s say John and Susan go out to lunch together. Here’s how the transaction would work:
1. John downloads an app like Coinbase and creates a digital wallet to purchase Bitcoin.
2. When John and Susan finish lunch, he pays using his smartwatch (because wearables are the payment method of the future).
3. His purchased data is immediately logged and transmitted via web-based services and stored in a transaction block inside of an unmined block in the blockchain. Each transaction has a unique signature, which is based on a hash value of the record’s content, plus the full hash of the previous record. This is what makes it a chain: each record contains a complete, hashed copy of the previous record, which contains a hashed copy of the previous record, etc.
4. Finally, records are sealed or closed using a special signature. This signature is referred to as a “proof of work.”
Other Uses for Blockchain Beyond Bitcoin and Cryptocurrency
In addition to cryptocurrencies, blockchain also comes in handy as a ledger for other transactions, such as trades, ownership transfers, the creation of one-of-a-kind goods and services, as well as creating and exchanging important records.
For example, the financial services industry is a primary candidate for blockchain because of the technology’s efficiency and security. Financial firms currently make most of their money by serving as an intermediary between two parties who want to make a transaction (deposit money, buy an investment, etc.). However, the transaction process is often slow and vulnerable to security risks, making it ripe for disruption. By using the blockchain, banks and financial institutions could stay more competitive in a fast-changing market and make the transaction process faster, more secure, and more affordable for their clients.
What’s interesting about blockchain isn’t the money — it’s the possibility it holds for lots of different industries and transaction types:
|How Blockchain Could Be Used
|Purchasing a vehicle
|Recording the transaction amount, date, and parties
|Recording the change of ownership between parties
|Creating digital artwork, music, and documents
|Recording ownership, copyright, and creation date details
|Recording outcomes, parties, judgments, penalties, etc.
|Birth, marriage, divorce, and death records
|Recording events that are irreversible without a separate transaction
|Managing records for patents, restaurants, daycares, hospitals, inspection ratings, and more
|Voting and polls
|Capturing votes and poll responses in elections, or other surveys where security and verifiability is a concern
|Ratings and reviews
|Logging real business ratings and reviews from verified contributors, not bots
|Making real and fantasy sports trades
|Recording the transaction facts, date, and parties
Just like Amazon has created a new economy of physical commerce, blockchain aims to create new economies of digital commerce. Markets will emerge for marketing data, health data, competitive analysis, artificial intelligence services, and financial services. Businesses could even exist entirely within the confines of a blockchain network, only operating within the digital marketplace.
Is Blockchain a Fad or the Future?
Blockchain has been closely linked with Bitcoin in the news, but there are endless uses for it beyond cryptocurrencies. Any transactions that would benefit from having tamper-proof, distributed, verifiable records are fair game.
Many businesses are brushing off blockchain as a fad, just like they did with similar technologies that we now use daily, such as DNS, the underlying naming and routing system for the Internet. When DNS was invented, the general public wasn’t very excited about it, nor were they talking about how revolutionary it is or how it would change economies. Now, the Internet can’t run without it.
At Method, our team thinks blockchain will have a similar future. Its potential isn’t tied to an inflated currency, but rather, the widespread adoption of the technology. Businesses who begin adopting blockchain early could reap great rewards for being first to market. However, it’s best to make sure there are valid applications for your business before diving in with both feet.
Those who ignore blockchain may find themselves being left behind. The ones who thrive will be those who consider whether it aligns with their digital strategy, and if so, use it to design solutions that benefit both their customers and their business.
For more information about blockchain and the possibilities it could unlock for your company, get in touch with Method.