By Kevin Delaney
A self-driving electric car picks up the same groggy commuters each morning, charges their fees, and ferries them to work. It then taps into a ride-sharing network to move dozens of other passengers around the city—negotiating their payments, along with tolls and recharging stations.
Later, it collects the same commuters for the journey home, before charging still more riders for transportation to restaurants, the theater, and a ball game.
Finally, our robot car takes a well-earned, late-night rest after purchasing a smart parking spot.
For this near-future vision to work, all of those transactions need to be verified and secure, without a middle layer of human intervention adding cost, time, and friction.
Blockchain, best known as the technology behind the Bitcoin cryptocurrency, makes this—and much more—possible.
Brett King discusses a similar robot-car scenario in his book Augmented: Life in the Smart Lane. “We have a machine that generates income and pays for goods and services independent of a human,” he said. “The only way to work out those problems is on a blockchain. Nothing else in the current system would enable you to execute this.”
The Next Internet Revolution
For true believers, blockchain is akin to the early Internet: a fast-rising technology that will shake the foundations of how people, companies, industries, governments, supply chains, and, yes, robots interact.
“We have come to the conclusion, unequivocally, that blockchain is the most important invention in computer science in a generation,” said Alex Tapscott, co-author with Don Tapscott of The Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World. “A lot of people assume that this technology is about changing the financial services industry; we think it’s about reinventing the economy.”
Blockchain, also known as distributed ledger technology, does what so many disruptive digital technologies have done: it eliminates the middleman.
That may not sound like much. But if the hype is to be believed, blockchain’s impact could be big. Very big.
So big, in fact, according to the book by the Tapscotts, some believe that we should be looking at moving entire currency systems to digital money.
Who knew that a distributed ledger could be so sexy?
Blockchain streamlines transactions of all kinds, replacing the central layer of verification while ensuring trust and security. By creating a verified permanent record of a transaction, blockchain could make corruption and “cooking the books” go the way of floppy disks.
What is Blockchain?
Blockchain is a digital platform that creates a permanent ledger of transactions. Blockchain technology assembles transaction data into a series of small blocks, linked together in a chain. These transactions are tracked and verified automatically across a vast collection of computers that may span borders, continents, and cultures.
Once all parties have agreed to the content of a block, no one can change it—it becomes indisputable and tamper proof.
The blockchain provides a “single source of truth.” A transparent, auditable record of who did what, when, and how. Every transaction is tracked in the value flow straight back to its point of digital creation.
By logging data such as the time, amount, and participants of every transaction, blockchain becomes a distributed, collective bookkeeper, eliminating third-party middlemen such as banks, governments, clearing houses, and contract lawyers. All while ensuring trust.
Going Beyond Digital Currency
Bitcoin is just the first of what may be many blockchain applications. Blockchain transfers, verifies, and tracks just about any form of value that can be represented by ones and zeros. That includes money, real estate deeds, kilowatt hours, shares in a company, smart contracts, services, IoT machine data—anything of value.
“Blockchain technology is worth getting extremely excited about no matter what industry you are in,” said Joan Warner, senior financial services analyst for Oxford Economics. “For anything that requires multiple layers of verification, the blockchain lets you cut out those layers. And that’s just very powerful.”
Before the dust settles, blockchain will probably change every industry. Especially those where transactions, verification, and trust are critical.
“I see applications broad and wide,” said King. “Blockchain sets up the architecture for the machine-to-machine world that is going to be acting on our behalf.”
As Alex Tapscott put it, “The Internet of Everything needs a Ledger of Everything.”
Building Trust into Every Transaction
With its open-source, public approach, Blockchain provides a highly transparent and secure record that can never be deleted. It’s tamper-resistant and free of censorship, since there is no central authority overseeing it.
In short, every computer must “agree” to every transaction.
If shadowy characters mess with a block, none of the other computers will “agree” to that transaction. In this sense, trust—and a true record of events and transactions, backed by consensus—is built into the blockchain.
King sees blockchain as part of a major seismic shift in how we use technology. “We are going to see more change in the next 20 to 30 years than in the last 300,” he said. “We will need to re-tool the planet. That means making energy production smarter, education smarter, cities smarter, governments smarter.”
Blockchain, he believes, will support the transformation of every value chain.
“Blockchain can change the actual architecture of the company,” Tapscott said, “by automating the leasing and enforcing of contracts. A lot of business processes that require manual contracts will move to this platform. And this will enable us to free up all sorts of other capabilities.”
Hype or Reality?
Naysayers question the rush to blockchain. Martha Bennett of Forester Research, for example, wrote that the technology can’t be ignored. But she stressed that for now, it belongs in the lab: “For each project, there must be a detailed explanation of why and how blockchain is more efficient, secure, and lower-cost than any of the available alternatives, as well as legally acceptable.”
Others see a race to adoption. “Like with smartphones, these transformations can happen very, very quickly,” said Warner. “And I believe that is what is going to happen with the blockchain. Very soon, within five years, there will be companies that won’t know how they ever did business without this technology.”
Technology hype? Perhaps, but investors in blockchain—including large banks and technology players—smell a big payout. They invested an estimated $1 billion in blockchain-related technologies in 2015, with more in the pipeline.
Changing the World, One Transaction at a Time
Tapscott sees blockchain driving great social change. Concepts like car ownership and centralized utilities could be upended, he argues.
For example, with advancements in solar panel and battery technology, users could sell their energy surpluses across a peer-to-peer smart grid. But to do so requires processing and verifying millions of micropayments, which, if handled by today’s technology, would cause friction and expense.
“To manage that kind of challenge, the only solution is blockchain,” Tapscott contends.
Moreover, micropayments and verification could impact poverty in the developing world, thwarting corruption and making financial services accessible to anyone with a smartphone—and creating a new market for global banks in the process.
“This is the technology that finally enables all sorts of change that the previous generation of the Internet was unable to fulfill,” said Tapscott. “It could have as great or greater impact on all of our institutions.”