The most obvious application of blockchain is a digital payment system where payments are immediate or nearly immediate. Bitcoin is an example of this.
The next most obvious is financial services. For example the transfer of financial securities. What if we had one unified ledger (database) that could do this must faster and with less risk. Unified ledger systems using blockchain could make things like insurance and so on would make the cost come close to zero. Blockchain could be used as an asset registry. These assets could be transferred this way. Smart contracts could also be used. Identity documents like passports, VISAs, professional certifications, marriage certificates and so on.
Obstacles to Adoption
There are two big obstacles that blockchain will need to overcome before widespread adoption can occur. There are trust and privacy. Since there is no central authority, some companies will not trust the blockchain technology. These people will also need to be convinced that the information they want private will remain private. Despite these two obstacles, many industries are starting to invest in blockchain technology.
Here is a list of the five industries already starting to use blockchain technologies.
- Digital Payments
- Financial Services
- Supply Chain and Logistics
- Internet of Things (IoT)
- Fleet Management
Supply chain and logistics is an industry that currently spends a lot of time and effort in tracking the origin and transportation of goods shipped between nations. There are a lot of “confirmations” required by each party along the way. Blockchain could be used for both the payments and the documentation.
The medical industry uses very sensitive data and blockchain is well suited to this. Health insurance will find blockchain useful. Health claims need to be recorded and validated. Secure data transfer, identity confirmation, validation of the claim and payment of the claim are all activities well-suited to the blockchain technology. Electronic medical records is another application well suited to blockchain. The owner of the information can execute a blockchain transaction that gives access to their health care pracitioner.
Energy trading is similar to the supply chain and logistics industries.
The automated control of millions of items and sensors is a good application of blockchain in the Internet of things. One example that is both IoT and in the Healthcare industry is the Healthpatch MD. It can be used for out-patient care by healthcare providers, letting them get ECG, heart rate, respiratory rate, skin temperature, body posture, fall detection, and activity readings remotely. This can alert doctors to potential health problems before they arise and give additional insights through the data acquired.
Fleet management needs to be securely and automatically controlled. Robots need to be controlled and their behaviour needs to be securely logged.
A spot market or cash market is a public financial market in which financial instruments or commodities are traded for immediate delivery. It contrasts with a futures market, in which delivery is due at a later date. Blockchain certainly operates in the spot market but it can also operate in the futures or options market. What you do is write a smart contract that controls the ownership of an asset in the future. With regards to the future, mortgages could be put on the blockchain and the interest rates can be automatically adjusted at a certain point in time according to the conditions of the interest rate market as set out in the contract. Amendments to the smart contract can only be made if both sides agree and their agreement can be verified.
A smart contract is a contract that is registered to a blockchain that executes as per stipulated in the blockchain. It is a legal agreement that executes automatically on the blockchain.
Governance is another huge opportunity for blockchain applications. Governments hold a lot of data. They keep track of who is who, who owns what land and buildings, who is travelling where and when, who changed their name and who got married, who owns what vehicle and if there are any outstanding tickets or any points against the licence, census data and so on.
The blockchain is an example of distributed computing.
In general, a state machine is any device that stores the status of something at a given time and can operate on input to change the status and/or cause an action or output to take place for any given change. A computer is basically a state machine and each machine instruction is input that changes one or more states and may cause other actions to take place. Blockchain is a state-change machine. The mechanism for updating the truth state of the network (many computer nodes holding state data i.e. wallet balances) is consensus. Consensus algorithms update the truth state. Bitcoin uses proof of work. This is bitcoin’s mining process to guess the nonce. The other big consensus algorithm is called proof of stake. This is more like a voting system. Players on the network offer a bond. There are other consensus algorithms out there but there is still much debate on which one we should be using.