Everyone is talking about cryptocurrency. Projects like Bitcoin and Etherium have accumulated hundreds of millions of dollars in value, with a single Bitcoin being worth more than $8,370 at the time of this writing. Every day new companies launch, trying to take advantage of the token economies.
Underlying all of that is blockchain technology, which combines cryptography and decentralized record keeping (called “the public ledger”) to create the first real concept of digital property. Among technologists it’s become The Next Big Thing, and unlike many previous trends, this one actually looks like it might live up to the hype. Just, not for its current use.
The exciting thing about Bitcoin and its many similar cryptocurrency projects is not that they create money out of the digital ether. It’s how they do so. The real revolution: Blockchain is a technology that allows people to create unique, specific assets online.
This may not seem like anything in an era when everything from entertainment to shopping has moved online, but it’s game-changing. One of the universal truths about the internet has always been that anything on a computer can be copied. Whether music, movies or tax forms, an unprotected file on a computer can be duplicated endlessly at no cost whatsoever.
Blockchain stops that. A digital asset backed by blockchain is unique. It can’t be copied or moved. It can’t show up on a torrent site, and no one can get rich by just duplicating the file a thousand times. As a currency, this makes for an interesting project. For many other industries, it can change absolutely everything. Here are just a (very, very) few ways.
Music, Books and Movies
Since the days of Napster, entertainment companies have been trying to keep piracy from destroying their business model. Before the internet, a company could sell a record or movie and know that they had sold a single copy to a single person. Even if it was possible to copy a cassette tape, the effort involved kept that problem small. Mix tapes were a hobby, not a threat to the bottom line.
Then along came the web and all of a sudden a single copy of a song could get halfway around the world in the time it took to reach the first chorus.
Blockchain may put an end to that. In the same way that Bitcoin can make an unreplicable token, the RIAA could sign each digital copy of a single song to a single purchaser. The same public ledger method that keeps me from spending your digital currency could also keep me from playing or duplicating your copy of the Nice For What song.
It would return entertainment to the days when buying a copy of an album or a movie meant exactly that: Buying a copy.
While most readers will probably have heard of Bitcoin, fewer will have heard of the more sophisticated Etherium project.
Etherium is built on what’s called “self-executing contracts.” Embedded in its code is the ability for two parties to reach an agreement and, upon fulfillment, the contract automatically transfers its currency tokens from one party to the other. It’s what coders call a trustless system. Instead of making a deal in which I have to hope that you’ll live up to your end of the bargain, the computer stands in between as an intermediary.
As soon as digital records confirm performance, payment simply happens.
In simple terms, consider ordering dinner. Instead of the restaurant having to worry about a dine-and-dash, the waiter can confirm each order. As soon as the plate hits the table my checking account transfers the money. This low-level interaction is unlikely, but at more sophisticated levels, a self-executing contract could all but eliminate the need for contract enforcement between parties. The system would simply alert your bank upon performance, and everyone goes home happy (except, of course, for people who like to cheat on their deals).
In 2017, there were 16.7 million victims of identity theft. A major reason for this is that the internet has enabled and enhanced the fungibility of personal information. Online, no one can tell the difference between a 58-year-old woman from Oklahoma and a 16-year-old hacker from St. Petersburg once that script kiddle gets ahold of her social security number.
This problem is exacerbated by the centralization of data. If someone wants to steal an identity, they have big, specific targets they can attack such as credit agencies, tax records and retailers.
Blockchain can help solve that. The technology is built around a decentralized model, so there is no one server to hack for records. Instead, privacy experts are starting to envision a future in which individuals have a digital identity that’s kept on a blockchain record.
Instead of asking for information that can be copied, like a social security number, computers would ask for access to that digital identity record. No one who doesn’t have the key (perhaps even a biometric one, like many smartphones use) could unlock that record, preventing even the most ambitious identity thief from pretending to be someone else.
Blockchain has many potential uses for governments, but we’ll focus on two at the moment: Voting and taxes.
The IRS loses hundreds of millions of dollars per year to refund theft, when someone steals a taxpayer’s identity to file in their name and claim their refund.
At the same time, despite pushes from numerous advocates, America continues to resist any kind of online voting system. Critics point to the major hacks of government systems as a reason not to embrace digital votes. The risk that someone could get in and switch an election, with no one ever the wiser, is simply too great.
Blockchain advocates believe that their technology could solve both of these problems altogether for the same reasons that it could help lock personal identities. A public ledger, secured with a unique key, could record each citizen’s contact with the IRS. If the public ID doesn’t say you filed your taxes, no one gets that refund. If it doesn’t say you voted, no one gets your vote.
Lawyers hate title searches.
Any search of real estate ownership that goes back more than 10 or 20 years often means having to visit a public records building, in which massive books log who has owned each plat of land theoretically going back to the town’s founding. Discovering who owns what is a tedious, awful process. Confirming that the record is accurate, without any mistakes or fraud, is even worse.
For something as high-value as real estate, though, it’s absolutely critical.
Blockchain can solve that. One of the most basic uses of blockchain technology is to keep a public ledger of transactions. The technology’s core use is to record who owns what, and then to update in the case of a transfer. For property, then, this can create an automatically updated, unhackable record. No one has to flip through massive books, no one has to worry about the resulting lawsuit if a clerk 50 years ago made a mistake. The record is clear, consistent and easy to read.
No one is saying that these uses for blockchain are around the corner. The technology still needs more development before it can be seamlessly applied to something like opening a music file without delays.
The basics are there, though.
As more and more of our modern life goes online, the strain grows. We want our music, money and communications to all happen at the touch of a button, but that’s also created problems for developers tasked with securing those systems. The ability to introduce unique assets, digital properties that no one can copy and which can belong entirely to you, will change the way our relationship with the internet works on a fundamental level.
These five examples are likely just the beginning.