Nation & World

Blockchain technology: the next big thing

Used for bitcoins, its technology cuts out the middleman

Dreamstime/TNS

The price of bitcoin has more than tripled in the past six months.
Dreamstime/TNS The price of bitcoin has more than tripled in the past six months.
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WASHINGTON — Viagra began life as a treatment for hypertension. Bubble Wrap protected greenhouses before it found a home in packaging. Frisbees came from pie tins. The internet was first invented for military purposes.

Some products and services take time to find their significant use.

So it goes for the core technology underpinning bitcoin, the digital currency that operates on a decentralized swarm of computers. Turns out that the blockchain technology has a bunch of other applications. Masses of them. And a real revolution may yet be unfolding.

Simple and elegant, the blockchain system is finding uses in transferring money, paying artists and musicians, proving identity, and protecting health and academic records.

Some experts see upended apple carts and leapfrog growth in the offing — not unlike what happened in the early days of the internet — in areas of the global economy where trust barriers between customers can be partially overcome through the unique and powerful decentralized information-sharing system known as blockchain.

The impact could be “mind-blowingly big because it affects every aspect of the global economy,” said Michael J. Casey, a senior adviser to MIT Media Lab’s Digital Currency Initiative and co-author of an upcoming book on the implication of blockchain ideas, “The Truth Machine.”

“We have the potential — I’m still going to use a qualifier like that — to get to trillions and trillions of dollars in savings and disruption and refocused activity,” Casey said.

Blockchain technology emerged with the advent of bitcoin in 2009, when a programmer using the pseudonym Satoshi Nakamoto came up with a novel solution using a network of computers to track transactions in a way that is secure, trustworthy, fast and transparent.

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The technology is used in public networks, open to the world or private ones that could connect any type of group such as a manufacturer and its suppliers, a musician and her fans or a real estate market and buyers.

What blockchain does is connect participants to a decentralized record-keeping tool, or ledger, that records all transactions, usually financial, and adds a time stamp and other information. Each block links to another in a continuously growing chain of records.

Every time a transaction occurs, it propagates across the global network so all parties host records, and each computer continuously monitors for anomalies. Transactions are encrypted, verified by all parties, and immutable.

Since the entire chain is continually self-updating, thieves and hackers would have to breach all computers that contain the ledger at one swoop to steal money or alter data.

Advocates say blockchain’s radical charm is that it cuts out the middleman and reduces costs. There is no need for a trusted third party to broker deals. All transactions can be audited.

In the bitcoin world, it means buyer and seller transact directly, with no intermediary, such as a bank or agency, coming in between.

But start-up companies and technologists are finding vast new uses for it.

Some musicians and artists see services based on blockchain technology as a godsend. New companies such as PeerTracks, Mycelia, Ujo Music and Stem all use blockchain technology, working to simplify licensing and liberate musicians from intermediaries — talent agents, record labels and streaming services — all eager to take a cut of revenue.

In other areas, blockchain is seen as a way to streamline logistical processes, cut out third parties and give a parade of entities transparent access to information.

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Global ports are studying distributed ledger technology as a way to kick-start a revolution in the way goods move globally. The technology could consolidate letters of credit, bills of lading and other data into a digital blockchain, giving real time access to customs and port authorities, terminal operators and security departments.

Resiliency of the blockchain system — and the integrity of data — are part of why the technique is making inroads in finance, banking and money transfers.

The technology’s ability to give owners consent over release of information is a key part of an unfolding battle over identity in both developing and developed worlds.

Scientists say they foresee blockchain technology used to protect and hold encrypted personal information — a Social Security number, birth certificate, driver’s license and the like — to be under the control of individuals and not any central agency. Individuals could summon verifiable data for identification purposes at banks or elsewhere, perhaps through a bar code that would appear on a smartphone screen and be read by a scanner.

Experimentation unfolds around the world. Sweden is in advanced testing to clear away burdensome land titling paperwork. By channeling real estate transactions onto digital public ledgers, the system would allow banks, brokers, buyers and sellers all to track progress until closing, vastly accelerating the process.

The Republic of Georgia and Honduras may follow suit.

Dubai in March tapped IBM to help it put all government licensing processes and contracts on blockchain systems to increase the ease of doing business there.

Use of blockchain also is changing banking and accounting firms.

“The Big Four accounting firms are some of the most aggressively exploring cases for this because they are going to have their auditing business turned upside down at some point,” Casey said.

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