The Distributed Ledger newsletter is almost two years old and this edition marks issue number 100.
In issue one, published on November 20, 2015, I offered simple, high-level, introductory answers to the question “What is the blockchain?” Nearly two years later, I’ll highlight some recent news that show just how far distributed ledger technology has come as it is increasingly adopted by high-profile actors in business, technology and government.
The First Blockchain
It makes sense to start this retrospective with cryptocurrencies, the first application of modern blockchain technology to emerge. The “bad news” that in the past used to wreak havoc in cryptocurrency markets doesn’t seem to do the same now. For example, the recent government clampdown on Chinese Bitcoin exchanges only caused a temporary dip in bitcoin’s price, which quickly recovered.
Only a few weeks after JPMorgan Chase CEO Jamie Dimon dismissed Bitcoin as a fraud, credible reports revealed that Goldman Sachs is considering a new trading operation dedicated to bitcoin and other digital currencies. In view of Goldman Sachs’s prestige, this move could boost bitcoin’s standing among investors, and Goldman would be well positioned to capitalize on further developments in the cryptocurrency sector.
Meanwhile, Quorum, developed by J.P. Morgan, is described as an enterprise-focused version of Ethereum, especially suitable for applications requiring the high-speed and high-throughput processing of private transactions within a permissioned group of known participants. In October, Zcash announced the integration of its “zero knowledge” technology on Quorum, which is likely to increase the appeal of J.P. Morgan’s permissioned business blockchain to security-conscious enterprises.
Growth in Enterprise
The previous issue of The Distributed Ledger addresses Oracle’s journey to become the latest top-level corporate entrant in enterprise blockchains, and argues that Oracle’s embrace of distributed ledger technology could be even more significant than IBM’s and Microsoft’s. The company recently joined Hyperledger, an open-source collaborative effort managed by the Linux Foundation, to advance cross-industry blockchain technologies and introduced the Oracle Blockchain Cloud Service.
“We’re introducing blockchain, both as a platform-as-a-service and as a way to do secure transactions: intercompany accounting transactions, procurement transactions and loyalty programs that span multiple providers in a loyalty network, using blockchain to handle the secure hyperledger,” said Thomas Kurian, president of product development at Oracle, at the OracleOpenWorld conference this month.
These examples show that distributed ledger technology is making steady progress not only in its original application area of cryptocurrency, but also in the enterprise world, with adoption by large companies and through mission-critical applications to enterprise needs such as accounting and supply chain management.
The State of Blockchain Technology
Distributed ledger technology is also advancing in the government sector. According to an IBM survey, 9 out of 10 governmental organizations plan to invest in blockchains for use in financial transaction management, asset management, contract management and regulatory compliance by 2018.
The United Arab Emirates (UAE), and particularly Dubai, remain at the forefront of blockchain adoption for government services. Dubai wants to go completely paperless by 2020 and plans to do so by leveraging distributed ledgers. As one of many first steps, the Dubai Land Department is developing a system that will record all local real estate contracts on a blockchain.
In Dubai, financial operators and blockchain startups are also planning to develop and implement “emCash,” an encrypted digital currency that people can use to pay for various government and non-government services.
Estonia, considered a leader in e-government powered by advanced information technology, is running a very successful e-residency program, introduced in 2014. The program manager, who is persuaded that in the long term “governments may have no option but to (literally) accept cryptocurrencies,” believes that Estonia should start issuing crypto tokens to e-residents, which could lead to a government-backed cryptocurrency dubbed “Estcoin.”
Sweden’s central bank, the Riksbank, is considering whether the country should introduce a purely digital form of government-backed money, perhaps using distributed ledgers. The central banks of Singapore, Papua New Guinea, Canada and others are considering similar moves. A recent research paper issued by the Bank of Canada, which considers a possible Bitcoin standard similar to the gold standard, is especially interesting. Even China’s central bank is cautiously testing a digital currency.
The United Nations (UN) wants to develop scalable identity systems by 2020. The UN’s 2017 ID2020 Summit, entitled “Platform for Change,” launched the ID2020 Alliance, a consortium of public and private organizations that want to develop globally recognized digital identity systems, not only for the online world but also for the “real” world, with a $1 million initial investment from Accenture. At the 2017 Summit, Accenture announced the development of a prototype blockchain-based identity system, which runs on Azure, Microsoft’s cloud computing system.
Advancing Smart Contracts
It’s worth noting that next-generation decentralized autonomous organizations (DAOs) — often crowdfunded through controversial initial coin offerings (ICOs) and Ethereum-based token sales — are prototyping innovative applications of Ethereum smart contracts that could eventually be adopted by mainstream financial operators and governments.
Smart contracts are bringing disruptive change not only to the information technology sector but also to distributed hardware systems such as the Internet of Things (IoT) — the upcoming network of billions of connected devices (from self-driving cars to household appliances), wearable medical devices, environmental and medical sensors, industrial robots and other smart devices. It’s worth noting that, in one of the first conceptual outlines of smart contracts, cryptographer Nick Szabo used an IoT scenario: a car lock that operates only if the car has been paid for according to the terms of a contract.
In September, the Trusted IoT Alliance, which includes Bosch, BNY Mellon, Cisco and the Foxconn Group among others, announced its plan to develop a blockchain-enabled, trusted IoT and set the standard for an open-source blockchain protocol to support IoT technology in major industries worldwide. In China, Tencent established a partnership with Intel to develop blockchain technology for IoT applications.
Based on these highlights, we can propose an answer to the question in the title of this issue. The blockchain is a set of transformative technologies, based on or inspired by Bitcoin’s first implementation of a decentralized, cryptographically secured, trustless and tamper-proof distributed ledger, which can be successfully applied to a wide, horizontal range of needs.
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