Home / Coin Payment / Blockchain: New Frontiers

Blockchain: New Frontiers

Blockchain is a technology that offers reliable transactions thanks to decentralized accounting. The most popular applications of the "blockchain" technology are still the alternative currencies, of which Bitcoin remains the most prominent. But it seems more and more as if the main short-term blockchain technology expansions did not concern currencies, but instead concerned other types of ownership, transactions and record keeping. A couple of recent studies that emphasize this theme are "How blockchain technology could change our lives", written by Philip Boucher, Susana Nascimento and Mihalis Kritikos for the European Parliamentary Research Service (February 2017), e "Blockchain and Economic Development: Hype vs. Reality", written by Michael Pisa and Matt Juden for the Center for Global Development (CGD Policy Paper # 107, July 2017).

Both documents offer a verbal and intuitive sketch of how blockchain technology works. Here is a taste of the explanation of Boucher, Nascimento and Kritikos:

"Blockchain offers the same record-keeping functionality but without a centralized architecture, the question is how it can be sure that a transaction is legitimate when there is no central authority to control it.The Blockchains solve this problem by decentralizing the ledger, so that each user retains a copy Anyone can request the addition of any transaction to the blockchain, but transactions are accepted only if all users agree that it is legitimate, for example that the request comes from the authorized person, that the seller of the house has not already sold the house and the buyer has not already spent the money, this check is performed reliably and automatically on behalf of each user, creating a registration system very fast and safe which is noticeably tamper-proof, grouped together with other new transactions in a "block", which is added as last with ligament on a long "chain" of historical transactions, which forms the blockchain ledger that is ld by all users. … "

So, anyone can download the blockchain of all transactions. But who has an incentive to update and control the blockchain? Blockchain technology relies on "miners" to do this work. Miners must spend computing resources to solve a complicated algorithm before they can add a block of transactions to the blockchain, and are paid by users of blockchain services or by the system itself. Once again, Boucher, Nascimento and Kritikos explain:

"This work is called" mining ": anyone can become a miner and compete to be the first to solve the complex mathematical problem of creating a valid encrypted block of transactions to be added to the blockchain. encouraging people to do this Most of the time the first miner to create a valid block and to add it to the chain is rewarded with the sum of the commissions for his transactions.The commissions are currently around € 0.10 per transaction, but the blocks are added regularly and contain thousands of transactions Miners can also receive a new currency that is created and put into circulation as an inflation mechanism.

"Adding a new block to the chain means updating the ledger that is held by all users. Users accept a new block only when it has been verified that all of its transactions are valid. If a discrepancy is detected, the block is rejected. , the block is added and will remain there as permanent public record No user can remove it.While destroying or corrupting a traditional ledger requires an attack on an intermediary, doing it with a blockchain requires an attack on each copy of the ledger at the same time There can not be a "false ledger" because all users have their own authentic version to check. Trust and control in blockchain-based transactions are not centralized and in black boxes, but decentralized and transparent. These blockchains are described as & # 39; without authorization & # 39;, because there is no special authority that can deny permission to participate in control and addition of transactions. "

When the blockchain is used for Bitcoin, the blockchain records the ownership of each bitcoin and when each bitcoin is transferred to another user. But users remain (even if the forces of reasoned order are sometimes able to find a way). Bitcoin has been in the news lately because it has experienced a price spike.

This recent spike, while certainly cheering the hearts of those who already hold bitcoins, is actually one of the reasons why bitcoin is not a particularly good currency. Useful currencies are relatively stable in value! In most modern economies, traditional currencies typically allow transactions that are already relatively fast, safe and economic. For most people, it is unclear how they would benefit from the use of bitcoins for transaction purposes. Pisa and Juden explain (notes and quotes omitted):

To usurp the role of national currencies, the bitcoin should first of all satisfy some (though perhaps not all) of the fundamental functions that money provides, including serving as a medium of exchange, a unit of account and a store of value. Currently, bitcoin does not do very well these things: its extreme volatility prevents it from being a good deposit of value and unit of account, and retailers and consumers, who seem satisfied with the advantages / benefits associated with the use of credit, they have not accepted the currency broadly enough to consider it a reliable means of exchange. Even national governments present an obstacle: at the moment, no government allows paying taxes with bitcoins, which reduces incentives for people and companies to use it.

