As I watched the commercial during an NFL playoff game my mouth dropped. I'd been reading about it for months. But here it was coming at me in primetime television and I had to do a double take.
Up until now it was mostly theoretical and abstract for me. But now the potential global impact of this new technology was in front of my eyes. And apparently, IBM has beaten everyone else to the punch by launching a nationwide commercial.
If you're unfamiliar with blockchain technology, keep reading. The fact is, this new technology has the potential to revolutionize every industry on the planet.
Imagine for a moment the ability to conduct business quicker, safer, more secure. What used to take hours, or even days, can now take just minutes. Imagine what used to require several middlemen is now a safe, secure transaction between just two people: a buyer and seller (or sender and receiver). With fewer middlemen to drive up costs and make mistakes, global business has the potential to become more efficient and cheaper.
In the current system, if you wanted to wire money to a relative overseas, you go to the bank (during banking hours), and use the banks wire service to send the funds. It will cost you a nice little fee, and take a couple of days for the funds to be sent as the bank verifies the funds transfer. This current system, essentially, makes you pay for the use of a middle man to transfer your funds. Additionally, you are trusting a third party to act in your best interest rather than conducting business solely between you and your relative. And really, you are just paying (and waiting) for a bank employee to make an entry in a ledger.
WHAT IS BLOCKCHAIN?
The easiest way to describe blockchain is this: it is a decentralized ledger where transaction contracts are created and stored instantly and securely.
Basically, instead of relying on a bank to move your money, you could do it yourself, without the middle man. If you wanted to wire $1,000 to a relative in Europe, you could do so using blockchain in a matter of seconds, with little to no cost. And there's no third party to make mistakes or drive up costs.
Now imagine being able to conduct such business 24 hours a day, 7 days a week. Do you need to make that tuition payment before the deadline, which is 2 days from now? No problem. Using blockchain you could, potentially, make the payment in minutes with no concern of late fees or errors by a third party middle man. An article at The Motley Fool explains several of the benefits blockchain would provide over our current system:
“It's decentralized. That's a fancy way of saying that there's no central hub where transaction data is stored. Instead, servers and hard drives all over the world hold bits and pieces of these blocks of data [...] Second, removing the middleman from the equation and working around the traditional banking system should allow for smaller transaction fees [...] Third, and maybe most important, blockchain offers the potential to process transactions considerably faster. Whereas banks are often closed on the weekend, and operate during traditional hours, validation of transactions on a blockchain occur 24 hours a day, seven days a week. Some blockchain developers have suggested that their networks can validate transactions in a few seconds, or perhaps instantly. That would be a big improvement over the current wait time for cross-border payments.”
One of the most interesting aspects to blockchain technology is that the contract created is unalterable. Once the contract is established it becomes an encrypted “chain” that neither party can alter. This contract becomes very easy to verify for a buyer and seller, or a sender and receiver. Some of the implications of how blockchain technology could be used are illustrated in the IBM commercial that aired during NFL playoff games this year.
Blockchain could allow us to follow the path of a tomato from garden, to factory, to jar, to store shelf, to table. This answers the question of which country (or state) the tomato came from, if it was in a factor with other vegetables (or nuts, or meat), if any chemicals were used on the tomato, and more. The “organic” food industry could see a shakeup if blockchain is used.
Or, we can trace the origins of a diamond. What country did it come from? Was it mined in a fair trade mine? Was child labor used? Is this a “blood diamond”? All of those questions will be clearly answered for diamond retailers so they can quickly (and honestly) answer them for their customers.
But the global commercial uses for blockchain don't stop there. As the previously cited article reports, many companies across the United States are already investigating how blockchain can help their business:
“Ethereum [...] currently has 200 organizations testing a version of its blockchain technology. Yes, traditional banks are testing out Ethereum's blockchain, but so are companies in the technology and energy industries. Integrated oil and gas giant BP envisions using a version of Ethereum's blockchain to aid it with energy futures trading. If these transactions were to settle faster, BP could presumably improve its margin. Blockchain may also offer the ability to replace state ID's that we carry in our wallets, or perhaps help tech companies such as Cisco Systems manage their Internet of Things network. Right now, Cisco is working on its own proprietary blockchain technology that can identify different connected devices, monitor the activity of those devices, and determine how trustworthy those devices are. It has the potential to continually 'learn' and assess which devices are trustworthy, and if they should be added to a network.”
Clearly this technology has worldwide implications.
I don't think blockchain technology is going away. In a world where business is 24 hours a day 7 days a week, a technology that allows companies to do business faster, more efficiently, and more securely has a seat at the table. What remains to be seen is how diverse blockchain can be. Which industries, which market sectors can take full advantage of blockchain, and how quickly? These are the questions that most need answers.
As the technology develops and companies customize it for their specific needs, blockchain will change the face of business world wide. The potential for faster, more cost-effective business processes is promising. We would do well to learn more about blockchain and how it can enhance our businesses.