Blockchain tech is all about establishing trust and leveraging that trust in building business relationships
Few technologies have upturned and seduced the minds of finance executives more profoundly than distributed ledgers, commonly referred to as Blockchain technology. This comes as no surprise given the success of Bitcoin, the world’s first truly global digital currency.
Most hypes find their origin in a singular prototype or story. Bitcoin has the characteristics of both a fairy-tale and an epic experiment that just so happened to grow to massive scale. The anonymity of its creator is nowadays commonly known, as is its decentralised nature. Just like with many innovations, this first manifestation of Blockchain is no longer the big show. The technology instead inspired the minds of many to find similar, universally valuable use cases above and beyond its original purpose. Some eight years after its humble origins in 2008, Blockchain has become the new silver bullet for how the future of everything should look like.
A lot of that attention is well deserved. Blockchain has quite a couple fascinating use cases a simple database is unable to match. For instance, it can technically enable a peer-to-peer insurance model with zero intermediation and manual intervention. This is a rather well–accepted use case, and many more emerging ones are being evaluated as I write these lines.
Yet, that is only half of the picture. More than the technology itself, it is the philosophy associated with Blockchain that fuels its notoriety in the innovation domain. I belong to the camp that believes economics is a social science, and many innovations that have economic impact are quite simply impossible to explain unless we take into account the social context in which they rose to prominence.
The era of Blockchain should be viewed as a direct descendent of the mobile age, which, enabled by the internet, added layers of digital experience into our daily lives. It appears to be a foreshock to the digital identity revolution, in which the physical and virtual version of people and things become fully integrated and seen as one and the same.
Unless you live under a rock, you will have begun to notice increasing convergence of physical and digital worlds. Technology nowadays comes in all kinds of humanoid vernacular – personal assistants, live chat attendants or robots that give interviews and sell life insurance.
Similarly, there is a digital layer to many of the products and services you consume on a daily basis. Think smart food packaging furnishing data on the produce inside, the Amazon button that reorders detergent with each press, or blatantly obvious improvements such as using your smartphone as an air-conditioning remote control (seriously, what took manufacturers so long to figure this one out?).
Right now, we may still perceive digital as a layer on top of the real world, but that will change in due course. Start-ups like OTONOMOS are virtualising company incorporation with smart contracts, a manifestation of Blockchain that turns legal contracts into pieces of code recorded and executed in a decentralised, technically tamper proof manner.
Similar advances have been made in property management – once ownership of a piece of real estate is recorded on a Blockchain, its provenance is transparent at all times, and trusted ownership transfers can happen instantly and at virtually no cost. At the moment, pilots are run to see how well this works in practice.
From a social vantage point, the virtue of Blockchain extends beyond its potentially revolutionary ability to maximise trust and minimise transaction cost in the realm of high-value commercial transactions – such as equity or real estate deals.
The key term here is provenance – or knowing with certainty where stuff comes from. Provenance is an essential pillar of human society. From passport to family name, degree to job title, provenance is the defining principle of our identity. In a world of abundant data, this idea is being reimagined. What better ways to identify, define or trace than our digital footprints?
This is where dated physical identity merges with real-time digital identity, and Blockchain technology could be the glue between these two. As objects receive a unique digital identity, establishing provenance is more important than ever to manage the added complexity of objects interacting with people and each other.
One of the by-products of our digital-enabled society is the return to an emphasis on personal interactions in commerce. Like in the old-days, we increasingly care about who made the things we consume every day. We are gradually moving from mass-produced, standardised goods to customised and personalised options.
It appears as though the digital revolution enables us return to an economy of personal connection, like it was customary before the industrial revolution. Back in the day, you entertained a close relationship with your butcher, shoemaker or banker – and this meant you trusted them and the provenance of their goods and services. The return of personal connection to our daily economic lives has been termed the relationship renaissance.
If the link between farm-to-table and cryptocurrency is too abstract for you, consider buying a second-hand car. Unless you buy it from a legit dealer, you have very little certainty that what you are buying corresponds to the description furnished. Even the dealer appraisal will require some guesswork, and checks performed will be costly.
If, on the other hand, you had access to tamper-proof evidence of past ownership, mileage run, major impacts sustained and other key vehicle metrics, your purchase decision would be much safer and easier. The ability to record such data is already present – with Blockchain, it can be used to create a trustworthy, bullet-proof trail of provenance.
At least so goes the theory – and as with any transformational technology, we are only just beginning to explore the possibilities. Application areas are vast, from recording every flight performed by an aircraft for safety and valuation purposes to geo-tagging truffles when they come out of the earth: Digital provenance ensures maximum traceability and fair valuation at significantly lower fraud risk than with conventional means.
Human life is built on identity – without a passport, identity card or citizen registration we are considered non-existent. We also have a need and right to know the identity and origins of the products, services and objects we procure and trade (as well as the people we interact with). Making sure things and people are what they appear to be has always been a massive challenge. Now, we are about to revolutionise how that is done thanks to digital provenance and identity. Blockchain technology can serve both as a decentralised virtual notary public and a custodian and might eventually remove the need for such.
Once we know with certainty who owns what and who we have in front of us, many of the administrative bottlenecks we deal with frequently – such as immigration queues or even security checks – might become a thing of the past. It is a similar story with a great deal of legal disputes, and the often substantial costs involved in processing transactions or vetting identities and provenance through trusted intermediaries.
If this article has enhanced your perspective on Blockchain and the role it plays in the transformation of identity from a centralised physical to a decentralised digital status quo, my work for the day is done. If not, perhaps you can entertain your next dinner party guests with an anecdote on how distributed ledgers can save you from blowing a couple grand on surrogate Périgord truffles that actually hail from a forest in China.
Philipp Kristian is an innovation leader in Singapore and expert in building trust and value in the digital age. His eclectic experience spans across innovation strategy in Fortune 500 financial services, startup advisory and entrepreneurship, and he currently focuses on Fintech and Insurtech. From blockchain to artificial intelligence, smart contracts to chat bots, robo-advisory, alternative investments, to reimagining insurance altogether, he is deeply immersed in pioneering initiatives.
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