"Although national governments choose not to withstand the broader use of bitcoins, there are questions about the ability of technology to scale due to network speed." Currently, Bitcoin blockchain can process a maximum of seven transactions per second. , Visa processes an average of 2,000 transactions per second and has a peak capacity of 56,000 transactions per second. Increasing the speed of the Bitcoin network could be achieved by increasing the size of the blocks.This is technically feasible, but some network participants have resisted, since it would increase the cost of extracting bitcoins and give greater control to larger entities, leading to greater centralization of the network. Finally, there are concerns about the energy intensity of mining. Even if the estimates vary widely, some indicate that bitcoin mining could consume 14,000 megawatts of electricity by 2020, which it is comparable to the total energy consumption of Denmark ".

But even if bitcoins and virtual currencies may not be able to take over the money supply at any time, the blockchain technology can be adapted for a considerable number of other purposes. Here are some suggestions on these other purposes.

Properties of digital media (as explained by Boucher, Nascimento and Kritikos)

"When consumers buy books and records, they come to possess physical artifacts that they can later sell, give away or leave as part of their inheritance.There are limitations to their rights, for example they do not have to distribute copies and have to pay royalties. author if they transmit the content: by purchasing the digital equivalent of these same media, consumers know that they will not acquire the ownership of a physical artifact, but many do not realize that they do not even acquire ownership of any content. valid for a period of time or a fixed number of games. These licenses can not be sold, donated or even left as part of an inheritance. Building a collection of legitimate digital music, literature, games and movies often has a cost similar to that of a collection of various disks and books with the same content: it is a substantial investment for a lifetime but can not be transfe ritual and which expires at death. enerations may like reliving the tastes and experiences of loved ones through the vinyl boxes, books and games they left behind, today's children may not enjoy the same access to their parents' digital content. Can blockchain technology help solve these and other problems with digital media? …

"The blockchain could be used to record all sales, loans, donations and other transfers of individual digital artifacts. All transactions are tested and approved by all users. For transactions in a bank account or land registry, the artifacts do not they can be transferred unless they are legitimately owned and buyers can verify that they are buying legitimate copies of MP3 and video files, since the transaction history allows anyone to verify that the various transfers of ownership are attributable to the original owner, ie The concept creator could be combined with smart contracts so that access to the content can be lent to others for pre-established periods before being automatically returned, or so that inheritance desires can be implemented automatically upon registration of a death certificate … Use of blockchai n technology in this way could for the first time enable consumers to buy and sell second-hand digital copies, give them away or donate them to char stores, lend them temporarily to friends or leave them as part of an inheritance – just as they used to do with vinyl and books – making sure they are not propagating multiple copies without a license. "

Management of global supply chains (as explained by Boucher, Nascimento and Kritikos)

"Blockchain-based applications have the potential to improve supply chains by providing an infrastructure for the registration, certification and monitoring of low-cost goods transferred from often distant parts, which are linked via a supply chain but they do not trust each other, they are uniquely identified by "token" and can therefore be transferred via the blockchain, with each transaction verified and stamped in an encrypted but transparent process, which allows interested parties to access regardless of whether they are suppliers, sellers, transporters or buyers, each transaction remains irrevocable and unchanging, open to all or authorized auditors, and intelligent contracts can be used to automatically make payments and other procedures.

"Several companies, innovators and incumbents are already testing blockchain for record keeping in their supply chain Everledger allows companies and buyers to monitor the origin of diamonds from mines to jewelers and to fight insurance or document fraud. cutting and clarity, the number of degrees in the corners of the pavilion and the place of origin generate a serial number for each diamond, inscribed under the microscope, and then add this digital ID to the Everledger blockchain (which currently has 280 000 diamonds). This allows you to establish and maintain a complete history of ownership, which can help combat fraud and support police and insurance investigators to track stolen gems and enable consumers to make more informed purchasing decisions, for example to limit search for diamonds with a "clean" story that is free from fraud, f impacts, forced labor and the intervention of dubious sellers who are licks to violence, drugs or arms trafficking. …

Wal-Mart, the largest retailer in the world, is testing Blockchain for food safety. An accurate and up-to-date Blockchain-based record is expected to help identify the product, shipping, and supplier, such as when an epidemic occurs, and in this way get details about how and where the food was cultivated and who has inspected it. Accurate registration could also make the supply chain more efficient when it comes to delivering food to stores faster and reducing deterioration and waste.

