Bitcoin was heralded as the first big, independent currency alternative. It wasn’t centralized or centrally controlled like PayPal and other digital currencies. It offered a unique combination of anonymity and accountability. You could buy anything, and in theory, the cryptocurrency couldn’t be stolen. Bitcoin has had its rise and fall, and it spawned dozens of cryptocurrency rivals. However, it is the blockchain on which Bitcoin was based that has the real-world impact and presents the greatest opportunity. Let’s look at some of the other applications of blockchain.
Is that really the deed to your house? Is this contract fully funded before we sign the paperwork to transfer ownership? Are these good legitimate, and is the person I’m paying really a representative of the organization that makes and distributes them? Blockchain is an excellent way to prove the authenticity of goods, track them as they move through the supply chain and verify payment and identities along the way. This is one of the non-cryptocurrency blockchain applications of greatest interest to financial institutions and large businesses.
The Potential of Smart Contracts
Blockchain has the potential to revolutionize intellectual property. You could tie use of software and images to blockchain, ensuring that the creator is either paid or given the attribution they require. This means that authors, photographers and other content creators could tokenize their content and prevent its use without payment. Smart contracts tied to data can also be used to prevent pirating. This technology has already been used to control 3D printing files. You pay for the 3D printing instructions with a smart contract. You’re able to download the file and print it a set number of times. The 3D printing instructions can’t be posted on the internet for someone else to use. Smart contracts can be used in other ways. It can record and document transactions while protecting anonymity. This has been used in online gambling and betting pools.
Financial Transactions Beyond Sending Money
Blockchain can be used to facilitate financial transactions that go well beyond sending money across borders without currency conversion fees. Blockchain can be tied to smart contracts that automatically distribute money when a certain amount of currency has accumulated in an account. It can automatically distribute funds to investors in an agreement.
This has the potential to dramatically lower accounting costs. Once the rent or royalties are received, the money is automatically divided among those who are due their share. If there are any concerns, the money trail is auditable. A side benefit of smart contracts tied to blockchain is that it allows people to sell shares without registering with various government entities. You could sell shares of a small business, a fraction of your home’s equity or your stake in an investment scheme. This makes it much easier for lenders and small investors to sell their shares to others, and there is far less paperwork for everyone involved. This is in sharp contrast to the expensive process of setting up a partnership or LLC with lawyers and accountants to collect and distribute money. And in these cases, it is almost impossible to sell your stake unless it is to someone already involved in the business.