It’s fast, cheap and data-rich, and it’s expanding activity in financial services, law and government. We explore the future of this revolutionary technology.
In the decade since it was created, blockchain has come to represent many of the opportunities and risks of the internet in our increasingly interconnected world. Governments and companies are coming to terms with the rise of this new technology, with Singapore’s government trialing a digital version of its currency based on blockchain and energy giant BHP using blockchain to enhance its supply-chain processes.
In Australia, the CSIRO’s Data 61 research unit has released recent research outlining the applications of blockchain in two reports, one looking at immediate technical applications and the other at longer term scenarios. We unpack what the reports find and what it means for the future.
What is blockchain?
Blockchain is a digital ledger, like a spreadsheet, that accepts inputs for anything of value, such as money or agreements, from multiple sources.
For anything to be changed there has to be consensus from everyone with access, and for this reason it is said to be incorruptible.
The technology allows digital information to be distributed but not copied, and there is no need for a centralised authority to approve or validate transactions, meaning blockchain offers speed and security on a wide range of transactions.
While blockchain is primarily known as the technology behind cryptocurrencies such as Bitcoin, governments and corporations around the world are beginning to unlock its many uses.
“The Data 61 reports have identified that as a country we must explore blockchain – if we do not put any research into this, we will be left behind,” says Dr Philippa Ryan, a lecturer at University of Technology Sydney and one of the world’s leading legal experts in blockchain technology. “The reports highlight the key uses for blockchain not only in payments, but also in smart contracts, digitised identity, regulation of records, and other practical and small-use cases.”
While enthusiastic about blockchain’s potential, the Data 61 authors point to three key barriers that need overcoming before it can be adopted more widely: privacy, fraud and bloat.
Blockchain bloat means that as more and more transactions are made, more data needs to be recorded, which not only slows the process down, but also presents logistical challenges for storage and computing power.
“There is an expense to running blockchain, because it needs reward systems built in as the system runs on third parties – there is no one [person or authority] keeping it alive, humming, and true,” Ryan explains.
“We need to do something like what Bitcoin does, which is release Bitcoin into the system for people to solve the problem [called ‘mining’] and make sure the system is working. And for blockchain to work, you need the whole network participating.”
Ryan also sees distrust as a barrier to adoption of a system that is decentralised and reliant on human input into the system and, as with all financial products, vulnerability to fraud. “How do you trust all of the players?” she asks.
Nevertheless, blockchain has never been hacked or compromised. “There have to date been 16 major hacks of cryptocurrencies over the last five years,” Ryan says. “But they only cracked the applications that sit over the top of the technology – no one has ever hacked the blockchain.”
In our next article, we will explore possible impacts blockchain will have on financial services.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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