More than just Bitcoin: why blockchains affect everyone
Behind Bitcoin and other cryptocurrencies, you’ll find what may be the most momentous invention since the Internet: the blockchain. Banks are fascinated by it, experimenting with new applications. Here, we look at the sectors that are particularly excited about blockchain technology.
The blockchain has some radical advantages over current forms of digital communication:
- The ‘distributed ledger’ concept prevents documents being sent twice or payments being made twice.
- In addition, it is always clear where the original document (for example an electronic ballot paper) is at any given time. This creates greater transparency.
- But because the blockchain uses up-to-the-minute cryptographic encryption techniques, it also ensures security and anonymity.
- And finally, ‘hashing’ (also a form of encryption) ensures that saved documents and transactions cannot be amended retrospectively.
These advantages are clearly particularly attractive to the finance industry. But there are promising business models and startups appearing in other areas of the economy as well. Here we look at the sectors that could be next to profit from the blockchain revolution.
Security and defence
One example is the startup Chronicled, which can fit wine or luxury items with microchips which allow them to be displayed in a blockchain. This means that counterfeits that have infiltrated the supply chain can be sniffed out. Experts estimate that counterfeits account for around 70% of the wine imported to China. Once the wine traders’ bottles are fitted with microchips, counterfeiters cannot continue selling their products without the manufacturer and merchant becoming aware.
But just because all of the transactions in the blockchain conform to the rules of the code, it doesn’t mean that they’re all legal. This fact inspired the company Elliptic to develop a new business model. Their software scans the millions of transactions in the Bitcoin blockchain for suspicious website links. Identifying illegal activity assists law enforcement authorities and financial institutions.
There is even a blockchain company taking on the notorious distributed denial of service attack (DDoS) which can take down whole websites – Nebulis. This company has developed a new type of domain registry based on the protocol of the Ethereum blockchain and the InterPlanetary File System. In contrast to current forms of domain name registration, the Nebulis registry is not organised by major companies. Rather, it functions in a decentralised way. This means that websites are not stored on a few major servers, but on the computers of numerous users. This makes successful DDoS attacks on name servers less likely, because they would have to artificially overload hundreds of computers at the same time.
One of the best-known companies in the field of cybersecurity is Guardtime. In February 2017, this Tallinn-based software company was awarded a contract to bring NATO’s ‘cyber range’ up to date by the Estonian government. ‘Cyber range’ is the IT industry’s term for a virtual test environment, similar to a military training ground or shooting range. Training in interception, defence and tactics is carried out here, while new infrastructures are developed to increase security on the Internet. Martin Ruubel, Director of Guardtime and Vice Chair of the European Organisation for Cybersecurity (ECSO) will be speaking at the Gottlieb Duttweiler Institute’s Blockchain Valley Conference on 13 June 2017.
The organisation Follow My Vote is developing a solution for online voting based on the blockchain. The US company believes its software can introduce greater security, transparency and efficiency to elections.
The non-profit organisation Democracy Earth Foundation also aims to democratise governments and organisations using blockchain. Democracy Earth Foundation’s app is called Sovereign, and it simplifies digital voting in line with the principles of direct democracy. The aim is to transform representative democracy, the current standard form of government, into a direct democracy solution.
The Free Republic of Liberland project also shows how far the idea of digitally organising countries and governments has reached. This unrecognised pseudo-state in the no man’s land between Serbia and Croatia aims to organise and govern itself using blockchains. There would be no taxes, no representative government and as few laws as possible.
The Bitnation project has similar ambitions, but without a geographic base. The first stateless and digital nation in the world was a partner to Estonia’s e-governance initiative. At the Blockchain Valley Conference, the former head of IT at the Estonian Ministry of Economic Affairs and Communications, Aet Rahe, will report on her work on ‘e-Estonia’.
Blockchain applications in the healthcare sector only make sense when patient data is available electronically. Switzerland has taken a big step toward digitalisation of healthcare on 15 April 2017. This was when the federal law on electronic patient records came into effect. Within a maximum of five years, all healthcare facilities such as hospitals and nursing homes will have to be equipped to work with digital patient records.
As soon as electronic patient records are established, the path to blockchain-based data storage systems for the healthcare sector becomes much shorter. In a 2016 report, IBM found that 16% of the 200 healthcare sector executives surveyed worldwide believed that they will be able to offer a commercial blockchain solution in their companies in 2017.
Some countries are already ahead of Switzerland in the blockchain healthcare system concept. Estonia, the ‘blockchain nation’, began storing its citizens’ healthcare data in a blockchain last year.
Even the US has jumped on the bandwagon: in collaboration with IBM Watson Health, the US Food and Drug Administration is aiming to analyse how blockchain technology can be applied to the healthcare sector.
The UK is also keeping an eye on current developments, as an interview with Dr Stewart Southey, consultant with the country’s National Health Service, demonstrates. He showed particular interest in MedRec, a research project of the Massachusetts Institute of Technology (MIT). Rather than storing health data in a new system, it instead links up with existing data storage programs in hospitals and associations. This means there is no obligation to feed large volumes of information into new programs in order to work with blockchains.
Transactions or changes to data in the blockchain would have to be verified by ‘miners’. In a bitcoin-based blockchain, they would receive bitcoins in exchange for this service. Because the MedRec version doesn’t use digital currency, the miners can’t be paid for their work with digital funds. Instead, they receive large volumes of anonymised medical data for their own academic purposes.
Healthcoin has a somewhat less anonymous approach. This startup has taken aim at the public health scourge of diabetes and introduced a reward system based on the blockchain. Healthcoin rewards healthy habits with digital points. These can be used to offset health costs or reduce insurance charges.