Technology / Blocking out the future of transactions
Blocking out the future of transactions
17 December 2017
Using the code behind Bitcoin transactions in other aspects of everyday life has been an aspiration for some time, but blockchain enthusiasts say the technology is already transforming the way we store and deal with data and pay for things in the real world.
Originally created as a perfect bookkeeping system for Bitcoin, blockchain is a distributed digital ledger that records and tracks Bitcoin transactions. Once a transaction has been accepted, verified and approved, it’s then encrypted into a special code called a hash – a unigue digital fingerprint of that piece of information.
Transactions, therefore, become not only easy to trace, but also impossible to tamper with, as any attempt to modify or change the recorded information means the unique hash will also change and so won’t match the original.
The simplicity, transparency and applicability of this digital record keeping technology have made blockchain go far beyond its original purpose, and are changing the way payments are made. Eddy Travia, a pioneer investor in blockchain technology and a CEO of the first London-listed blockchain investment firm Coinsilium, sees a bright future and potential in the technology.
“If only two or three years ago we were talking about potential blockchain applications, now we are actively using this technology in different spheres. So blockchain technology has already as an infrastructure technology, sort of a back-office system. For instance, there is a company in the US which has created a blockchain technology for the mortgage industry. So obviously when you apply for a loan in a bank, they may be using it to track and store all your documents, but you wouldn’t necessarily feel it in any way.”
In fact, says Travia, almost every major bank – either on its own or in a consortium such as R3 CEV – is working on developing this technology. Santander believes the technology is fast, minimises errors and could save banks up to $20billion dollars annually by 2022. Other institutions, such as Nasdaq, have started to use blockchain in their trading applications, such as in smart contracts.
“A simple smart contract works similarly to a vending machine on the blockchain – the input could be the gold price and the output could be a payment to someone. For example, if you have a derivative contract based on the gold price and you say that party A will receive that amount of cash if a price, for instance, reaches a certain level, then the smart contract will replicate or be programmed to perform that transaction,” says Travia.
Blockchain also opens up a whole new market of micro- or nano-payments – transactions involving very small amounts of money. Travia cites the example of SatoshiPay, a London-based company currently using the technology to build nano-payment platforms. “It’s a great way to monetise content – for example, an advertiser approaches you with a survey and, if you fill it out, they will send you a very small amount of money. Sort of like pay-per-view – you will receive a payment on a very simple mobile wallet. It’s a great new tool for advertisers – you are paying people pay per view. With Visa or MasterCard it doesn’t make sense, but with nano-payments it can work,” explains Travia.
Other sectors, such as insurance, have started to use the technology. “There is a company in London called Everledger which uses blockchain to track diamonds from the mines all the way until it reaches the retailer,” says Travia. “It’s a way to prevent fraud and a great method to track diamonds in a unique type of application, that’s working quite well.”
In many countries, blockchain has picked up governmental support along the way. In the UK, for instance, scientific advisers have encouraged the government to use blockchain technology. “In Dubai, the government has famously announced that they want to move all their government documents onto blockchain,” Travia points out. “They are financing some companies we have invested in and are working on government projects with them.”
“If only two or three years ago we were talking about potential blockchain applications, now we are actively using this technology in different spheres” – Eddy Travia, Coinsilium
One of the main problems, says Travia, is lack of talent – a shortage of IT specialists who would create these applications and investors who would support them. “You know that when you open your iTunes or your Apple applications, that Apple is not building those applications,” he says. “It’s thousands of developers around the world that are building them. You need the same with blockchain – you need people to understand it first and built those blockchain applications. Then it will not be difficult to use.”
Another thing holding blockchain technology back, believes Travia, is the lack of a universal standard that all blockchain systems would use. “Standards are helpful for when you deal with new technology. A very easy analogy is mobile telecoms – you wouldn’t be able to use another network, or go to abroad and use your phone there, because they would all be operating on different standards. The same thing applies to blockchain: if you want it to become mainstream, you need it to be standardised.”
Travia is sure that blockchain technology is on the right track, though, and that it’s only a matter of time before it will firmly integrate into our everyday lives.
So the question is, are we there yet? How soon will the technology become mainstream? Travia thinks it will take at least another five to 10 years for the technology to be properly developed. He thinks that technical problems such as speed – critics say that blockchain transactions can take longer than normal bank ones – can be resolved easily. But the real stumbling blocks are not with the technology itself, but the people surrounding it.
This article was published in our Business Reporter Online: Future of Payments.