International financial transactions (as explained by Pisa and Juden)

"The cost and the inefficiency associated with international payments in some corridors are an obstacle to economic development: whether it is a business that invests in a developing country, an emigrant who sends money home or an aid organization that funds a project abroad, moving resources from rich to poor countries ultimately requires money to be sent across borders … [C]the transformation of these transactions through the formal financial system can result in significant costs and delays. Cross-border payments are inefficient because there is no single global payment infrastructure through which they can travel. Instead, international payments must pass through a series of corresponding bilateral banking relationships, in which banks hold accounts at other banks in other countries. The number of such relationships that a bank is willing to maintain is limited by the cost of financing these accounts as well as the risk of conducting financial transactions with banks that do not have strict controls to prevent illicit transactions …

"One consequence of the fragmented system of global payments is the high cost of remittances, which are a hugely important source of development finance: about 430 billion remittances were sent to developing countries in 2016, almost three times. more than official aid, the average cost of sending remittances worth $ 200 is 7.4% but varies considerably between the corridors: for example, the average cost of sending $ 200 from a developed country to the South Asia is 5.4%, while the cost of sending the same value to sub-Saharan Africa is 9.8 percent (World Bank 2017). …

Small and medium-sized enterprises face similar costs when making cross-border payments. Industry surveys indicate that around two-thirds of cross-border business activities are not satisfied with the delays and fees associated with the use of traditional bank transfers for international payments …

"The use of a bitcoin-based company to send remittances to countries with deep bitcoin exchange markets may be cheaper than using traditional MTOs, for example, sending a remittance to $ 200 from the United States to the Philippines with Rebit.ph currently costs 3%, while World Remit, a consolidated MTO that relies on the traditional system of bank transfers, stands at 3.5%, however, in most corridors, Bitcoin-based remittance companies have not been able to offer substantially lower fees than traditional players, many have closed, while others have moved to emphasize business-to-business payments … "

Public register and cadastral registers (from both groups of authors)

Boucher, Nascimento and Kritikos write:

"The most immediate applications of blockchain technology in public administrations are on record: the combination of time-stamping with digital signatures on an accessible ledger should offer benefits to all users, allowing them to conduct transactions and create records (e.g. registers, birth certificates and business licenses) with less dependence on lawyers, notaries, government officials and other third parties …

"The Estonian government has experimented with blockchain implementations that allow citizens to use their identity cards to order medical prescriptions, vote, bank, request benefits, register their businesses, pay taxes and access about 3,000 other digital services: encrypt documents, examine and approve permits, contracts and applications and send requests for information to other services. This is an example of an authorized blockchain, where some accesses are limited in order to protect data and protect users' privacy …

"Several countries, including Ghana, Kenya and Nigeria, have started using blockchains to manage land registry records, with the goal of creating a clear and reliable property record in response to registration problems, corruption and low level of public access to documents is also conducting tests to put real estate transactions on blockchain, in this case to allow all parties (banks, government, brokers, buyers and sellers) to follow the progress of the 39; operation in all its phases and guarantee the authenticity and transparency of the process while saving time and money.

"The UK Department of Labor and Pensions has also experimented with the use of blockchain technology for welfare payments: here citizens use their phones to receive and spend their payments and, with their consent, their transactions are recorded on a distributed ledger.The objective of the initiative is to help people manage their finances and create a safer and more efficient welfare system, preventing fraud and increasing trust among applicants and the government. The UK government is also considering how blockchain technology can enable citizens to track allocation and spending of funds from government, donors or aid organizations to actual recipients, in the form of grants, loans and grants ".

Pisa and Juden write:

"The idea of ​​storing land titles on a blockchain has a clear appeal, but above all sharing a land registry on a distributed network greatly increases security by eliminating the risk of" single point of failure "and making it more difficult to alter the records also increase transparency by allowing certified actors (including, potentially, auditors or monofreud organizations) to monitor changes to the registry almost in real time and improve efficiency by reducing the time and costs associated with registering ownership. .

