Blockchain is inevitably associated with cryptocurrencies like Bitcoin, especially as the technology continues to grow in popularity.
Recent ransomware attacks have attracted even more attention to the popular cryptocurrency as hackers demand payment in Bitcoin, pushing blockchain, the technology behind it, to centre stage.
Blockchain enables Bitcoin transactions to be secured without a trusted intermediary or a governing body supervising, such as the Australian Securities and Investments Commission or a bank.
Free from watchful eyes, Bitcoin has rapidly gained popularity as a means of paying for illegal services and goods on the dark web.
Despite this, the uses of Bitcoin is gradually becoming more legitimate and financial bodies and businesses are recognising its potential.
A study by Santander found that blockchain technologies could reduce banks’ infrastructure costs by $15-20 billion a year by 2020. Constantly looking for ways to reduce costs, banks and other financial institutions are drawn to the potentially huge savings blockchain technology holds.
The savings blockchain’s automation and structure capabilities hold have made it an attractive technology to many Australian banks, such as CBA, ANZ, NAB and Westpac, who are already working with US start-up Ripple to allow real-time money transfers using blockchain.
While the potential application of blockchain sounds impressive, it’s important to understand the technology itself before considering its other potential applications.
Blockchain isn’t as simple as people often think.
Rather than being a single entity, it is available in public or private forms and the distinctions between the two are critical to understanding their applications.
All data stored on a public blockchain can be accessed by anyone, while private blockchains are closed and only allow individuals or businesses with permission to see the data.
The public variety of blockchain is commonly associated with cryptocurrencies, while private blockchains are more often used by businesses due to their control over data access.
Anonymity and accessibility are characteristics commonly associated with blockchain, however, these only apply to public blockchains. They enable individuals to come together, conduct transactions and then disperse again – without ever knowing the identity of each counterparty.
For certain transactions, anonymity and accessibility will continue to be attractive qualities. Unique applications of these include:
Regardless of these appealing qualities, the majority of future blockchains are likely to be of the private variety. It’s necessary to know the individuals involved for most business use cases and applications.
This requires a central authority or committee to establish an identity and authentication service to verify the users. This would make the blockchain ‘permissioned’, and appropriate for business use.
Both public and private blockchains present a wealth of opportunities to businesses and consumers.
By introducing an easily accessible, secure, efficient and tamper-proof peer-to-peer platform, blockchain will fundamentally alter the way we transact and economically empower consumers. It’s evident that blockchain signals the start of a digital turning point as it helps to redefine the ways that value and opportunity are created and distributed.
In the future we may even see Internet of Things devices at home, such as heating systems or entertainment systems, using a private blockchain to make decisions.
It’s likely that an increasing number of businesses will also begin to use private blockchains to complete deals with their suppliers and partners.
These could provide selective data to a public blockchain that is used to collect economic data (supply chain usage) and consumer data (entertainment systems).
What’s clear is that blockchain has the potential to revolutionise far more than just the financial sector.
It’s important that the industries set to benefit most embrace the technology soon to stay ahead of their competition.
Blockchain is more than a buzzword thrown around in banking circles; it’s the future of distributed security.
Article by Graeme Pyper, regional director, Australia and New Zealand at Gemalto