What is Blockchain and How will it Change New Zealand?

Blockchain technology graphic with purple connected planet in background

What is Blockchain Technology?

A blockchain, in simple terms, is a protocol for a list of growing records that are linked together using cryptography. These records are bound together to form ‘blocks’, which link up into a string of encrypted data. A blockchain can be millions of blocks long, and they are distributed across the network in a decentralised fashion.

Man in black suit looking at decentralised Blockchain structure

This results in an ultra-solid grid of information, providing the user with a level of trust and permanence that has never been achieved by other data structures before. The blockchain is a foundational technology that promises to bring significant efficiencies to global supply chains, financial transactions, asset ledgers, decentralized social networking and much more. But how is this different from what we already have?

blockchain cartoon graphic with computer bitcoin email money paper calender locks email cloud and the words Blockchain concept

What’s so special about Blockchain technology?

  • The first blockchain created was for the digital currency Bitcoin, and from this virtual currency, we effectively solved the double-spending problem. Until Bitcoin and the first blockchain, ‘digital’ was not synonymous with ‘scarcity’, and anything on the internet could be copied at the click of a button.
  • To work, money can’t be copied and pasted, or else the whole system would fall apart. The Blockchain that was created for Bitcoin was the first time in history we figured out how we could send two bits of data to the same receipt at one time – and only one would be authenticated as legit and sent through.
  • Blockchains are not only good for facilitating payment networks, as theoretically any data consisting of ones and zeros can be stored on a blockchain.

Blockchain image with red and blue dots

Blockchains can be decentralised, just like how the Bitcoin blockchain is.  This means that each of the people hosting the network live and operate in different places, and operate and run the blockchain freely from each other. There are over 100,000 computers running the Bitcoin network around the world, meaning that as long as one person running the network, the Blockchain will live on.

Blockchains like Bitcoin’s is held up by ‘Bitcoin miners‘. These are individuals or organisations around the world who independently run computers that automatically facilitate Bitcoin payments. Every time they facilitate a payment, they receive a tiny cut of the transaction, hence why Bitcoin has a tiny ‘network fee’ when you make Bitcoin payments. These transactions are not authenticated by a bank or government, but by mass collaboration powered by collective self-interests.

blockchain network in space with white network

Then what exactly is a Blockchain?

Essentially, blockchain is an open, decentralized ledger that records its transactions in a permanent way without needing third-party authentication.

  • This process removes the need for intermediaries such as banks or central servers, placing an unprecedented amount of efficiency in the hands of the user.
  • A decentralised blockchain like Bitcoins is virtually 100% censorship-resistant.
  • Blockchains can store more than payment data, and you could record theoretically anything in a decentralised fashion on these networks.

For these reasons, blockchain technology can dramatically reduce the cost of peer-to-peer transactions, as well as massively speed them up. Aside from payments, Blockchain technology is expected to hugely impact the future of automation, ownership and computing.

Multiple laptops tethered to a big gold bitcoin with smaller bitcoins next to it with blue background

How Will Blockchain Change Money?

The way we send money has not changed in decades, and these outdated methods are starting to bite us hard in the butt. When you send your money, it is likely it will go through about five different intermediaries to process and authenticate your transaction. This turtle race can take between four days to two weeks if you’re trying to transfer money across international borders.

With blockchain technology now in our hands, we can send large payments within seconds, anywhere in the world, with extremely low fees and zero intermediaries putting their hands in our pockets. Blockchain has the utility to completely reform the infrastructure for cross-border payments, but this revolution is still in its infancy.

Easy Crypto multiple coins animation screenshot

The worlds current largest payment system when it comes to volume is the SWIFT system, a Belgium based organization who processes around 5 trillion dollars per day, or over 1.25 quadrillion dollars per year. These are mighty numbers in comparison to bitcoin, who has only moved 3.5 billion dollars in metric volume within the last 24hrs on the day this article was written.

To add to this, central governments can print and destroy money as they like, however, cryptocurrencies have a pre-set supply, such as Bitcoin’s 21 million. Some people like to pass this technology off as a fad, or a scheme of getting rich quick, but the reality of it is that these coins are the closest thing we have to a universal currency, and they are not going away any time soon.

Ripple and Swift logos in front of retro world map with connected dots
There are several cryptocurrencies that are direct threats to SWIFT’s monopoly on global payments infrastructure, including Ripple’s XRP and Stellar Lumens XLM. Click on the image to learn more.

Banking the Unbanked

Currently, in the world, there are a whopping 1.7 billion adults who still don’t have access to a bank account. This means they are either already dealing in total mobile payments, they only have government-issued fiat, or they have no medium of exchange at all. This strikes up multiple issues such as security, convenience, government-induced volatility and control over who owns your money.

Now with the number of cellphones accessible to the masses shooting through the roof, electricity accessibility and costs better then it ever has been, and internet access expanding every day, providing accounts and economic independence to this gigantic invisible population is now on the cards. Think of the benefits to these people and the world economy!

adults without access to a bank account statistics from forbes and statista
In India, the number of people without access to banking stands at 191 million while in Pakistan, it’s 99 million. By comparison, the total number of people with no account in the U.S. stands at a still pretty sizeable 18 million.

Blockchains have made Digitally Assets genuinely Scarce

Cryptocurrency like bitcoin has also done something that we have never been able to do before; add real, add value to the bits and bytes in a computer. Before bitcoin, ‘digital’ was not synonymous with scarcity. Anything digital could be copied with the click of a button. A quick look at the music industry and album sales tells this story convincingly.

