Blockchain, what can I do with it?
A short primer for non-technical readers (Part 2)
There is a lot of talk about Blockchain. By innovators, industry leaders, investors, consultants and by us. However, I find that many readers and listeners are not yet familiar with Blockchain. This is why I wrote this short primer; it’s meant as an introduction for non-technical readers.
In part 1 “Blockchain, what is it?” I explained that Blockchain basically is a database replicated over many servers with digital data that cannot be changed and that can be trusted without a central authority.
As such it can be used for many things. We see three types of applications for the blockchain technology based on its two main characteristics: the content is immutable and independent verifiable.
Transfer of ownership
The first type of applications are similar to the best-known use of Blockchain, the Bitcoin cryptocurrency. They are centered about the capability to transfer the ownership of an asset, any asset, from one party to another.
Besides Bitcoin, a bunch of other cryptocurrencies have been launched around the world, like the ‘Gulden’ in The Netherlands, Ether(eum), Ripple and Litecoin, are other more common cryptocurrencies.
Ownership can be transferred, used to pay for goods or services or just held for speculation on their exchange rates.
Besides cryptocurrencies ownership of other assets can also be transferred using blockchain, like art, energy, gold, securities. Basically any asset that now is being traded on exchanges.
The main benefit seems to be to by-pass central authorities, like banks, central banks and governments.
The network of Trust
A central authority is single point of failure. We’ve all heard about bank’s payments systems being down, governments alleged manipulation of voting systems, or crooked investment schemes, just to mention a few examples. And they are not free: we pay taxes, levies, commissions and other costs.
These second type of applications provide a network of Trust. With transaction architectures built on blockchain, the trusted third party is replaced by the implementation of a shared public database. Because of the inherent characteristics of this distributed ledger (immutable and independent verifiable) the data on the blockchain can be trusted.
For example, Everledger uses the blockchain to protect luxury goods, like diamonds. It enables you to record all of a diamond’s unique attributes and store them on a blockchain. In case of a dispute of ownership, like with theft, the data on the blockchain provides an unchallengeable proof of its identity.
The third type of applications are so-called “smart contract” applications. These applications will be the biggest disruptors of the near future. Smart contracts are uniquely tamper proof: immutable (read: impossible to influence) and independently verifiable.
Smart Contracts are self-verifying and self-executing, computerized transaction protocols that perform the terms of a contract and are stored on a blockchain.
Think of them as automatic, independent “When X happens, Then Y will happen” programs.
When they execute, the smart contract runs on a network of nodes. Which nobody controls and therefore everyone can trust – assuring that the contract will be executed as it was written, even when the execution takes place in say, 2 years’ time.
Both the contract and it’s inputs and outputs are transparent, immutable and verifiable, removing the need for paper contracts and a trusted third party like a notary or clearinghouse.
The middleman is no longer needed. Smart contracts allow for seamless integration of external actors within the contract, like humans or external systems, without the need for a contract on “paper” or someone to regulate and facilitate the transactions.
Smart contract example
World-famous DJ Hardwell worked together with Rightsshare to create a Smart Contracts system for music, bypassing the slow and expensive royalty authorities.
A simplified explanation:
Firstly, Hardwell’s team registers the ownership of his tracks on the blockchain.
Next, a smart contract (program) is agreed upon, between the creator and a publisher. After agreeing, the smart contract is placed on the blockchain nodes.
Once the smart contract is in place, the master file of the track is signed with the unique smart contract ID and provided to the digital service providers, such as Spotify, iTunes, etc.
When a song is streamed, this is registered (the ‘when’ condition occurs). The smart contract verifies this automatically.
Then the smart contract charges a fee to the music provider. Also automatically, without anyone intervening or being able to intervene.
Summary of the summary
Blockchain is a database replicated over many servers with digital data that cannot be changed and that can be trusted without a central authority.
As such it can be used for many things: from Proof of Existence/Ownership/Authenticity, to Proof of Work/Processing, to so-called Smart Contracts.
Sphereon is provider of the smartest document processing software. Our software is the first, in which the blockchain technology for day-to-day documents and contracts is integrated for SharePoint users.
More information on each of these use-cases can be found on-line. Or just ask us.
Maarten Boender firstname.lastname@example.org
Part 1, click here: https://sphereon.com/blockchain-what-is-it/
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