Bigger than bitcoin: Here comes blockchain
Got bitcoin? I’ve got a little filed away, but only because it’s my job. Like most of you, I have little use for the stuff, despite all of the celebratory hype about this new kind of digital money. At the supermarket or the gas station, US dollars work, and bitcoin doesn’t. For most of us, bitcoin solves problems we haven’t got.
And yet, there’s no denying the seductive appeal of the concept, and maybe more important, the vast potential of the technology that makes it work. It’s called blockchain, and there’s an excellent chance that we’ll all be using it someday, even if we never trade in bitcoin.
Blockchain has so far proved to be a bomb-proof way of registering and storing information about a product or an event so that it is indelibly preserved and impervious to hacking. With bitcoin, it is about a form of currency, or money, but that information could refer to an insurance claim, a mortgage, medical records — even a pair of fancy basketball shoes.
Don’t laugh. Nike Air Jordan “Legends of Summer” basketball shoes are collectors’ classics, worth more than $5,000 a pair. But how can you be sure the shoes are for real? A San Francisco company called Chronicled is working with shoe manufacturers to equip their most exclusive products with digital “smart tags” linked to a blockchain.
Each tag is permanently affixed to the shoes, like a car’s VIN. Each contains a radio chip with a unique digital code that’s been stored in the manufacturer’s blockchain. That code can also be read by a smartphone, which can check with the blockchain to confirm that the shoes are legit. The smart tags can’t be removed without destroying them, and fake tags won’t work because they aren’t recorded in the blockchain.
The blockchain is really a vast and accumulating database of transactions that are stored on a network of thousands of computers set up by blockchain providers. Each new transaction is encrypted before being added to the blockchain, and each machine has its own copy of the data. The owner of that data can share it with anyone, anytime, by handing over a digital key.
That’s how bitcoin works. The blockchain stores the value of transactions involving the electronic currency, creating a kind of global virtual bank or exchange that makes transferring bitcoin anywhere on earth quick and nearly free. That’s why Boston-based Circle Internet Financial Ltd. uses bitcoin to let people send dollars, euros, and British pounds to countries all over the world, at no charge.
Once that encrypted information is stored on the blockchain’s networks, there’s no use trying to hack one of the machines to alter the data. The slightest change affects every block in the chain on that one machine, warning other users that the data has been corrupted. All the other computers with copies of the blockchain would be unaffected — and available to verify whether those Air Jordans are authentic.
Chronicled founder Ryan Orr, an obsessive shoe collector, hopes to apply his system to furniture, artwork, and other costly consumer items. A British company called Everledger is using a similar blockchain-based system to “fingerprint” and track diamonds.
Companies like Uproov and BlockNotary are creating apps to let users add photos, videos, and voice recordings to the blockchain. Say you’re in a car crash. Video the damage, upload it to the blockchain app, and you’ll have tamper-proof evidence, including the date, time, and location of the accident.
Blockchain could even offer the ultimate defense against identity theft. A company called Shocard has developed a smartphone app that lets you enter vital data about yourself. The data never leaves the phone, but a digital signature proving its accuracy goes to the Shocard blockchain. If a bank or credit card company needs to know that you are you, the Shocard app transmits a key to the signature. Now the bank’s computer can read the blockchain and confirm your identity.
Hardly any of us use bitcoin. But according to IBM Corp., which makes a commercially available blockchain product, 65 percent of the world’s top banks will be using the technology before the end of the decade for near-instant trading of stocks, bonds, and foreign currencies. And, one way or another, so will you.