Blockchain is more than just the technology behind bitcoin. Its use can improve security, efficiency, privacy, and flexibility and reduce platform complexity.
Cryptographic authentication is part of the baseline in the blockchain platform architecture. As my colleague Mark Jamison defines in a recent video:
Blockchain is a database of ledgers or “blocks” spread across multiple computers. Each block contains a set of codes called hashes, which keep the blocks in sync. Every time a new entry is introduced, a new hash is created. Once it is verified, the new entry is accepted by all computers. This network of ledgers is what makes blockchain secure. Tampering with just one block, or one computer, has no effect.
This means there is an accurate record of transactions, which makes the platform tamper-resistant. Blockchain platforms allow for much tighter controls and more secure interoperability between partners using the technology. Platform partners can choose how sophisticated — or perhaps how simple — they want the chain to be. For example, you could have regulatory or smart contract obligations as part of the basic code, allowing only transactions that have the full set of the desired information to be completed.
Blockchain-based platforms can allow businesses and governments to manage secure transactions directly between parties. Key enhancements to blockchain technology are an ability to interoperate, driving inefficiencies out of the system and limiting the risk of inaccurate data in a chain of custody of information.
Currently, blockchain platforms led by private industry are used for financial clearinghouse systems such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) or Single Euro Payments Area (SEPA). They have migrated long-term reconciliation systems onto the new interactive platform for real time transaction records. These blockchain-based records have lowered the cost and operational risk for participating financial institutions while adding a new level of data richness that includes transparent and traceable payment streams that are auditable compliant with financial regulations.
Transparency and public records of supply chains help manufacturers, the wholesale transportation layer, and end consumers. Creating a public record blockchain can help entities authenticate data sets for compliance records in real-time while decreasing the potential for data manipulation. For example, blockchain technology could help eliminate food waste by targeting a food recall to the exact items that are defective. It would allow manufacturers to track their products through their supply chains, through the transportation system, and to the shelf of exact retailers.
Blockchain technology is also being used by pharmaceutical and medical device manufacturers, who use a blockchain platform to comply with recently enacted Federal Food and Drug Administration (FDA) regulations requiring an electronic system to track and trace certain prescription drugs and devices. The blockchain platform allows for the tracking of products as they move through the supply chain from manufacturers, distributors, medical offices, pharmacies, and finally to patients. By having the drug or device company upload the identifying information onto the blockchain platform, the item is tracked and traced from the manufacturer through the process to the final patient.
Once an “identity chain” is created and the parties are all identified and agreed on as partners on a platform, that identity can be used for other transactions. Think of it as a digital license, if the blockchain that hosts your identity has legal standing. This can work for both corporations or individuals.
Most of the media attention around blockchain has been focused on cryptocurrency trading, but blockchain’s ability to inform and enhance transaction records while giving users the ability to tailor the level of flexibility, efficiency, security, and privacy of certain records to their needs makes it useful for many applications.
Blockchain can drive efficiencies in critical industries and take the darkness out of transaction processes. It could change the way we manage transactions and individual identities around the globe — as the financial industry is already proving — and now, with a recognition of the benefits for uses such as tracking pharmaceuticals, the potential use cases are increasing in number. Having our legal system embrace the capabilities of this technology could help catapult us toward more efficient and effective government processes. Lack of understanding and negative press have held us back from seeing more use of this technology. Educating policymakers on the efficiencies and improvements to record keeping capabilities that this technology could enable could alter information flows and the economy worldwide. It’s time to make a push for embracing this technology — not least for all the positive effects it can bring to our regulatory and legal systems.