"A blockchain can not, however, deal with record reliability issues, but this is an obvious but often overlooked aspect.As previously stated, blockchain is a" garbage in, trash "system: if a government uploading a fake to a blockchain (for negligence or deception), will remain false, which suggests that the use of technology to store land records works best in places where the existing system for registering land titles is already strong in Georgia, which has started a project with the Bitfury Group and the Blockchain Trust Accelerator in 2016 to register land titles on a blockchain … The Bitfury pilot project in Georgia has been reported as a success. In February 2017, the NAPR had registered over 100,000 documents and the Georgian government announced a new agreement with Bitfury to extend the use of blockchain technology to other government departments. It is if this success can be resubmitted in less favorable environments. Bitfury will face this challenge in Ukraine, where it recently reached an agreement with the Ukrainian government to put all its electronic records (not just land titles) on a blockchain. "

Proof of private and validated identity (as explained by Pisa and Juden, omits quotes and footnotes)

A number of countries have recently implemented digital identification systems for their citizens, notably India, but also Estonia, Pakistan, Peru and Thailand. However, these are not blockchain systems, but rather a combination of identification numbers, biometric indicators (such as fingerprints or iris scans) and cryptography (in which a person must know a private code). Governments are unlikely to outsource their citizens to blockchain technology. The question is whether it would be useful to use the blockchain to provide proof of private identification that people could use for other purposes, along with their government ID, while having greater control over their private information. The authors explain:

"Because of the weakness of centralized and federated ID solutions and the belief that people should have more control over their personal data and the value that comes with it, some ID experts have focused on developing" user-centric "or "self" "sovereign" systems These systems aim to shift control over people by allowing them to "store their identity data on their devices and provide them efficiently to those who need to validate them, without relying on a central repository of identity data. "Until recently, this solution seemed technically not feasible, but blockchain technology seems to make it possible.

"Several advantages derive from the storage of certified attributes on a blockchain. The first is privacy: Alice can control who shares her personal information with how much information she shares, the second is security, since the absence of a centralized database eliminates the single point of the risk of failure The system is also cheaper, since it allows users to provide verified information at the touch of a button rather than having to access and send a wide variety of documents. Finally, a blockchain provides an easy and accurate way to track the evolution of ID attributes as each change is marked by time and added to the previous record.

"The idea of ​​a blockchain self-sovereign identification system is about to become a reality, for example, SecureKey and IBM are now piloting a digital ID system in Canada using the Linux Foundation's open source Hyperstreamger Fabric blockchain. Canadian government (including national and provincial government agencies) with the country's largest banks and telecommunications over an authorized blockchain network. These participating companies and agencies play a dual role in certifying user characteristics and providing digital services. in 2017, when Canadian consumers will be able to access the network to access a variety of economic and financial services by sharing the verified attributes stored on a mobile phone. "

Transparency and coordination of financial aid (as described by Pisa and Juden)

"An example of the first model is an application called Stoneblock developed by the company Neocapita.However at an early stage of development, the platform will enable actors along the supply chain of development (including donors, recipients, implementation partners and auditors). ) to keep track of information on how a project is progressing and the flow of funding. The company is also exploring the use of smart contracts that could trigger the provision of funds linked to performance metrics. In many cases , human observers would report the metrics on a blockchain (eg by reporting the number of children attending a school), but in others, electronic meters could play the same role (for example, measure the amount of water produced by a well) allowing all participants in the network to view the same information at the same time using a blockchain for cond splitting project data could drastically reduce administrative overhead. Even the memorization of records on a blockchain would make them substantially R proof, thus reducing the potential for embezzlement ".

These documents include other possible applications: blockchain enabled registrations when a patent application has occurred; voting enabled for blockchain; "smart contracts", which may include provisions for payments relating to loans, insurance payments or wills that can be made automatically when pre-specified dates or conditions occur; and we even speak of creating "decentralized autonomous organizations" on blockchains that own assets and could execute a series of contractual commitments with human beings, businesses and other autonomous organizations. Alternative currencies like bitcoins get the titles, but my guess is that these alternative frontiers for the application of blockchain technology will be much more important very soon – if they are not already more important.

A version of this article appeared for the first time on Conversable Economist.

Source link