While the cryptocurrency Bitcoin excited investors and speculators in the final weeks of 2017 with its steep appreciation in value, it is its associated blockchain technology which has excited corporations, entrepreneurs, and governments with its promise of improved efficiency and security for a wide range of economic, social, and even political applications.
As David Boyle explains, the blockchain “is an essentially unchangeable form of bookkeeping” that is built from “cryptographically chained signatures between blocks of information that are authenticated by users over a peer-to-peer distributed ledger — a public record that can be applied to any type of bookkeeping, not just cryptocurrencies.”
With the blockchain, all changes are cryptographically recorded, allowing for an unprecedented level of security and transparency: “In a blockchain system … every line is contingent on what came before it. Any breach of the weave leaves a trace, and trying to cover your tracks leaves a trace … The blockchain makes every footprint immediately noticeable, regardless of the source … There is no possibility of a back door.”
Such security and transparency create opportunities for corporations to reassure consumers on the authenticity and safety of their products. In the food sector, for example, the blockchain would allow a customer checking “a piece of fish in the supermarket” to “instantly see secure records of its entire path through the supply chain, from the technique used by the fisherman who caught it in Indonesia to when it was shipped and how it was processed at a factory in your home country.”
In major markets like China which have developed heightened consumer expectations for product authenticity and safety, corporations are investing in blockchain technology as a means to attract greater market share through the technologically-mediated security and transparency of their supply chains.
For example, a consortium consisting of Nestlé, Wal-Mart, Unilever, Dole, Tyson Foods, and other corporations is working with IBM to build a blockchain platform to track the supply chains of their food products and thereby “strengthen consumer confidence in the global food system.” The traceability of the food supply chains facilitated by blockchain will be “critical to ensuring the global food system remains safe for all.”
Wal-Mart, one of the consortium members, has already staged trials of the blockchain platform: “In May, it successfully validated the use of the technology by being able to successfully trace pork products from one farm owned by Chinese meat producer Jinluo, to a Walmart distribution centre in the capital, Beijing. It has also run similar pilots in the US to trace mango from plant to store shelf.” Wal-Mart has also found significant efficiencies with the blockchain platform, with, for instance, the time needed “to track the meat’s supply chain … cut from 26 hours to just seconds using blockchain.” In view of this, Wal-Mart is expanding “the scope of the project … to other products.”
Garment manufacturers are also investing in the development of a blockchain platform, and a pilot project completed earlier this year allows customers to track online “a piece of clothing — an Alpaca Mirror Jumper from London-based designer Martine Jarlgaard, from a farm in Dulverton, Britain, through every step of production into London with location, content and timestamps.”
While entrepreneurs and corporations around the world are exploring various uses of blockchain technology, the post-Soviet Baltic country of Estonia has gone ahead with a large-scale deployment of the blockchain in its government services.
Corporations also see blockchain technology as potentially delivering significant cost savings. In the logistics sector, for example, shipping companies are exploring the deployment of blockchain technology to reduce the expense of trade transactions. As Tim Sandle notes, almost “200 different communications steps involving around thirty different interested parties” are involved in shipping “a container by sea from Mombasa, Kenya to the Port of Rotterdam, Amsterdam.” This complex chain of communications creates significant inefficiencies: “Each one of these steps takes time (which, in economic terms, represents a delay in time-to-market) and costs money, either directly in terms of fees or indirectly in terms of time wasted. Moreover, such a labyrinthine system is prone to deliberate fraud or accidental miscommunication.”
The Dutch shipping company Maersk is hence working with IBM to develop a blockchain platform which will control the “the supply chain process from beginning to end,” thereby allowing the end user to “manage and track a documented trail comprising of tens of millions of shipping containers throughout the world.” This would “enhance transparency and introduce a faster and considerably more secure means for sharing of information from one trading partner to another.” When complete, the platform “will be made available to the entire global shipping industry, bringing with it a potential to save the industry billions of dollars.”
In the social sphere, antipoverty activists see blockchain technology as a powerful new tool in the global fight against poverty. The Peruvian development economist Hernando de Soto and the American bitcoin entrepreneur Patrick Byrne have initiated an ambitious antipoverty project based on using the blockchain to guarantee property rights, thereby securing the material foundations for the poor to build future prosperity for themselves and their families: “Even if poor people hold property, their ownership is often based on informal rights rather than any official government ledger — and their homes and land can be seized by big companies or government officials.” However, a blockchain platform “will let poor communities record their formal and informal property rights in a permanent manner — without government interference.” As De Soto notes, once your property holdings are securely recorded, “you can get credit, you can advance.”
In the political sphere, blockchain technology has obvious application for the construction of a secure online voting platform. As Joe Liebkind explains: “a blockchain-based voting application does not concern itself with the security of its internet connection, because any hacker with access to the terminal will not be able to affect other nodes. Voters can effectively submit their vote without revealing their identity or political preferences to the public. Officials can count votes with absolute certainty, knowing that each ID can be attributed to one vote, no fakes can be created, and that tampering is impossible.” As blockchain entrepreneur Santiago Siri points out: “The blockchain is incorruptible, no one can modify or subvert how the votes are stored, and that’s vital for democracy.”
While entrepreneurs and corporations around the world are exploring various uses of blockchain technology, the post-Soviet Baltic country of Estonia has gone ahead with a large-scale deployment of the blockchain in its government services. As Nathan Heller explains, blockchain technology provides a key layer of security for the Estonian government’s data platform which “links individual servers through end-to-end encrypted pathways, letting information live locally” instead of in a centralized database that leaves the information open to the risk of a massive breach. Thanks to the blockchain, data privacy of Estonians is strictly policed: “A tenet of the Estonian system is that an individual owns all information recorded about him or her. Every time a doctor (or a border guard, a police officer, a banker, or a minister) glances at any … secure data online, that look is recorded and reported. Peeping at another person’s secure data for no reason is a criminal offense.”
The blockchain also guarantees the integrity of public information in Estonia, thus ensuring a remarkable level of transparency: “Finding the business interests of the rich and powerful — a hefty field of journalism in the United States — takes a moment’s research, because every business connection or investment captured in any record in Estonia becomes searchable public information … An online tool even lets citizens map webs of connection, follow-the-money style.”
Other governments are also looking to blockchain technology to improve their services. In Singapore, for example, the Monetary Authority of Singapore (MAS) is working with local banks to develop a blockchain platform for inter-bank payments. The MAS is also working with the Hong Kong Monetary Authority and the Bank to Canada to deploy blockchain technology to improve the efficiency and security of functions like trade finance and cross-border payments.
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