We are all now used to sharing information through a decentralized online platform: the internet. But when it comes to transferring value – e.g. money, ownership rights, intellectual property, etc. – we are usually forced to fall back on old-fashioned, centralized institutions or establishments like banks or government agencies. Even online payment methods which have sprung into existence since the birth of the internet – PayPal being the most obvious example – generally require integration with a bank account or credit card to be useful.
Blockchain technology offers the intriguing possibility of eliminating this “middleman”. It does this by filling three important roles – recording transactions, establishing identity and establishing contracts – traditionally carried out by the financial services sector.
This has huge implications because, worldwide, the financial services market is the largest sector of industry by market capitalization. Replacing even a fraction of this with a blockchain system would result in a huge disruption of the financial services industry, but also a massive increase in efficiencies.
The third role, establishing contracts, opens up a treasure trove of opportunities. Apart from a unit of value (like a bitcoin), blockchain can be used to store any kind of digital information, including computer code.
That snippet of code could be programmed to execute whenever certain parties enter their keys, thereby agreeing to a contract. The same code could read from external data feeds — stock prices, weather reports, news headlines, or anything that can be parsed by a computer, really — to create contracts that are automatically filed when certain conditions are met.
These are known as “smart contracts,” and the possibilities for their use are practically endless.
For example, your smart thermostat might communicate energy usage to a smart grid; when a certain number of wattage hours has been reached, another blockchain automatically transfers value from your account to the electric company, effectively automating the meter reader and the billing process.
Or, smart contracts might be put to use in the regulation of intellectual property, controlling how many times a user can access, share, or copy something. It could be used to create fraud-proof voting systems, censorship-resistant information distribution, and much more.
The point is that the potential uses for this technology are vast, and I predict that more and more industries will find ways to put it to good use in the very near future.