Blockchains: How they work and why they’ll change the world.

Morgan Peck provides an overview of the tech behind Bitcoin and Ethereum and the potential impact on the financial industry. In 2014, R3 (a group of top financial institutions) explored how the blockchain could be used to “improve the efficiency of payments between banks”. However, in comparison to cryptocurrencies:

Financial institutions are also legally required to protect customer data and control its export across national or regional lines. Given that public blockchains replicate the entire transaction record on every computer in the network, it’s impossible to restrict the chain of custody while using them. Thus was born the “permissioned ledger” approach to blockchain technology. In a permissioned ledger, the identity of people adding blocks is known, and data in the system is viewable only by selected parties. Because the right to create new blocks is assigned by the people who run the code rather than by a lottery, there is no need for proof-of-work mining or a cryptocurrency to pay for it.

Furthermore, Peck discusses the problems around smart contracts → blockchains can’t store much data and are unaware of what is going on in the real world as blockchains were never designed to query websites. This means all external information needs to be “injected” in by a “trusted” third party. For example, if a smart contract is a “flight insurance system”, information on whether a flight takes off and lands would need to be “injected” into the system.

Also, in the context of healthcare, a recent Black Book survey finds that “blockchain is increasingly being viewed as a potential solution to numerous IT problems, such as connectivity issues, data privacy concerns, and patient record sharing barriers”. Interestingly — the findings point out the “lack of technical standards” is causing “regulatory uncertainty” — which is perhaps causing the slow adoption.

Side note — can blockchain revolutionise archaeological data?