Blockchain Beyond Bitcoin
By: Sanket Kumar Mishra
Tags: Blockchain, Bitcoin, Dlt, Decentralisation, Distributed

Blockchain powers the popular cryptocurrency Bitcoin. And Bitcoin Mining is the buzz these days. The first thing that comes in our mind when we hear the term Blockchain is Bitcoin. But these are two different things interconnected with each other. Blockchain is the concept and Bitcoin is the implementation. Blockchain provides such a platform where Bitcoin overcomes all the issues of traditional banking. Let us look at these in detail.

Decentralised manner →

no company

no government

no authority

no gatekeeper

no person

no place

no bottleneck

that you need to interact with to exchange value / get what you want. Instead you can connect with other people on the network to get all of this, and the collective of the network establishes the rules, terms of service etc.

Distributed Public Ledger

Every single person on the network has a copy of the ledger. There is no single centralised original copy. Ledger here means the copy of all the transactions that ever happened.

Blockchain is a distributed database that stores all the Bitcoin transactions that have ever happened in the history of Bitcoin.

Hash Encryption

Everything stored on the Blockchain is encrypted. This way, everyone is able to see all the transactions but at the same time no one will know which of those accounts belongs to you.

Proof of Work

Proof of Work is a concept invented in Bitcoin Blockchain where in the miners (special users of Bitcoin) will validate transactions by solving a complex mathematical puzzle called Proof of Work. Technically, there is a hash target value designated to every block before time.Miners club together a set of unverified Bitcoin transactions (around 250) into one block, compute its hash and then begin a race to find a specific set of characters called Nonce. The total hash obtained from the hash of the previous block, transaction data and the nonce has to match the final pre-assigned target hash value. It is this Nonce which is computationally extensive. Only people with huge computational computing power and electricity are able to solve it in 10 minutes on average.

Blockchain is a public distributed database holding encrypted ledgers. This means, a block is the ‘current’ part of a blockchain which records the recent transactions. Once it is verified, it becomes a permanent part of the growing blockchain.Bitcoin is just one of the applications of Blockchain. But does blockchain make sense without cryptocurrencies? It’s a question worth asking, and FreightWaves reported from the Digital Chamber of Commerce’s Blockchain Summit in Washington, D.C., where the issue was discussed. It’s a question worth asking because, after all, the ideas of blockchain and Bitcoin were invented simultaneously. Satoshi Nakamoto (a pseudonym of an anonymous person) wrote his now-famous 2008 white paper to propose a solution to the double-spend problem in digital currencies. The double-spend problem is essentially this: say I’m using a digital currency to buy something online. What is there to stop me from spoofing transactions, and spending the same digital dollar twice? And if I give two different parties a digital dollar with the same ‘serial number’, who is holding the authentic money and who’s holding the counterfeit? Satoshi’s solution was to create a distributed ledger so that many, many computers held a record of the Bitcoin transaction history Satoshi wrote, “We need a way for the payee to know that the previous owners did not sign any earlier transactions, we need a system for participants to agree on a single history of the order in which [transactions] were received”. The system involves cryptographic hashes, a process that takes an arbitrary size of input data (a text file, or an MP3, or a video), runs it through an algorithm, and generates a 256 character output — the ‘hash’. The particular way that the hash algorithm works makes it essentially irreversible… in other words, it’s very easy to take input data and generate a hash (and the algorithm always generates the exact same hash for the data), but it’s virtually impossible to reverse-engineer the original input data from the hash.

In government for example, blockchain technology has many use cases in which it can help achieve better efficiency and transparency, which do not have anything to do with cryptocurrencies. Recently, the Indian Finance Minister Arun Jaitley acknowledged blockchain’s potential, stating that the Government will “explore the use of blockchain technology for ushering in digital economy”. Investors can invest in blockchain by purchasing blockchain startup stocks. There are many stocks of blockchain companies that are traded on global stock exchanges. For example BTL group, a North American based blockchain service provider.

In U.K. Coinsilium group limited was the first IPO by a Blockchain company in the world.

Uses of Blockchain

1. Transfer money

Bitcoin has been described as “blockchain’s first use case”, and with good reason. For more than 40 years, since David Chaum’s DigiCash, economists have been seeking the holy grail of a digital currency that can eliminate the problem of double-spending and circumvent the issue of needing to trust an unknown third party. When Satoshi’s famous White Paper was published in October 2008, few people realised its impact at the time. Eight years on, the Bitcoin blockchain has still not been hacked — and you really need to try using it for yourself to realise how simple and how amazing the protocol is. The convergence of mobile payments, particularly in the African market, with cryptocurrency, is a niche to watch… companies such as BitPesa are leading the charge here.

