Blockchain

How It’s Developing

The concept for blockchain was introduced in a 2008 proposal by Satoshi Nakamoto to create a “purely peer-to-peer version of electronic cash,” which would become the digital bitcoin currency in 2009. The system supporting bitcoin provides proof of who owns what at any given moment; the payment history of each bitcoin in circulation; the encryption that makes it theoretically impossible to alter once a transaction is registered; the copies spread across computers, or “nodes," that form the bitcoin network; and a “consensus mechanism” that replaces a central list-keeper so that the system can be truly independent. [2]

The system that supported bitcoin was recognized for its applicability for other purposes beyond currency, leading to a greater recognition of blockchain as a potentially transformational technology. [3] Blockchain systems store information in blocks that record all transactions ever done through the network and require several nodes to agree on a transaction in order to process it. The system leverages computing power to solve complex cryptographic problems (proof-of-work) that add blocks to the chain and validate the included transactions. This provides an updated chain that colloborates with other nodes, becomes the new reference, and prevents duplicate transactions. [4]

Due to their distributed nature, blockchain systems require constant computational power in multiple locations, a feature that has limited the realization of blockchain’s proposed applications. [5] The bitcoin system manages seven transactions per second, compared with thousands in a typical credit card network. [6] Future scaled blockchain models would accelerate the process by figuring out how many computers are necessary to validate each transaction and dividing up the work efficiently. [7] Computational and network storage requirements could limit broad application of blockchain, especially in government, non-profit, and other sectors that are challenged by technology investment and capabilities. [8] In the place of permissionless or unrestricted blockchains, a permissioned network or private blockchain would grant a restricted set of users the rights to validate transactions. [9]

Several startups have begun to leverage blockchain as a solution for business. Ethereum allows developers to build applications directly into blockchains to create “smart contracts” that can store registries of debts or execute specific instructions at given times or in accordance with given events. [10] Everledger keeps track of valuable assets, registering the IDs for more than a million diamonds so that consumers can check on whether gems were stolen or mined in war zones. [11] Verisart proposes using blockchain to create a non-centralized database of art that verifies each work by assigning it unique authenticity codes that owners and buyers can use to validate the authenticity and provenance of pieces. [12] Similarly, Block Verify seeks to use the blockchain to authenticate a wide range of high-value goods, tracking sales, veryifying authenticity, tracing stolen goods, and identifying fraudulent transactions; in addition to luxury goods and art, the system could be used to identify counterfeit drugs. [13] Proof of Existence allows users to certify documents in the Bitcoin blockchain, anonymously and securely creating an online distributed proof of existence for any data or document. [14] The “smart contract” features of Ethereum and Everledger can be programmed with external data (stock prices, weather reports, news headlines) to create contracts that are automatically filed when certain conditions are met. [15]

In addition to start-ups, established technology firms are pursuing blockchain solutions. Microsoft’s open-source Coco Framework project will allow businesses to implement blockchain technologies to track transactions between customers, suppliers, or anyone with whom they do business. [16] IBM’s IBM Blockchain is a commercial application of Hyperledger’s open-source Fabric codebase. One pilot project had banks use a blockchain identity solution to make it easier to verify identities while also reducing the amount of data shared; a second pilot deployed the "world’s first blockchain-based green assets trading platform" by Beijing-based Energy-Blockchain Labs Limited. [17]

In addition to business applications, blockchain could revolutionize the ways that institutions store personal information. Sony is exploring blockchain to store student information - registration documents, attendance, grades, and even the lesson plans that previous teachers have used – that could then easily be transferred between schools as students move or graduate into new institutions. [18] Like Sony, Southern New Hampshire University will pilot a program to provide one thousand alumni with blockchain-based digital credentials – the digital credentials will not replace paper degrees or traditional transcripts but will serve as an enhanced version of a student’s academic record and as a platform to organize the certifications, competencies, and achievements that come with lifelong learning. [19] The European Union’s Decentralised Citizen Owned Data Ecosystem (DECODE) will pilot a system for citizens to elect to share personal data and specifications for how it should be used into a blockchain system that keeps track of citizen preferences while still making the data available for companies or government groups to create new products or services. [20] Future visions for blockchain technology could help secure personal identities – birth and death certificates, marriage licenses, property deeds and titles of ownership, and other life records – in a blockchain that citizens could control and share with institutions (hospitals, employers, banks) as they need. [21] Even as governments show interest in blockchain, most are only engaged in informal discussions at this time. The National Association of State Chief Information Officers (NASCIO) notes that the computing power and network storage requirement are a central impediment to making theoretical applications real. [22]

Why It Matters

Blockchain’s potential purpose as a convenient system for record keeping could lead to more government documents, historical records, and other pieces of information migrating to such a system. [23] Blockchain could help cut transaction and record keeping costs, improve accuracy, and reduce the risk of losing information to disaster or sabotage; however, a blockchain solution would require not only loading new records into the network, but also digitizing and uploading the coordinating historical records while navigating currently distributed systems for recordkeeping across city, state, and federal governments. [24]

Blockchain technology has been proposed as a means of improving digital badges, facilitating the transfer, authority, and reputation of awarded badges and other digital credentials. [25] As blockchain facilitates more secure and trusted certification, its use could expand across formal and informal learning that happens in academic, public, school, and special libraries.

Like artificial intelligence and other disruptive technologies, blockchain has the potential to fundamentally change many of the institutions that humans have built (banks, insurance companies, etc.) and to displace the administrative workers that sustain those institutions. [26]

Smart contract features in services like Ethereum and Everledger could eventually transform access to content and intellectual property, controlling how many times a user can access, share, or copy something. [27]