The Applications of Blockchain Technology Beyond Cryptocurrency
Many of you will have read something here and there about Bitcoin, the cryptocurrency that set out to turn the global economy on its head and remains a unique alternative to traditional currencies.
The blockchain is a fundamental pillar of bitcoin, but in reality, it could be a pillar of many more things.
This way of transferring a digital message offers clear advantages in areas such as security or message integrity, and although theoretically it seems indivisibly linked to cryptocurrencies, this component goes much further. Or at least, it can: let’s see what blockchain is being used for beyond bitcoin.
What is Blockchain? & When did it start?
It has been a few years since we started talking about Bitcoin and the unique transformation it was proposing in the economy segment.
This cryptocurrency showed its technological virtues already then, and although even in issues it reinforces such as those of security it is not immune to certain attacks that focus on other links in the chain, as already demonstrated in August last year.
The role of the blockchain in facilitating these transactions should not be confused with anonymity.
Although bitcoin became a currency of exchange for purchases of objects belonging to illegal markets – you will remember the Silk Road event – one of the virtues of the blockchain is that it can uniquely link each user, and that each user’s identifier is linked to a real person as if it were a bank account.
Another clear advantage of bitcoin and the blockchain scheme is that it departs from the centralized philosophy that has prevailed on the Internet for the last two decades.
The transfer relationship -in the case of cryptocurrency and these economic operations- is distributed, decentralized, and very secure.
So much so that it solves the “classic” problems of electronic currency transfer: fraud, dependence on a central server, or that double expense that allows you to pay twice with the same currency.
The blockchain is also very greedy in data logging. It is like a punctilious and inflexible moneylender: it stores all transactions since the cryptocurrency – or whatever we control with the blockchain – was created, and every time bitcoin changes hands, that movement is recorded, which is also public and available to everyone who makes use of the blockchain. Money of dubious provenance in the form of bitcoins? Impossible.
Not everything is perfect, of course: one of the problems with this system is that it is somewhat slow: the proof of work needed to verify the whole process takes time to achieve, which means that real-time processes can suffer.
Blockchain.info shows average wait times to confirm transactions, and these range from 6 to 11 minutes, and reducing the time to obtain the proof of work can weaken the security of the entire transaction.
And yet, the advantages outweigh that drawback and others posed by various alternatives that try to “reinforce” the original bitcoin blockchain with new features.
Blockchain as a Promising Pillar of a Decentralized Future
Proponents of this type of scheme have already made it clear that the possibilities of the blockchain are almost limitless when it comes to applying it to new and existing markets, as well as to new (or existing) services that move to this decentralized philosophy.
The network of users of this scheme becomes a source of trust, a way of conferring legitimacy to the currency or object that embraces the blockchain. As happened with the internet, no one owns it, but everyone can participate freely.
How Will Blockchain Technology Transform Financial Services?
Clearly, the financial system and its transformation to a decentralized segment are especially appetizing. Goodbye to banks (well, maybe it would be more like goodbye) and the influence these entities have on society.
Some have already called bitcoin the Napster of finance, but this is not really an apt comparison, since Napster provided that P2P scheme for the exchange of copyrighted content (specifically, songs). The ultimate effect would nevertheless be the same: it would transform the financial industry as Napster did the music segment.
Although there are attempts to bring about this transformation with bitcoins, there are other major efforts underway, and one of the most notable is Ethereum, a non-profit organization created by a 21-year-old Russian-Canadian named Vitalik Buterin.
This developer is particularly ambitious in his application of blockchain and among other things wants to turn his own cryptocurrency, Ether (what an appropriate name for a sci-fi movie), into the basis of that new decentralized structure.
Buterin has managed to capture the interest of the user community – close to $20 million has already been invested in the project thanks to a crowdfunding campaign in bitcoins – and of developers who have started collaborating with him.
With Ethereum, however, the revolution that is being proposed goes beyond the currency, and could theoretically be applicable to any service or segment thanks to the use of a blockchain compatible with various programming languages. As Buterin himself explained, “instead of Javascript making calls to the server, you could make calls to the blockchain”. The concept, of course, is ambitious.
Buterin’s idea with his Ethereum also has its detractors, and not only those who are more conservative and prefer to continue using current financial systems.
Gavin Andresen, one of the main bitcoin developers, has already commented in his blog that “I suspect they are trying to do too much – complexity is the enemy of security – and that they will end up either dramatically reducing the scope of what they are trying to do or they will get tired of playing cat and mouse with security vulnerabilities and DoS attacks”.
Ethereum is a good example of a Distributed Autonomous Corporation (DAC), a type of company that would operate in such a way that the business rules would be public and auditable, as well as distributed on the computers of the shareholders. Those shareholders could be external or work for that corporation, which in turn would pay in shares by providing them with certain services.
The workers would become shareholders and participate in its growth, as well as have a say in these auditable business rules. The idea could be extrapolated to altruistic corporations (NGOs) that would also avoid possible fraud with donations and whose management would be public and transparent so that the funds collected could be audited.
Another problem that blockchain could help solve is that of copyright management and licensing of creative works. Ascribe has been working for some time with Creative Commons France to produce a system whereby authors and creators could access a new way to verify that they are responsible for work, manage its use – all transactions (“publications”) would be recorded on the blockchain” – or share it.
This impact is already being felt in several consolidated institutions, which do not seem to renounce the benefits that blockchain can provide. Its experimental implementation is already a reality in the Nasdaq Private Market.
We have learned of the interest of several banks such as Bankinter and BBVA in bitcoin, and we recently learned of the interest of Banco Santander not in bitcoin, but in the blockchain: this group has invested in companies that are researching how to take advantage of this philosophy in traditional banking, something that other giants such as Barclays are doing.
Blockchain as the Key to Decentralization
Some call bitcoin the third technological democratization of our era. “The first came thanks to the internet, and it enabled the democratization of information.
The second democratization started with 3D printing, it is the democratization of manufacturing where factories become obsolete.
They are no longer needed to build a product. Now we are about to encounter the third democratizing force. It is the democratization of money and finance. There will be no more monopolies controlling our money or our businesses. Bitcoin is freedom.
Decentralization (and its consequence, democratization) of those kinds of segments is being seen as the great revolution of our days, and that blockchain seems to be the key component of that potential global decentralization. Now it remains to be seen whether this type of project will get off the ground, but everything points to the fact that if it does, implementation will be long and tedious.
It is happening with bitcoin, the cryptocurrency for which many entrepreneurs are pining: in these years of availability there has been a real frenzy for bitcoin mining and the emergence of alternatives that promise to deal with the theoretical disadvantages of the original project.
The same is happening with blockchain, which looks even more promising for the impact it could have on that democratization of not only finance but a multitude of additional segments.
The transparency and efficiency of this “protocol” are really promising, and a priori this concept may be one of the most relevant in the future. Whatever happens, we will be here to tell you about it.