2. Make micro-payments

Closely related to 1, the ability to use blockchains to transfer minuscule amounts of money is a potential game-changer. Whether you’re talking about in-app payments of a fraction of a cent, microgrid transactions or household appliances moving towards a pay-per-use rather than an ownership model, being able to make tiny payments using cryptocurrency without incurring bank fees that exceed the original payment is a huge opportunity.

3. Lend people money

Peer-to-peer lending is one of the fastest-growing areas in personal finance, with users attracted by the opportunity to make a return on their savings in a low-interest environment while enabling other users to borrow at a sensible rate — and all without giving the bank their cut. In contrast to fiat competitors such as Zopa and Funding Circle, BTCJam allows users to do all of the above, but with Bitcoin.

4. Pay your parking fines

Last year, New York City councilman Mark Levine suggested that recalcitrant motorists in New York should be able to pay for parking tickets not only with ApplePay, but with Bitcoin.

No news yet on whether this will actually happen, but in the context of BitLicense, it’s an interesting aside.

5. Consume content

The rise and rise of ad-blockers has thrown the traditional business model out of the window. All-or-nothing paywalls have proved successful for a few publishers, but research has shown that users are more prepared to reward content creators if the process is seamless and if they can pay only for what they consume. Startups such as London-based Smoogs, Berlin-based SatoshiPay and Yoursprovide an easy way for writers, film-makers and other content producers to be paid for what they do. The groundbreaking Brave Browser is yet another example.

6. Charge an electric car

Small, incremental payments are good for more use cases than just content consumption. Traditional car-charging stations normally require drivers to pay in fixed increments, regardless of how much electricity is consumed by the car’s battery. Additionally, for electric rental fleets, the hire company needs to develop software to track the charge left on the battery, or to do this manually. Imagine a system where every electric vehicle has a chip that allows it to pay directly for exactly the power it consumes, and where all the driver has to do is top up the payment allowance from time to time. German energy giant RWE developed exactly this pilot scheme with Ethereum pioneers slock.it, allowing electric cars to charge while waiting at the traffic lights.

7. Certify a supply chain

Many consumers would prefer to make ethical choices about the products they buy. Recent scandals such as the sale of horse meat as beef in the UK, and revelations about the poor conditions of garment workers in developing countries has pushed this issue into the headlines. However, proving the origin of every component in a product can be impossible, and even if this information is held by a centralised authority, it may not be trustworthy. London startup Provenance offer decentralised supply chain certification.

8. Share electricity with the neighbours

It should be the easiest thing in the world to do. Take one street that has a sunny side and a shady side. The lucky people on the sunny side of the street have solar panels on their roof. It’s more efficient to use electricity close to where it is generated, so instead of selling the excess power back to the grid (which most networked domestic solar installations do), imagine if the owners of the houses with excess power could sell it on the local market. Unfortunately, this would normally come at a cost, with the homeowners having to agree a price among each other and monitor the amount of electricity being used. The MicroGridproject in New York’s Brooklyn solves this requirement by allowing the households to buy and sell energy via smart contracts on the Ethereum blockchain. No independent calculation or monitoring required.

9. Prove your identity

A reliable digital identity system is the Holy Grail of our connected world. We already live so much of our lives online, but it all comes to a grinding halt as soon as we need to somehow connect our carefully honed digital identity with our presence in the physical world, verified by some kind of government-issued paperwork or proof of existence at a particular address. Meanwhile, as we struggle to maintain our credit records and prove who we are to employers, banks or car rental companies, private corporations are making money from selling our data: data which belongs to us as individuals, and which we should be able to monetise. Too many organisations to mention are working on digital proof-of-identity schemes, many of them blockchain-based. Deloitte’s Smart Identity System is probably the best known.

10. Let your household appliances pay for things

IBM’s ADEPT [Autonomous Decentralised Peer-to-Peer Telemetry] research project was one of the first Blockchain/IoT proposals, and certainly the highest-profile of 2015. The idea of a blockchain on which a household appliance is registered at the point of manufacture, and which has some kind of autonomous identity which it can use — for example — to purchase consumables such as washing powder, is a powerful one. As the white paper itself notes, scalability is (and remains) the major barrier: “A blockchain to cater to hundreds of billions of devices needs to be scalable…”

The SPUR scheme under development by Quantoz is based on these principles.

