Blockchain technology essentially enables you to create a permanent, unchangeable ledger of transactions and save it in a distributed database.
It’s a fraud-resistant, decentralized way to organize and verify transactions, without any need for a governing authority to oversee the ledger. Blockchain is most famously used to support the Bitcoin digital currency, but the cryptography-based technology could have disruptive effects outside the financial sphere.
There are plenty of industries that could benefit from this method of recording transactions in a single, decentralized platform. This could include authenticating certification, such as from educational institutions.
By recording course credits and academic achievements, it’s much harder for someone to fraudulently claim a qualification they don’t possess.
It’s also much easier to check on a person’s qualifications without having to manage paperwork or request documentation. The transparency of blockchain may also have applications in the voting process. It would be harder for votes to go missing or uncounted, and the end result is much more visible, if blockchain tech was used.
There would be no need for manual counting of votes because all parties to the voting process are able to see the end tally themselves, as well as verify that their vote was counted. Because blockchain leaves an audit trail, there’s much greater visibility. This makes it harder to vote illegally, change votes, or remove them. It’s also a paperless system.
Blockchain and the arts
Surprisingly, blockchain could also contribute to the arts industry, by helping to finance artists. One of the issues musicians face is that they often receive a very low percentage of the profits from their recordings.
By recording all stages of the transactions between the artist and the purchasing listener, there’s much greater visibility about who is taking a cut and how big that cut is.
It’s thought greater visibility of the music supply chain could benefit artists and shrink the music management industry, redistributing the financing of the whole operation.
A startup is currently at work with blockchain trying to establish a way for listeners to support emerging musicians, and potentially reap rewards later in their career.
Peertracks essentially allows you to buy shares in an artist, changing the way fans and artists interact with one another. It’s another way that blockchain cuts out the middleman (in this case, managers and recording studios), enabling fans and musicians to connect much more directly.
Blockchain and security
It’s much harder to hack into a distributed processing network, which is one of the main reasons blockchain has great potential for combating fraud and identity theft.
By creating secure records of ownership and identity, individuals have undisputable proof and records of their identity and ownership.
Blockchain also offers the potential to bring greater transparency into the supply chain, helping to combat fraud and counterfeiting.
It can help track and identify counterfeit merchandise or stolen goods, which will be beneficial to industries that tend to be impacted by fraudulent activity and counterfeiting.
This could include the gemstones and jewelry industry, luxury goods and pharmaceuticals. Blockchain will create a solid record of transfer between parties and between participants in a supply chain, making it harder for goods to drop out of the system onto the black market.
Consensus among all participating parties is key to blockchain’s success. The entities involved in transactions can check each others’ work, providing their approval as well as a time stamp.
Actions won’t be recorded until they have been completed, for example, a payment won’t be recorded until it has been made.
It’s also striking how fast this can happen. Traditional banking exchanges can be slow, thanks to cumbersome processes.
Blockchain technology could introduce new speed into the process. It’s likely that blockchain technologies will have the most disruptive effects in verification-intensive industries, such as debt servicing or insurance; essentially anywhere that financial transactions are taking place.
Blockchain’s disruptive impact
Because it removes intermediaries from peer-to-peer transactions, blockchain brings implications for the jobs market and the wider business landscape. Decentralized payment methods based on blockchain circumvent the banking system and connect payers and payees directly, without the need for an intermediary such as a bank.
Interchanges will essentially happen between collaborating partners without the need for any go-between.
Not only will this make the whole process faster but it will also reduce the transaction fees.
To some extent, blockchain technology replaces the tradition bank’s function as a transfer hub for finances. In fact, the Financial Times expressed the view that blockchain technology could represent the most radical departure from longstanding financial bookkeeping practices since the 15th century.
Some bankers believe it could cut up to $20bn of costs from the banking sector by streamlining processes. By removing intermediaries, reducing costs, eliminating paper, and speeding up processes, blockchain has a massive disruptive potential for many different kinds of transaction.
Already, the financial services industry is paying attention. Investment capital is pouring into blockchain startups in the FinTech area.
Several investment banks, including JPMorgan and Credit Suisse, are working to develop common standards for blockchain via their joint investment in R3CEV, a FinTech startup.
Visa is just one of the parties investing in Chain, which aims to introduce the technology into the wider financial services system. For the banking industry at least, this is the biggest new development in the way they do business for several centuries.
It remains to be seen exactly how blockchain will impact on other types of industry but it seems likely the world is soon going to be using the technology in a range of applications.