Tech evangelists never rest: they move from one ‘game-changer’ to another in the blink of an eye. But there are some new technologies that genuinely will change the way we do business in the next few years – and it won’t matter whether most of us understand exactly how they work. Take blockchain, which has become almost the brand name for the underlying technology that powers it – distributed ledger.
There are three key aspects that power blockchain:
- Immutable – Time-stamped, cryptographically secured entries provide an immutable ledger of record
- Distributed – The ledger is held by all nodes on the network
- Consensus – Consensus on the state of the ledger is reached without a central authority (so no bank or broker needed)
A simple way of explaining what blockchain is to look at Bitcoin, the cryptocurrency which runs off the platform. Anyone with an internet connection and suitable device can become a ‘node’ in the Bitcoin network: they can access a live copy of the Bitcoin ledger, view and participate in trading, and, if they want to, can assist in verifying transactions.
The key point is that control, ownership, and maintenance of the Bitcoin ledger is distributed across those who want to participate in the Bitcoin network. In contrast, a centralised ledger is held in one place and is controlled by a central entity: for example, a bank’s ledger is centralized and held in a single place (although customers can view parts of it which are relevant to them) and entries to it are controlled by the bank.
Making it work
So what will this mean for your business? In essence, it means that the ‘middlemen’ model is under threat. Why do you need a bank to sit between you and a counterparty if you can manage payments or transfers yourself? Why do you need a lawyer to draw up a contract if it can be done directly between parties? Then there is tokenization, which allows physical assets, such as properties, to be represented and therefore bought and sold digitally without the need for a third-party broker or clearinghouse.
Elsewhere, tangible or intangible property, such as cars, houses, or cookers, on the one hand, or patents, property titles, or company shares, on the other, can have smart technology embedded in them. Such registration can be stored on the ledger along with contractual details of others who are allowed ownership in this property. Smart keys could be used to facilitate access to the permitted party. The ledger stores and allows the exchange of these smart keys once the contract is verified.
Sky’s the limit
The potential uses of blockchain are enormous – and the banking, professional services, and cybersecurity sectors are just a few of those who are nervously eying how the tech will disrupt their current models.
For now, it’s not hugely important to understand exactly how the tech works – not many of us could explain exactly how the underlying technology in something like GPS functions, but we do know how to use the applications that are part of our daily lives. Blockchain has the potential to impact us in all kinds of ways, so watch this space.
Catch up on other news in our Techwatch series including our blog about immersive technology.