11. Prove ownership of an asset

If someone steals your car in most countries of the world, there’s a reasonable chance it will be traced or recovered. Most governments operate some kind of registration scheme based on licence plate and/or chassis number. But what if your stolen possession is a bike? A jetski? A luxury handbag? A drone? Such high-value portable assets are easy to steal and also to remove from a particular geographic area where they may have been registered. Our startup Mamoruaims to provide a global standard for proof of ownership.

12. Issue shares

Overstock CEO Patrick Byrne is a long-time Bitcoin advocate, and the retailer already has its own issuance and trading platform, t0. At Money2020 this week, Overstock announced that stockholders would have the opportunity to subscribe for shares of its Blockchain Series A Preferred, which will trade exclusively on t0.

“Through this public issuance of blockchain-based securities the history of capital markets is entering a new era, the era of blockchain-based securities”, said Byrne.

13. Execute an equity swap

Enterprise blockchain technology firm Axoni recently conducted a test of OTC smart contracts for equity swaps involving institutions such as Barclays, Citi and JP Morgan. “Using a blockchain you have a reliable record of who signed to the transactions and when each action was taken, so what you end up with is this distributed data store with a valid, provably gold version of the trade,” said CEO Greg Schvey.

14. Issue money from a central bank

The idea of a cashless society is hugely appealing to governments around the world. Not only does it circumvent the need to print notes and mint coins, but it also means an end to the anonymity of cash, and provides a way to track the spending of individuals. Various central banks have flirted with the idea, but the Bank of England has gone as far as endorsing an independent study at University College London which proposed how cryptocurrencies might be issued by such an authority.

15. Smooth the shipping process

Shipping across national borders generates so much paperwork that it can be measured in whole kg (or pounds, if you prefer imperial). When shipments are delayed, it can cause an impact on the whole supply chain as factories wait for components, and in some cases (for example, perishable goods), it can affect the viability of the whole shipment. Days of time and huge administration costs are tied up in producing bills of lading, so there was plenty of interest when shipping giant Maersk recently announced a blockchain-based bill of lading proof of concept.

16. Authenticate sneakers

San Francisco startup Chronicled hit the headlines when they partnered with high-end sneaker manufacturer Mache Customs to produce a range of smart-tag-enabled shoes in honour of Kanye West. Busting the counterfeit trade is one of their stated aims.

17. Run a decentralised marketplace

Open Bazaar is widely seen as a successor to Silk Road, but it is far more than that. Silk Road was a website on a server hidden by the Tor network. The FBI was able to track it down, seize the server, and arrest those involved. In contrast, Open Bazaar is a peer-to-peer network like BitTorrent. You can download the software and set up your own storefront. It’s worth mentioning that Open Bazaar does not explicitly endorse selling illegal items. From their FAQ: “Sellers on the OpenBazaar network host their own products and are therefore directly responsible for complying with local laws (and their own conscience) when listing items or services. Users engaged in illicit activity cannot hide behind a third party service.”

18. Register music copyright

Channelling income from music to the artist who created it is a huge global challenge. Often, the administrative costs of recovering royalties exceed the amount due. Friction caused by cumbersome payment processes mean that fans who would otherwise be prepared to pay to consume music end up illegally downloading content, just because it’s easier.

Singer-songwriter Imogen Heap, assisted by various Ethereum people, announced the launch of Mycelia in July to address this problem. Billed as ‘fair trade for the music industry’, it aims to offer extra functionality such as allowing fans to pay for additional content, and targeted pricing, such as allowing charities to use tracks at a lower or zero cost.

Swedish startup Zeptagram are also operating in this area.

19. Vote

The idea that we are still voting with pens and paper in 2016 is an anomaly. But electronic voting — whether at local or national government level, or in the context of corporations — is justifiably regarded with suspicion as the results seem open to manipulation without the relevant oversights. Because of the transparency offered by public blockchains such as Bitcoin or Ethereum, proponents of open government are vocal about the advantages of blockchain-based voting. Nasdaq has already announced plans in Estonia to allow corporate shareholders to vote and various startups are developing e-voting machines for state and national elections that work in a similar way.

20. Register land rights

Maintaining a national register of land ownership is an expensive and labour-intensive operation. Additionally, in countries where there is a history of government corruption, they may not always be trustworthy. Factom were widely reported to be working on a solution with Honduras to come up with a proof of concept for a blockchain-based land registry. This proved to be less concrete than originally reported and the project has stalled, but someone, somewhere will implement this one day.

