Beyond Bitcoin: the future of blockchain technology
When reflecting upon the most hyped-up tech trends in recent years, it’s hard to think of a greater example of the market’s fickle nature than that of the cryptocurrency phenomenon. Simply put, cryptocurrencies work by storing all their information on a digital ledger – essentially, a large database which is duplicated many thousands of times across a network of different computers. This system is referred to as a blockchain, and all records of new monetary transactions are added onto this digital ledger as a ‘block’. Subsequently, it’s much harder to dispute or falsify proceedings, as these records can be independently verified.
Originating with Bitcoin back in 2009, its open-source code allowed for a wave of copycat cryptocurrencies to follow in its footsteps. In its heyday, new start-ups were emerging seemingly every minute, with over 1,600 recognised cryptocurrencies existing based upon the same idea of a shared public ledger. The hype surrounding Bitcoin even meant that governments and official bodies were indulging in talk of investment in this exciting new technology. Cryptocurrencies looked to become one of the biggest disruptors in the world of banking and finance, with big players such as J.P. Morgan Chase and the Royal Bank of Scotland looking to cash in on the concepts underpinning Bitcoin’s innovative use of cryptography and data transportation.
After an explosion in popularity just a couple of years ago, prices of a single Bitcoin in December 2017 rose to a record-breaking $19,783 USD, with huge profits made by those who invested, sold or mined (validated a new virtual currency) at the right time. However, this was followed by a similarly dramatic decline in price over the next two months – such a dramatic price drop was unprecedented until that point, having lost over 50% of its value in just 16 days at the start of 2018. The exact cause of this price bubble is subject to debate, though critics of the currency have voiced concerns about Bitcoin’s shortcomings and volatile nature for some time. At the time of writing, the value of one bitcoin has now stagnated to around the $4,000 mark, with the other leading cryptocurrencies (such as Litecoin and Ethereum) faring even worse.
Bitcoin’s mode of exchange via a huge, immutable public ledger means that the process of generating cryptocurrencies is both time-consuming and computationally expensive. In fact, should the price of cryptocurrencies continue to decline so extremely, the cost of the electricity needed to generate new coins and validate existing ones would eventually outstrip the value of the currency itself.
With all that said, the potential for blockchain technology itself (outside of the world of currency exchange) to become a cornerstone for global security, collaboration and innovation is huge. With the possibilities too numerous to list in their entirety, I’ve penned my thoughts on a handful of the most promising below.
1) Preventing Identity fraud
Identity theft persists as a major issue throughout the digital world. As more and more of our sensitive data is stored and moved electronically, the threat of data breaches and subsequent identity theft increases. What makes the concept of Bitcoin such a novelty is that all the information stored inside the blockchain is decentralised – that is, unlike a traditional centralised database or server, there is no single point for an attacker to target. Theoretically, if we each owned a digital identity stored on a distributed ledger, it would enable private information to be accessed only via a cryptographic key: providing a much-needed extra layer of security for our most valuable data.
Whilst on the topic of anonymity, it’s also worth mentioning how cryptocurrency platforms such as Monero are fervently developing new ways to validate transactions on the blockchain without giving away any indication of the identity or location of the sender. Though not yet a faultless solution, perhaps the restoration of genuine confidentiality in a post-Wikileaks world lies in the development of these sophisticated algorithms.
2) Smart Contracts
Another innovative use for blockchain is the concept of smart contracts. Designed using the principles of blockchain technology, they work by automatically executing transactions once terms are met by all parties involved.
Though already in use by certain cryptocurrencies such as the Ethereum project, this self-executing system could facilitate a faster, more convenient, ‘trustless’ system for ratifying contracts of all kinds. Given the potential for theft and deception when agreeing to exchange money, goods, loans or other legal obligations of any kind, using digital records as an intermediary could provide a smarter alternative across many different industries.
3) Money Transfer
A financial service in desperate need of an overhaul? International money transfer. Despite the digital age making it easier than ever to book a plane, browse the best hotels and plan an entire trip in minutes, moving your money from one country to another still remains a slow and expensive process. The traditional route generally involves several separate banks, each with their own processing fees, and using your usual bank card abroad or sending money to a friend overseas can incur pretty hefty fees of up to 20%.
The decentralised model used by virtual currencies such as Ripple and Litecoin removes the need to rely on the inefficient processes of individual banks and can instead utilise near real-time processing speeds and low transaction costs.
4) Integration with IoT devices
Finally, it’s worth mentioning how the Internet of Things’ development can progress further and more safely with the aid of blockchain technology. This heavily-discussed buzzword encompasses any device that can be connected to The Cloud in order to communicate with both the user and other devices. Think remotely controlled smart meters that can control heating and electricity use, or security systems capable of sending instant alerts with the movement of doors and windows. It can even scale up to ‘smart cities’ with responsive traffic light systems and bins which can signal when they need to be emptied. Despite how quickly this exciting concept is taking off, it’s important that our focus shifts not from pushing new products to market as quickly as possible, but rather to making sure all of this extra digital communication is secure.
Whilst not a massive security risk at the moment, as more homes become equipped with surveillance cameras, connected baby monitors and motion detectors, the possibility of cybercriminals causing havoc becomes more alarming. Could blockchain’s stringent cryptographic protocols be the answer? As our world, and our things, become more connected, it’s more important than ever that our safety and privacy remain a top priority. Fortunately, it appears that the industry is picking up on this, with tech giants such as Samsung and IBM already investing in the implementation of blockchain technology into their IoT services.
Whilst there are lots of exciting developments within the blockchain space, they are all still in relative infancy, and so only time will tell whether the Bitcoin will live on or be resigned to history as a passing fad. If the issues facing cryptocurrencies in their current state turn out to be little more than teething problems, perhaps we should all be anticipating a seismic shift in the most fundamental uses of our technology. Either way, I’m looking forward to seeing how new ideas and a little ingenuity can impact the world around us.
What do you think the most interesting uses for blockchain technology are? Tweet us your thoughts @homeagencyuk.
Written by:Barry Bell
Category:What we think
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