What Donald Trump was to US politics in 2015, blockchain was to tech. Both had been knocking around for a while but the last few months of the year saw both rise to a sudden prominence, striding the globe making increasingly extravagant claims – or having them made on their behalf in the case of blockchain.
According to its advocates, blockchain is going to change banking forever, bring about Internet 2.0, and provide the foundations for both the Internet of Things (IoT) and the personal information economy. You never know. Unlike Trump’s self aggrandising pronouncements, some of these might even turn out to be true.
Certainly the word “blockchain” has come up increasingly frequently in interviews I’ve done over the year with knowledgable people in all sorts of areas, such as financial tech, social media, privacy activism and big data. Some of these areas are covered below.
It looks very much as though 2016 is going to be the “year of the blockchain”, so my New Year’s resolution is – belatedely – to find out more about it.
It begins with Bitcoin
For a long time blockchain was synonymous with the crypto-currency Bitcoin. At Computing we watched the rise of Bitcoin with some interest. The consensus in the office was that it would fail, and at first our analysis seemed confirmed with Bitcoin suffering price crashes and exchange bankruptcies galore. However, determined to prove us all wrong, Bitcoin continues to survive and thrive and, grudgingly, about 6 months ago I decided to give it a try. The experience was not an enjoyable one.
Downloading and updating the Bitcoin blockchain on to an admittedly ageing notebook took five whole days, during which my ear was being constantly bent by family members who wanted to use the machine. When that was finally over I chose the Armory wallet and bought £10.00 of Bitcoin. I sent these to another wallet as an experiment, whereupon my Bitcoin disappeared – something that’s supposed to be impossible because with blockchain every transaction is recorded for ever. No doubt I did something wrong, but at that stage I was fed up and handed the laptop back to my Minecraft-addicted offspring. End of experiment.
This loss I would put down to teething problems with a technology that’s still new and a lack of experience on my part. However, it demonstrates that there are are a few usability issues to sort out before Bitcoin is for everyone, the “blockchain bloat” alluded to above being another.
Blockchain is decentralised. Everyone can write to it and no-one can delete from it. The Bitcoin blockchain is a record of every single Bitcoin transaction ever performed. As more transactions occur, so it grows. And grows. And grows. As it has ballooned in size it become impractical for those without high-powered servers at their disposal to host it. Cloud-based wallets are the alternative. They can run on a smartphone, connecting with the blockchain in the cloud, although these are arguably less secure. As part of my resolution I will revisit Bitcoin via one of these wallets – Mycelium is the one I’m considering. Some believe these detract from the original ethos of everyone having direct access to the same system of record. Needs must, though, to be honest.
Blockchain in banks
One circle in which blockchain is frequently mentioned is finance. When Bitcoin emerged, with its promise to cut out the middleman in financial transactions, the banks – being the middlemen in question – were not best pleased. Since that time, though, they have grasped the nettle and have been investing heavily in blockchain to cut out the middlemen of their own in international banking transfers. Santander reckons the industry could save up to $20bn in transfer costs, and all of the big banks are working on their own virtual currencies.
Not to be outdone, the big tech firms are in on the blockchain act too with the Linux Foundation bringing together the likes of IBM, Intel, Cisco and Fujitsu with banking groups and stock exchanges in the Open Ledger project, which should go live in 2016
Bitcoin’s back end, it turns out, is of much more interest than that currency itself.
Towards Internet 2.0
In other conversations I’ve heard blockchain whispered in the same breath as the word “revolution”. If the potential of the technology is all about missing out the middleman, intermediaries don’t come much bigger than the giant data centres that act as the internet’s storage warehouses. A Scottish company, MaidSafe, has ambitions to completely do away with client-server model, replacing it with an autonomous, self-healing peer-to-peer storage network (the SAFE Network). In this model data is shredded, encrypted and dispersed across multiple devices around the globe, be those smartphones, PCs or servers, only to be reconstituted and decrypted when presented with the correct credentials.
In principle this decentralised network is similar to the long-running ET-hunting program SETI at Home, which makes use of participants’ unused CPU power. Instead of the global processing surplus, however, the SAFE Network taps into the surfeit of global storage capacity. This spare storage is used to host the fragments of encrypted data, along with pointers to allow them to be reassembled by a user with the right credentials. The SAFE Network has its own crypto-currency SafeCoin, which users (or Farmers) earn by donating unused storage capacity to the network. Blockchain technologies store the tokens that are the basis of the whole system.
It is – founder and CEO David Irvine told me – virtually impossible for anyone to delete or corrupt data on the network, making data physically secure in a way that is not possible if it is stored in one piece on a server. Firewalls and intrusion prevention systems will be a thing of the past, he insisted, and DDoS attacks against the network will not work. What’s more, the Internet 2.0 will be more anonymous than Tor, and applications running on it will get faster the more data is stored on the network.
Big ambitions indeed. Whether or not any are actually achieved next year (noting that the launch was originally planned for 2014) remains to be seen, but it is certainly an interesting attempt at doing something very radical, and one I’ll be keeping an eye on in 2016.
Making contracts smart
Blockchain facilitates peer-to-peer transactions without refererence a central authority, and the same can be done for contracts. Two parties can agree upon something, program it and enforce it with cryptography.
Smart contracts are fulfilled as soon the agreed conditions are met. Applications include appliances automatically ordering and paying for consumables when stocks are low and smart-locks that open immediately on receipt of payment. Because all transactions are recorded forever, as well as missing out the financial or technological middleman there is potential to skip the legal one, too. Such smart contracts will become common in the Internet of Things (IoT) world, where people will feel uncomfortable allowing Google or Samsung to eavesdrop on their home life, predicts Meeco’s Katryna Dow.
A leading light in the world of smart contracts is Ethereum. This is a programming language that works on top of blockchain that allows you to program contracts without revealing any confidential information about the parties. It was developed by 19-year developer Vitalik Buterin and is one of the most succesful crowdsourced projects of all time.
As the IoT takes off, expect to hear more about smart contracts.
The personal information economy
Blockchain technology’s ability to allow strangers to make secure transactions completely transparently and without a mediator is of great interest to proponents of the personal information economy (PIE). In the PIE individuals control how their personal data is traded and what they get in return.
Blockchains can provide a private digital identity which can be used to login to websites, in the same way that Facebook, Google or Twitter do now, but without the requirement to hand over any data.
Predictions may be for mugs, but I’m pretty sure blockchain will outlast Trump’s presidential bid and probably Trump himself – although possibly not his hair. My resolution, then, is to keep an eye on these and other developments in blockchain. It’s a geeky resolution, admittedly, but at least it should be easier to keep than giving up the booze or striving to be a nicer, kinder person.
If you have any suggestions of blockchain areas that I should check out please let me know in the comments section below, or via email or Twitter.