Over the past few years it has become relatively apparent that bitcoin is not going away. Though rumors of its death are always greatly exaggerated, for a few years it seemed there was a real chance the whole idea may never catch on. The unshakeable association with illicit activities, wallet thefts, exchange heists and other bad press made bitcoin extremely unpalatable among those in society who consider themselves to be professional or upstanding, yet the technology behind bitcoin remains foolproof and unhacked. Today bitcoin enjoys an $11.5 billion dollar market capitalization, making it bigger than the vast majority of all companies listed on the NASDAQ.
So, in the face of its wild-west reputation and intimidating complexity, how does bitcoin continue to succeed and grow in popularity? The answer lies in the engine under the hood: the blockchain. As a reader of this site, you are likely to be already familiar with the idea of decentralized networks and public ledgers, mining and the reward system for adding new blocks to the chain. This original idea by Satoshi Nakamoto has been so tamper resistant over the years that miners collectively pour millions of dollars into their rigs annually, with the daily amount of electricity used to mine bitcoin rivaling that used by small countries.
The decentralized nature of bitcoin, fueled by blockchain technology, is now starting to appeal to large corporations, governments and other entities looking for a more efficient and secure way to perform transactions and maintain records or databases. In short, Satoshi managed to create not just the first viable digital currency, but a radical new approach to solving problems inherent in conventional methods of recordkeeping, as well.
Executives at financial institutions like Visa and MasterCard are finding the non-malleable, non-corruptible mechanism of blockchain consensus to be attractive and are currently throwing millions of dollars into the development of blockchain research and technology. Over 50 major financial institutions have publicized the fact that they are searching for applications utilizing the blockchain to save money and improve routine operations via shortening transaction, settlement and payment times.
In late October, rating agency Standard & Poor’s announced that in addition to simplifying and quickening backend processes in the financial industry, they believe the potential of the blockchain includes acting as a trustworthy alternative type of ledger system whose widespread usage should be considered. The globally famous financial intelligence company is considering making changes to credit ratings of major financial institutions if blockchain technology can offer a transformational effect on classic financial business models.
Different branches of various governments around the globe are exploring the potential of the blockchain to replace or streamline a wide array of bureaucratic processes, from recordkeeping to fraud reduction to saving money on clerical costs. Earlier in 2016, the UK Government Office for Science published recommendations to be taken on behalf of the country’s government concerning the implementation of blockchain technology. They recognized the fact that a successful transition would require a magnificently coordinated effort from all governmental departments and mapped out leadership of the project, as well as a plan for successful integration with standing processes. It also included five use-case studies which attempt to demonstrate:
- protection of systems and infrastructure from cyber attacks
- reduction of operational costs
- improvement in record keeping of social service benefits and eligibility
- improvement in traceability of expenditures, and
- reduction of tax fraud
The United States Postal Service is also looking into the possibility of using blockchain technology to improve their own operations, specifying potential applications such as the improvement of identity services, transportation, logistics and their own financial services. Somewhat like bitcoin, “postcoin” would be rewarded to miners who successfully add blocks to the chain of postal data, which would then be redeemable at a local post office for a fixed amount of fiat currency.
One proposed method of countering the spiraling costs of healthcare administration is the use of the blockchain to reliably centralize the storage of medical records, claims histories, service authorizations and member eligibility status, among many other potentially sensitive items. This need is particularly present in the United States where the medical insurance industry is highly fragmented and non-standardized. Because coordination of benefit payments through multiple plans and providers is often a headache-inducing problem for health insurers and patients alike, a new method of storing and accessing healthcare data is highly desirous.
Earlier this year, the U.S. Department of Health and Human Services announced a competition for the public to submit original whitepapers detailing possible use case scenarios of blockchain technology in the healthcare sector, garnering much interest and yielding some highly original and fascinating results. Papers winning cash and other prizes highlighted subjects like privacy, security, improved information exchange, claims administration and storage of sensitive patient data. As an example, the first winning paper detailed a blockchain-based method of storage and analysis of healthcare data with total privacy; access only being granted through a permissioned blockchain via smart contracts and digital identities.
As the blockchain becomes more of an integral and accepted part of business operations, the possible applications of its utility will no doubt be explored in other industries, such as entertainment and media. The concept of micropayments (made possible via cryptocurrencies) would be useful for websites and bloggers that want to charge their readers a fee per-article. Internet titans Facebook and Google could be among the first to adopt the blockchain as a useful way of managing their extremely large business networks. While attempting to solve the problem of the “double-spend,” Satoshi stumbled onto a technology that offers a far broader range of potential applications than simply being the engine behind bitcoin, in that any industry which relies upon data security, integrity or transmission for its profits may very well consider employing the technology of the blockchain.