Tech world sees potential of new kid on the block
As the system behind Bitcoin, blockchain was once seen as the domain of arms dealers and money launderers. However it is now recognised as an important technology in its own right.
We anticipate that within the next 12 months we will see DLT being used across multiple functions and markets.
A technology that was virtually unknown just five years ago is set to replace legacy accounting and record-keeping systems across a wide range of sectors.
As part of a wider family known as distributed ledger technology (DLT), blockchain is best known as the enabler of Bitcoin. However, the DLT platform is rapidly expanding, with new capabilities that enable, for example, smart contracts and different currencies.
Dr Alastair Robb, a business information systems expert at UQ Business School, has been tracking its rapid evolution. “DLT is comparable to communal ledgers hosted on public or private networks of computers,” he explains.
“As DLT records every single transaction creating blocks in the chain, permanent records are created and any changes are apparent, so you know if anyone has attempted to alter it.
“It offers an attractive technology to further new forms of accounting, record-keeping and audit, as well as providing credible financial information for decision makers. We anticipate that within the next 12 months we will see DLT being used across multiple functions and markets.”
Here are some of the potential applications:
1. Ensuring faster, more reliable audits
Auditors are responsible for checking that company records listing debtors and creditors are accurate. Typically, they check a sample and if these are correct, the rest are assumed accurate too. If, however, suppliers and customers could share all of their information on debtors and creditors, auditors could check the full list.
“As such processes lend themselves to automation, it would save auditors’ time and allow them to focus their efforts on problem areas that come to light, rather than on reconciling items. DLT could allow us to make the audit stronger by using the full population of creditors and debtors and help to ensure the evidence provided by firms is credible because of its tamper evident nature,” says Alastair Robb. “We could then have greater confidence in firms’ financial statements."
2. Stopping the trade in blood diamonds
Around US$460 billion worth of counterfeit goods were bought and sold online in 2016, according to figures from the International Trademark Association. Brisbane entrepreneur Leanne Kemp says counterfeiting is particularly dangerous as the proceeds are often used to fund terrorism.
Leanne is the founder of Everledger, a London-based start-up that uses DLT to establish the authenticity of diamonds, to combat fraud and the trade in jewels from war zones. The company uses more than 40 features, including colour and clarity, to create a diamond's ID and track its ownership from mine to ring.
“We can apply this technology to solve very big problems: ivory poaching, blood diamonds, all these big ‘blood problems’ that are helping cartels, terrorists and criminals,” says Leanne. The same method could also be used to track other high-value goods, from haute couture to art, antiques and even fine wines and food.
3. Helping refugees rebuild their lives
Imagine having no proof of your identity. How would you rent a home, open a bank account or even register with a GP? That is the situation facing many refugees who lose or deliberately destroy their ID documents as they flee from wars or persecution.
Now a number of organisations such as Blockchain Emergency ID and BanQu are helping the dispossessed create a new economic identity. The ID, which is based on a combination of ‘selfies’, biometrics and other physical characteristics, is uploaded to a secure online ledger along with evidence from family members or credit references from people who have dealt with the individual concerned.
The concept of a ‘shared ID’, which could be stored as a QR code in a mobile phone, is gaining ground as a way for people to access the financial system and rebuild their lives.
4. Creating a ‘fair trade’ music industry
Technology has made music more accessible to the public but made it more challenging for artists to earn a living. Many in the business believe that the old system of record labels and royalty payments has failed to keep up with the internet age.
Now some are turning to DLT as a way to ensure a fairer distribution of royalty payments and store their music copyright information. They include the Grammy Award-winning singer songwriter Imogen Heap, who released her song, Tiny Human, using a blockchain platform and has since founded her own platform, Mycelia.
5. Surviving an economic crisis
With Bitcoin now accepted by Amazon and other major businesses, the currency has finally come of age. It has for some time been used by migrant workers as a way to avoid high bank charges when sending money home and more recently, has found a new role in developing and recession-hit countries.
In Venezuela, where inflation is out of control and the bolivar is virtually worthless, locals are using Bitcoin to buy food and other essentials on Amazon and other overseas sites. According to one brokerage house, the number of Venezuelan users rose from 450 in August 2014 to more than 85,000 in November 2016.
Bitcoin is also a good way for people to donate to Venezuelans in need of help. Unlike traditional currencies, governments can’t just print more of it and, while the value does go up and down, the changes are not as dramatic as the bolivar. Another advantage is that users don’t need a bank account, just a mobile phone with an Internet connection.
Alastair Robb adds: “Blockchain has evolved rapidly from the shadowy technology behind Bitcoin to become mainstream. In the coming years we expect DLT to be at the forefront of change for businesses and markets and the way in which they operate.”