Cryptocurrency and Blockchain Series – The Blockchain Part 2
Firstly, apologies on the rather sizable gap between this post and the previous one. I have been away for a large part of March and had intended to complete the final part of the blockchain mini-series within that period. However this clearly wasn’t to be, but now there will be an additional blog post regarding my trip to Iceland on a retreat practicing the Wim Hof Method with the genuinely inspiring Joren De Bruin. More on that later – back to the blockchain.
Applications of Blockchain Technology
Many believe the Blockchain represents a type of disruptive technology with the ability to break the current system in a short amount of time (I even mentioned this in my previous post). However, blockchain will more likely be seen as a foundational technology that takes time to fall into place – it has the ‘potential to create new foundations for our economic and social systems. While the impact will be enormous, it could take decades for blockchain to seep into our economic and social infrastructure. ’1
What is certain is the blockchain revolution has already begun and even though it may be a foundational technology, the very nature of blockchain technology (being a decentralised ledger that is fully transparent and as yet incorruptible) makes it easy to dream up high-level use cases for potential applications.
In the previous post we looked at the main features of the blockchain and how it works. To finish up with this blockchain mini-series, we will now look at a number of ways blockchain technology can be and is being used to enhance our lives.
Smart contracts not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically monitors, executes, verifies and enforces those obligations by the network of computers connected to the blockchain, reducing the demand for the services of intermediaries or ‘middlemen’. The Ethereum network for instance is an open source blockchain project that was built specifically to realize this possibility. Read more about how Ethereum Smart Contracts work here.
Protection of Intellectual Property Rights
One of the most obvious applications of blockchain technology is as a registry of IP rights, to catalogue and store original works. In the UK, copyright is unregistered and comes into existence automatically on creation of an original qualifying work. This means that, unlike registered trade marks which can be recorded and viewed on various registries around the world, there is often no adequate means for authors to catalogue their works.
As such, ownership can be hard to prove. It can also be difficult for authors to see who is using their work, and equally difficult for third parties using a work to know who to seek a licence from. The result of this is that authors are often unable to stop infringements or to make the most of monetising their works.
Using blockchain as an IP registry may help give clarity to copyright authors, owners and users. By registering their works to a blockchain, authors could end up with tamper-proof evidence of ownership. This is because a blockchain transaction is immutable, so once a work has been registered to a blockchain, that information cannot ever be lost or changed. In theory, third parties could use the blockchain to see the complete chain of ownership of a work, including any licences, sub-licences and assignments.
Platforms such as Blinded (previously Blockai) and ascribe are taking advantage of blockchain technology in this way, allowing authors to make a record of copyright ownership, which can then be used to see where and how the work is being used on the internet, and to seek licences from third parties.
Land Title Registration
Blockchain technology could potentially underpin land title registrations, with each property uniquely coded and linked to a smart key which would be held only by the owner. This has the potential to greatly reduce property fraud at a time when this has become a growing concern for HM Land Registry.
Smart Contracts could also be used to transfer the title to a property to the purchaser automatically on receipt of funds into the vendor’s account, speeding up the registration process. With the ledger updating immediately, the registration gap would be eliminated. This, in turn, would also lead to greater efficiencies and cost savings for land registries.
The buzz around blockchain has not been lost on HM Land Registry. It plans to test a live ‘Digital Street’, which will allow property transactions to take place almost instantaneously. This is all part of the UK government’s commitment to make HM Land Registry the “world’s leading land registry for speed, simplicity and an open approach to data“. However, given the technology is relatively young, it is likely to be a matter of years, rather than months, before a blockchain-based registry is adopted in England & Wales.
The Bill and Melinda Gates Foundation has been exploring ways to use the Blockchain technology under the Level One Project since 2015. Among the initiatives is the possible use of the technology to bridge or link the disconnected financial systems.
In October 2017, the Foundation released new open-source software called Mojaloop that provides a reference model for payment interoperability between financial institutions, payment providers and other firms that offer services across a country’s economy to the unbanked. Ripple’s Interleger protocol is being used to help accomplish that goal.
Mobile technology has spread at an astonishing pace in the developing world and using this technology with Mojaloop will be an important step towards levelling the playing field, connecting the world’s poor to a digital financial system and help to create an economy that benefits everyone.
Digital identity is critical to many business and social transactions. It enables ways to interact with billions of users in the digital world. However, traditional identity systems are costly, disjointed, fallible, and hindering innovation and greater customer experience.
The distributed trust model is a new way of managing identities. Blockchain technology empowers consumers to control their own identity and share between trusted entities with their consent. Also, no single institution can compromise a consumer’s identity.
Anti-Money Laundering (AML) and Know Your Client (KYC)
Currently, institutions offering financial or professional services are obliged to follow time-consuming and expensive practices for each new client to satisfy the requirements from regulators.
The adoption of blockchain technology could lead to the reduction of AML and KYC costs and would save compliant firms the time-intensive multi-step KYC process thanks to its cross-institution client verification capability, as well as its effectiveness in monitoring and analysing data required for AML and KYC checks. Any updates and changes in a client’s status or a potential scam or fraudulent transaction could be communicated and updated in near real-time. Ultimately, the risk of noncompliance due to delayed or inaccurate reporting would be greatly diminished.
An interesting article on the AML/KYC use case can be found here.