21. Execute a legal contract

Code is not yet law! Remember this. But some legal firms are so convinced that one day this will be the case, that they are already making the first moves in this direction. London law firm Selachii have already announcedplans to launch digitised agreements based on blockchain technology.

22. Run a prediction market

The decentralised prediction market Augur is a brilliantly simple idea. Their platform allows you to make predictions by trading virtual shares in the outcome of events happening in the real world, such as the upcoming US election. If you buy shares in the correct outcome, you make a profit.

23. Manage a swarm of robots

This sounds pretty sci-fi, but is rather more based in fact than the title suggests. Increasing automation means that all kinds of industries, from farming to manufacturing, are now predicted to rely on large numbers of robotic labour. MIT Media Lab affiliate Eduardo Castelló Ferrer explains his rationale in this white paper.

24. Manage healthcare records

Think of any sector where there is an overriding need for non tamperable data and a clear audit trail, and one of the first to come to mind is healthcare. Various startups are competing in this space, as this Bitcoin Magazine story describes, but one of the more interesting is the Factom/ HealthNautica partnership in which they “are looking to secure medical records and audit trails. This is done by encrypting the data onto the Bitcoin blockchain with a timestamp to verify its accuracy. The records can’t be changed and, because it is hashed to the blockchain, it can’t be accessed without permission. HealthNautica hopes to improve efficiency of claims processing and certainty that the records have not been changed.”

25. Certify students

In a world with a mobile labour force, verifying academic qualifications (which are often needed for work visas) can be a slow and painful process. Vietnamese architect applying for a job in France? Russian developer seeking work in Germany? When universities have to be contacted individually and employer references verified over the phone or email, these processes consume time and money. Imagine a world where your certifications were written into a secure global data structure where they could not be deleted or altered. MIT wrote an interesting post about their certification architecture. Similarly, London’s B9Lab certify successful graduates of their excellent blockchain developer course with an entry into the Ethereum blockchain.

26. Trade cryptocurrencies

Bitcoin is not the only cryptocurrency! Hundreds of other cryptocurrency blockchains exist, although the majority of these are either defunct or carry virtually worthless tokens. A host of exchanges, some more reputable than others, have sprung up to cater for those which are worth trading: Bittrex, C-Cex and Poloniex are some of the popular options. Check out CoinmarketCap for an exhaustive list. And of course, I can’t resist mentioning my own altcoin portfolio tracker, CountMyCrypto. Since my friend Bruce and I launched it nearly three years ago, we’ve seen countless coins and exchanges spring up and die, and enough drama to put a soap opera to shame.

27. Rent a car

The car rental process is often more cumbersome than it needs to be, with insurance documents and identities that need to be verified, and vehicle mileages and damage reports that are still manually verified in many cases. This is how DocuSign described their smart contracts trial for car rental, in conjunction with Visa’s innovation team.

28. Verify your work history

Closely aligned with student certifications on the blockchain, the idea of a careers networking API based on a blockchain is one that’s been around for a while. At Mamoru, we’ve been working on this, since we won a BlockchainX grant from Wanxiang Blockchain Lab earlier this year.

29. Get compensation for flight delays

When the Ethereum DevCon2 conference happened in Shanghai earlier this month, attendees who flew to China from all over the world were notified of an interesting opportunity before the event. The Flight Delay dapp trialled a new proof of concept that allowed travellers to share the risk in the event of flight delays. Stephan Karpischek wrote a good post about the results of the experiment.

30. Buy beer

Ok, so this is really a subset of use case #1, but you can’t be in Berlin and not mention Room 77. It’s a piece of cryptocurrency history, as the first bricks-and-mortar establishment anywhere in the world to accept Bitcoin. And, of course, it’s also a favourite haunt of Mamoru and all the other awesome Bitcoin and blockchain startups based in Germany’s capital city.

To conclude, the fact that the blockchain protocol provides platforms for both good actions and bad actions does not mean that it is a neutral technology. In its purest form it promotes a redistribution of power from central actors across wide communities of peers. While the most idealistic and revolutionary visions of blockchain development will probably remain no more than visions, even moderate implementation of blockchain may still promote some degree of redistribution and transparency. As Glyptis notes, blockchain will not make better people, but it might make some of the precautions necessary in people’s daily lives faster, cheaper, more secure and more transparent.

“Have a blockchain project in mind? We love brainstorming with you on creative ideas. Reach out to us at hello@acycliclabs.com”.