While finance is one of the most talked about use cases for the blockchain, it is certainly not the only one. There are plenty of other industries that are ripe for disruption for this new technology, including identity.
Matthew Roszak, Founding Partner of Tally Capital, said: “Think about the issues involved with signatures, voting registration, birth certificates, passports and the like. Being able to create a permissioned identity stack for consumers and businesses with unprecedented levels of security, privacy and control can be very powerful.”
Consider the following scenario. You walk up to a bar, but the bouncer stops you because you look like you may be under 21. He asks to see your identification. Currently, you show him your license, which has your name, age, eye color, height, address, and an identification number on it. Now the bouncer has a considerable amount of information about you despite the fact he only needs to know if you are 21 years old. But take it a step farther, how is the bouncer 100 percent certain that the license is legitimate?
With the blockchain, you gain access to two things. On one hand, you could select only the pertinent information required for that transaction—and entering a bar through a bouncer is a transaction. In this case: name, picture, and age. On the other hand, the bouncer can rest easy knowing that once something is hashed into the blockchain, it can’t be changed; new information can only be appended and there is a transparent record of all changes.
Counterfeit and stolen goods are a significant problem of global commerce. According to the Economist, "estimates for the total value of fakes sold worldwide each year go as high as $1.8 trillion."
This results in tremendous losses to product owners without even taking into consideration the deceptive loss for consumers. Further, the resale of stolen goods results in losses for consumers and insurance companies. Every year, the insurance business has to pay out approximately $150 million in relation to jewelry theft.
The problem lies in the inability to truly track real from fake and proper provenance or ownership history. Due to historical and legacy reasons, many industries still use paper to prove whether something is real or whether a particular person actually owns an asset. Paper can be altered. Paper can be lost. When purchasing a diamond ring at a jeweler, it is easy for the corresponding certificate to say one thing, but for the ring to be something entirely different.
This is a problem that has been hard to solve until the blockchain came along.
Needham & Company, an investment bank and asset management firm, has released an expansive document, The Blockchain Report: Welcome to the Internet of Value. The report explains what the blockchain is, how it can be implemented, applications and growth events, investment opportunities, and many of the top companies in the space.
The fundamental point presented in the document is that, "in the same way that the Internet enabled permissionless innovation for all things regarding information exchange, so too do public blockchains enable permissionless innovation for all things regarding value exchange." Because a public blockchain doesn't have any central authority, its ability to act as a completely open protocol for the transfer of value is comparable to how information was transferred once TCP/IP went mainstream.
But value is not just currency, as many are inclined to propose when discussing bitcoin. Multiple new applications have been developed targeting all aspects of the financial sector as well as cybersecurity. Due to limitations in Bitcoin, new technologies for public blockchains have emerged that compete with and complement the Bitcoin blockchain:
Alternative blockchains: This is an entirely independent chain, such as Ethereum, and also includes private, permissioned or federated blockchains. The writers believe it is unlikely that another open payment network will supplant bitcoin, but recognize that there could be use cases where an alternative blockchain is sufficient.
Colored coins: These utilize the Bitcoin blockchain, but represent assets that are not currency. These are fractions of bitcoin (satoshis) that can carry value, such as shares of stock, but remain limited to the functionality of the Bitcoin blockchain.
Sidechains: A two-way communication connection between the Bitcoin blockchain that utilizes the network effect and security of Bitcoin, but uses different scripting languages and capabilities of an alternative blockchain.
Bitcoin has seen a significant increase in usage. Daily unique addresses used have increased from 67,476 in 2013 to 226,422 in 2015. The average number of daily transactions has increased from 53,805 in 2013 to 112,275 in 2015. The estimated total transaction volume in 2015 is approximately $195 billion.
“Distributed ledgers, or blockchains, have the potential to dramatically reshape the capital markets industry, with significant impact on business models, reductions in risk and savings of cost and capital.” So reads Beyond the Hype: Blockchains in Capital Markets, a report just released by McKinsey & Company that focuses on ways the blockchain will contribute to finance.
The bottom line: more black, less red. How soon can this happen?
In the report, McKinsey, a multinational management consulting firm, identifies four steps to the adoption of blockchain technology in capital markets:
Single-enterprise adoption across legal entities.
Adoption by a small subset of banks as an upgrade to manual processes.
Conversion of inter-dealer settlements.
Large-scale adoption across buyers and sellers in public markets.
The disruptive nature of blockchain technology is easy for people to conceptualize in the field of finance. T+3 interferes in traders being able to maximize earnings – payments shouldn’t take days to process while an email can be sent in seconds. As the first use case in many to come, finance is a perfect use for the blockchain.
But a trend toward new use cases is emerging, and one industry that is ripe for optimization and increased efficiency using this technology is healthcare.
Consider all the sensitive information that is associated with health: identity, diseases, treatments, payment, etc. An individual’s health is one of the most private things they have, yet time and again, data breaches release considerable amounts of information about an individual’s health onto the Web.