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Because this is blockchain, everyone involved looks at the same contract; no one can change it without the permission of most others.
Here’s an example: When a truck picks up finished video game consoles from a factory in, say, China, the shipping company scans each box. Those are added to the blockchain, triggering a release of funds from the video game company’s bank account. No one has to invoice and chase a payment.
“You can marry up the delivery and payment of services,” Brody said.
It can go beyond getting paid, too. Each worker on the assembly line could scan their identification card, which is then verified by multiple sources such as government agencies and third-party auditors, ensuring the workers are not underage or overworked. And because it’s a blockchain, no one can alter the record later.
Some have discussed blockchain as a possible tool to help prevent sex trafficking and other scourges. And there are other uses for it that may become big parts of our lives.
Samantha Lee / Business Insider
Smart contracts in healthcare could do things such as trigger an insurance payment to a doctor when a patient undergoes a CT scan.
A blockchain could also be a secure place to store electronic medical records.
It would detail all patient-doctor communication, illness and treatment information, vaccination records, medical bills etc. Every subsequent doctor visit or treatment would be added to the blockchain, including those in different cities and countries, creating a complete, historical record of the patient’s health.
In this case, the blockchain is private, and only certain participants would have the encryption keys to see the record.
Music and media
Musicians may wish there had been blockchain when Napster undermined music sales around the turn of the century through file-sharing.
Blockchain could prevent music piracy Flickr/Kelsey
Now some are thinking blockchain could prevent piracy and help boost sales. Artists could provide their music directly off a ledger, and smart contracts might ensure the right people are paid and only those with rights play the tracks.
A similar model could help fund news outlets and other media organizations.
Some companies’ whole job is tracking down property records. Blockchain could change that.
If property deeds were on a blockchain, the other participants (known as “network nodes”) that validate the transaction could be real-estate agents, financing banks, and a land registry authority.
Once the transaction is validated, it is added to the blockchain, and the updated state of the blockchain is broadcast to the participants in real time. As the blockchain maintains the history of all transactions, the entire history of the property and its owners is on the blockchain.
Trading and banking
The Australian Securities Exchange — ASX — plans to decide by mid-2017 if it will replace its post-trade clearing and settlement system with a blockchain version. This could be a turning point for blockchain and potentially a catalyst for widespread adoption.
Bank of England Jim Edwards
Central bankers are also getting in on the action. The Bank of England and the People’s Bank of China are discussing issuing their national currencies — the pound and the renminbi, respectively — on blockchain. If successful, the technology would make the currencies more traceable, allowing the banks to track them through the financial system in real time.
Right now, this use of blockchain is limited to discussion and research papers, but if implemented, other central banks are likely to follow suit. The US Federal Reserve is closely following developments as well, with Fed Gov. Lael Brainard in charge of keeping an eye on the new technology.
It’s also rumored that other items such as diamonds, art, and food could be put on blockchain so the entire history of the items could be traced.
Buzz vs. reality
There are over 120 blockchain projects spanning a variety of industries, and the annual budget for blockchain initiatives in 2016 is estimated to be $1 billion.
In financial services, Goldman Sachs, JPMorgan Chase, and Bank of America are among the big names that have partnered with R3, a startup trying to bring blockchain technology to the finance world.
But if blockchain is going to work, it needs an industrywide standard. For the first bank to adopt this digital system and overhaul existing infrastructure, it could mean a risky and expensive investment, and that bank would have to hope others follow suit. No one wants to be the first to test that theory.
That’s why this is one of the few cutting-edge technologies that is generating a lot of talk but not a lot of action among banks. While they are dabbling in the technology, attending conferences and partnering with R3, no bank is taking the lead and going from proofs of concept to using it in the real world.
“To get the true value, you need the network effect,” said Graham Warner, head of global transaction banking product development in the Americas at Deutsche Bank. The more people and companies use blockchain, the more valuable the technology becomes.
For all its promise, some major impediments could prevent blockchain’s widespread deployment, including regulation, cost, and security issues.
Implementing and standardizing blockchain could cost in the billions of dollars, and it would mean an overhaul of legacy systems that people are used to and understand. Today’s technology works, and replacing it with something unproven is seen as an expensive risk.
Blockchain technology would also potentially mean a huge number of job losses, especially in middle- and back-office functions. Banks would have to get the remaining employees up to speed on the new technology, and using it would initially be a trial-and-error process.
Security and privacy issues
In August, hackers stole $72 million worth of bitcoin from accounts at the Hong Kong cryptocurrency exchange Bitfinex. And in June, hackers stole $55 million worth of ether, a bitcoin rival. The nonprofit that runs ether, Ethereum Foundation, just rolled back the chain. It’s as if the hack never took place, and business returned to normal. But that worries purists.
The Ethereum hack — and the response to it — led Accenture to create an “editable blockchain model,” to “resolve human errors, accommodate legal and regulatory requirements, and address mischief and other issues,” according to a news release.
Blockchain enthusiasts say this threatens the very nature of the blockchain itself. One of the fundamental benefits of blockchain technology is its immutability — the blockchain represents a “golden record” of transactions, a complete, historical record that technically cannot be interfered with or undone.
But there “isn’t one blockchain to rule them all,” Warner said. “It will be an evolutionary, Darwinian process” to figure out which version of the blockchain applies to which use case.
When McNamara learned about blockchain, she said she was “a little bit of a skeptic. But I’ve been proven wrong.”
The ecosystem is evolving, she said, and people involved, whether they’re activists or bankers, are getting together and talking about “shared values and pain points.”
While some big players like the ASX may be using some form of blockchain as early as next year, some issues are holding blockchain back.
Different versions of blockchain are in development, and there’s little agreement on what’s the best or purest version to deploy. And dozens of startups are working on their own takes on blockchain. Innovation is happening, but all the competing ideas makes big companies cautious to commit to any one type.
But most proponents think everything will be worked out in due time, and that in the next few years, blockchain and its smart contracts would improve our lives, even if it operates quietly in the background, invisible to most people.