Part One took a heroic stab at explaining the technology that underpins Bitcoin – the blockchain. But although the mysterious inventor (or inventors) of the blockchain concept, ‘Satoshi Nakamoto’, wrote specifically about using it to implement a ‘crypto-currency’, the concept is not dependent on this: in principle the blocks could contain any structured information. The mechanism “enables trust between mutually distrusting parties” (Joi Ito). It doesn’t have to be trust about a transfer of currency, so much as a transfer of value.
And so whether or not bitcoin itself has a bright future, the blockchain is a real source of interest.
Because in principle the technology can be applied to any information where consensus and trust are vital amongst parties who don’t necessarily trust each other, and especially where that trust is currently provided vicariously by some kind of third party – registrars, trustees, custodians and so on.
But there’s more. Because two other factors have the potential to take this idea into the realms of the extraordinary – the potential for ‘hybrid’ bitcoins, and the Internet of Things.
What I call hybrid bitcoins is a simple recognition that other information can be transferred with a coin. The Internet of Things on the other hand is a converging technology – the ability of all manner of devices to communicate independently via the internet.
Imagine a car, or a house, for example, whose ownership is registered on a distributed blockchain rather than at a centralised government database, and which is in contact with it’s own block. A change in ownership is registered on the blockchain and the vehicle or property is immediately aware of this, and can act on the new information…
Already companies are working on a raft of applications, including:
- ‘Smart’ contracts and escrow arrangements
- Digital assets – decentralised asset registries, including home ownership
- Smart assets, like our car above
- Audit trails
- Chains of share ownership – shareholder registers, stock exchanges
- Music royalties
- Global airline payments
Oh, and the Phillipines government has given serious consideration to moving the peso onto a blockchain. Meanwhile Ethereum are trying to decentralise the web altogether, with a combined blockchain and ‘Turing complete’ programming language – the ‘Swiss army knife of the internet’.
For the rest us, the challenge of imagination is to think about all the parts of our business lives that depend on some third party to establish trust, and how that might fundamentally change as the blockchain becomes the AirBnB of the custodial professions.
“The underlying Block Chain technology … is a core part of the next generation of the internet that is radically going to transform not just commerce and the nature of the corporation, but many of our institutions in society and everyone needs to pay attention to this.” – Don Tapscott
“My hunch is that The Blockchain will be to banking, law and accountancy as The Internet was to media, commerce and advertising. It will lower costs, disintermediate many layers of business and reduce friction. “ – Joi Ito