The impact could be “mind-blowingly big because it affects every aspect of the global economy,” said Michael J. Casey, a senior adviser to MIT Media Lab’s Digital Currency Initiative and co-author of an upcoming book on the implication of blockchain ideas, “The Truth Machine.”
“We have the potential — I’m still going to use a qualifier like that — to get to trillions and trillions of dollars in savings and disruption and refocused activity,” Casey said.
Blockchain technology emerged with the advent of bitcoin in 2009, when a programmer using the pseudonym Satoshi Nakamoto came up with a novel solution using a network of computers to track transactions in a way that is secure, trustworthy, fast and transparent.
The technology is used in either public networks, open to the world, or private ones that could connect any type of group such as a manufacturer and its suppliers, a musician and her fans or a real estate market and buyers.
What blockchain does is connect participants to a decentralized record-keeping tool, or ledger, that records all transactions, usually financial, and adds a timestamp and other information. Each block links to another in a continuously growing chain of records. Every time a transaction occurs, it propagates across the global network so all parties host records, and each computer continuously monitors for anomalies. Transactions are encrypted, verified by all parties, and immutable.
Since the entire chain is continually self-updating, thieves and hackers would have to breach all computers that contain the ledger at one swoop to steal money or alter data.
Advocates say blockchain’s radical charm is that it cuts out the middleman and reduces costs. There is no need for a trusted third party to broker deals. All transactions can be audited.
In the bitcoin world, it means buyer and seller transact directly, with no intermediary, like a bank or agency, coming in between.
But startup companies and technologists are finding vast new uses for it.
Some musicians and artists see services based on blockchain technology as a godsend. New companies like PeerTracks, Mycelia, Ujo Music and Stem all use blockchain technology, working to simplify licensing and liberate musicians from intermediaries — like talent agents, record labels and streaming services — all eager to take a cut of revenue.
In other areas, blockchain is seen as a way to streamline logistical processes, cut out third parties and give a parade of entities transparent access to information.
Global ports are studying distributed ledger technology as a way to kickstart a revolution in the way goods move globally. The technology could consolidate letters of credit, bills of lading and other data into a digital blockchain, giving real time access to customs and port authorities, terminal operators and security departments.
Resiliency of the blockchain system, and the integrity of data, are part of why the technique is making inroads in finance, banking and money transfers.
“What blockchain was originally designed for was to solve what’s called the ‘double spend’ problem. After I give you 10 bucks, you should have the 10 bucks and I shouldn’t be able to spend it again,” said Andre Boysen, chief identity officer at SecureKey, a Toronto firm that provides identity and authentication services to the financial industry. Each blockchain transaction is indelibly and uniquely tagged, showing ownership of the underlying bitcoin or item.
Experts are also testing usage of blockchains in areas such as voting and in ensuring identity for individuals and giving them sovereign control over their own identity.
“Think about your own life. When do you show up and have to prove your identity? The list is so long,” Boysen said, noting places such as the airport, banks, bars, in seeking health or academic records or to the state trooper who stops a motorist for an infraction.
The technology’s ability to give owners consent over release of information is a key part of an unfolding battle over identity in both developing and developed worlds.
The United Nations estimates that 1.5 billion people live without state-issued identity papers. That condition gave rise to ID2020, a public-private partnership between the U.N. and companies like Microsoft to explore use of blockchain for a distributed, tamper-proof registry so that those without identity papers (mostly women and children) can prove who they are.
Identities are also under siege in the developed world as internet giants increasingly seek to establish their brands as guardians of identity.
“What you’re starting to see on a lot of webpages right now is, ‘Log in with Facebook,’ ‘Log in with Twitter,’ ‘Log in with Google,’” said David Huseby, research director at Hyperledger, an umbrella project run by the Linux Foundation to advance blockchain technologies across industries.
Scientists say they foresee blockchain technology used to protect and hold encrypted personal information — social security number, birth certificate, driver license, and the like — to be under the control of individuals and not any central agency. Individuals could summon verifiable data for identification purposes at banks or elsewhere, perhaps through a barcode that would appear on a smartphone screen and be read by a scanner.
Some advocates call for a public utility that would safeguard digital identities and verify them through blockchain, ensuring privacy and employing a characteristic, which some call “blinding,” that allows limited disclosure of information, and only with user consent.
In other areas, blockchain technology could give consumers greater confidence in what they buy and overcome the trust barrier that requires middlemen, escrow accounts and title insurance in low-tech areas such as real estate sales and land titling.
Experimentation unfolds around the world. Sweden is in advanced testing to clear away burdensome land titling paperwork. By channeling real estate transactions onto digital public ledgers, the system would allow banks, brokers, buyers and sellers all to track progress until closing, vastly accelerating the process. The Republic of Georgia and Honduras may follow suit.
Dubai in March tapped IBM to help it put all government licensing processes and contracts on blockchain systems to increase the ease of doing business there.
In the journey from field to store, or supplier warehouse to manufacturer, blockchain can carry data along each step of the way, with time stamps, location and other information.
“If I want to buy fair-trade coffee, coffee that is labeled as such in a bag from Brazil, I can now trace where it’s traveled through the system and see that it actually hasn’t been mixed up with unfair trade,” said Casey, the MIT expert.
“There is a company called Everledger that is doing it for diamonds to prove the provenance of diamonds to ensure that they are not blood diamonds,” he added, referring to gems from a war zone and used to finance violence.
Use of blockchain is also roiling banking and accounting firms.
“The Big Four accounting firms are some of the most aggressively exploring cases for this because they are going to have their auditing business turned upside down at some point,” Casey said.