Now that we can genuinely distribute information between computers, we have created a whole new genre of digital assets; Cryptocurrency, which is nowhere at all paramount in metric value to any of the other major asset classes, yet. Clearly, from the infographics from the last hyperlink, you can see that the blockchains metric value has plenty of space to grow. Good thing there is a finite supply of cryptos! 😉

Bitcoin market cap in comparison to other global asset classess

 

Another under-rated application of the blockchain to the worlds financial theatre is how accurate these transaction records are, and what this can do for book-keeping and accounting.  Because the blockchain is a fully contained record-keeping system in itself, the ability to automate this data is expected to make a profound impact on the quality and ease of the modern accounting system. This is just the tip of the iceberg for blockchains application, so what else can we do with the blockchain?

Various applications of blockchain technology infographic with green cycle

How is Blockchain going to Impact Supply Chain?

Over 100 years ago, supply chains were relatively simple. This is because commerce was local, but jumping to 2018, supply chains have grown to be incredibly complex. Supply chains can have over hundreds of stages, multiple hundred geographical locations, and a multitude of payment systems and several entities and individuals involved.

This has made it incredibly difficult for customers or buyers to truly know the value of products due to a significant lack of transparency. It is also extremely difficult to investigate these complex systems for suspicion of illegal or unethical practices, but this will not be the same for long.

people pointing to various steps on a supply chain graphic

Blockchain infrastructure has the ability to bring all transactions and operations into one transparent system, where products like bacon can be tracked from the shelf at your supermarket all the way back to the location that the pig was born. This technology is expected to make a significant impact on all logistics systems all over the world to improve efficiency, speed, transparency, and control.

birds eye view of a container ship at a port at night time

Blockchain technology in combination with supply chain will profoundly increase the standard for ethical business practices worldwide. For-profit and non-profit organizations would be expected to operate with total ethicality, as all supply chain information could become public, including who they employ, who they are paying and where their products are going and coming from.

Waste emissions would become a matter of public knowledge, companies would not be able to make dirty deals with other countries without civil unrest, political parties would not be able to take dirty donations and charities would have to fulfill the expectation that their money is going to right where they say it is.

blockchain and supply chain info graph with three stages

What is a Blockchain Smart-Contract?

A Smart-Contract is a computer protocol intended to digitally facilitate, verify and enforce the negotiation or performance of a contract.

Smart-Contracts allow the performance of credible transactions without the need for third parties, such as banks, financial institutions, or governments.

Smart Contracts, unlike a standard contract, can operate and execute events autonomously based on a sequence of If / then / therefore protocols. Rather than having to rely on a third party such as a law firm, you can program a smart contract (or get someone to program it for you) to facilitate an agreement and ensure that the obligations of a contract are fulfilled, in a peer-2-peer fashion.

Traditional Contract steps graphic
Here is a basic example of a smart contract:

You’re wanting to pay somebody to remove snow from your driveway, and you find someone online that is willing to do the job. You don’t know this person, so there is no way you can 100% trust in their ability to get the task completed. You are wary about paying up front, and the snow shoveler is wary about not getting paid after. You want to pay 60$ for the job, and you expect it to be done in 3 hours. This is where a smart contract would come into play.

Smart Contract info graphic with 3 steps
A smart contract would be set up as a middle man between your own crypto wallet and the snow shovelers wallet. The conditions of the smart contract are set up so that you initially send 60$ to the smart contract to hold in escrow. The smart contract can only send the payment to the snow shoveler once both you and the shoveler tell the smart contract that the job has been completed. If the job is not completed by a certain time, the money will be sent back to your wallet.

Human and robot arm shaking hands

This seems like a great way to ensure the commitment and execution of an agreement, however, there are several faults in this scenario. What if your snow shoveler brings a flame thrower and melts all the snow in 30 seconds, and that doesn’t sit well with you? What if you weren’t happy with the final job but the shoveler still put in the hours? Due to this reason, it is better to host the smart contract between two parties where outcomes are predictable, such as a supply chain computer system.

Smart contracts utility goes far beyond shoveling snow, and to some, it is called the spearhead technology of our transition into the digital age, among other applications of the blockchain. To learn more about smart contracts, and the company at the forefront of this tech, click here.

Ethereum logo in front of Cables

What is Blockchain Digital Identity?

Identity is a critical component of service delivery, but relying on physical identity in this digital age has become not only inefficient but more importantly unsafe. Physical identity has become a breeding ground for identity theft, fraud, and hacking, and the blockchain can provide a better way to let a system know that you are really you.

You probably have about a billion different usernames and passwords for about a billion different accounts on websites or services, and this can be extremely inefficient, unsafe and downright annoying. You also don’t own your identity on these services, and revoking permission to hold your information from these organizations can be a massive pain. Blockchain backed digital identity can not only provide you with full control over who has your information, but also manage ownership rights to various forms of assets that are currently scattered around various organizations in your name.

Digital Lock with flashy lights on top of a glowing circuit board

Digital Identity is like a digital watermark that can solve this data ownership problem, but identity ownership is just the beginning. As we progress further into the digital ID realm, we will have the ability to link up ownership of other assets to our digital identity, such as the ownership of our cars and the rights to our houses.

Consequently, this will also mean we can track the history of the vehicles or real estate down the day they were built, the year they were serviced and the inherent value of these assets. Blockchain backed digital ID can also be linked to other forms ownership such as intellectual property, debt, equity, voting, communications, and of course, money. To learn more about Digital ID, click here.

If you are looking to get in early and invest in this revolutionary technology, head straight to our Bitcoin page!