Proponents say blockchains allow databases to be shared between entities who have no reason to trust each other, and without a central authority or clearinghouse.

Blockchain-based databases are modified via ‘transactions’. While centralized database transactions and edits are created or overseen by a central authority, blockchain transactions can be created by any users. The database provides rules and standards to verify and confirm transactions, to deem changes to the record as legitimate, not fraudulent.

Smart contracts are celebrated as part of blockchain technology. Smart contracts are a method for restricting transactions in a database. Though proponents claim they will one day be able to do much, this is little more than a forward looking statement at the present juncture.

Thanks to new ways of securing and authenticating intellectual property with greater efficiency, blockchain could fundamentally transform the way businesses manage records.

Provenance

Provenance refers to the custodial chronology or history of ownership and transmission of an object. Provenance is important to markets, such as art, where it refers to the detailing of auction houses, dealers, or galleries that have bought and sold an item, as well as private institutional collections in which an item has been held, and exhibitions where the item has been put on display. Provenance also applies to artifacts or real estate.

The need to authenticate can help determine which party owns an asset prior to any further business regarding that asset. This ensures the asset is not counterfeit. There are numerous blockchain companies dedicated to provenance.

Financial institutions see the potential here, as well. Distributed ledger consortium R3 and Hyperledger have trialed blockchain for provenance systems.

“Distributed ledgers (and specifically blockchains) facilitate a framework where all parties privy to the ledger can evaluate the provenance of the information in it to determine if there has been tampering,” wrote blockchain consortium R3CEV in its blog.”In theory, a distributed ledger prevents the more obvious types of data tampering by validating information submitted to the ledger with a unified protocol and replicating all valid data across nodes. This feature makes them more appealing to trading partners than having data managed by a third party.”

Company Record Keeping

A use explored by many-a-blockchain startup is the technology’s applications towards company record-keeping. Similar to the provenance use-case, records kept via a blockchain are claimed-to-be immutable and cannot be changed. They cannot be deleted and are highly secured thanks to decentralization.

In such a system, documents might be stored, for example, with “Asymmetric Key Cryptography”, making the documents unreadable to anyone without the private keys. Only the key-holder(s) could unscramble documents using the passphrase. Recordskeeper.co is one startup exploring the possibilities in this space.

Record keeping has struggled historically with problems of trustworthiness of the systems deployed by companies, and the neutrality of the record-keeper him-or-herself.

Italian banking group Banca Intesa Sanpaolo tested a Bitcoin blockchain-based system as a means of validating records of trading data. The bank worked with Deloitte, which believes blockchain technology could be “the next step” for accounting.

“Instead of keeping separate records based on transaction receipts, companies can write their transactions directly into a joint register, creating an interlocking system of enduring accounting records,” writes Deloitte in a report on blockchain. “Since all entries are distributed and cryptographically sealed, falsifying or destroying them to conceal activity is practically impossible. It is similar to the transaction being verified by a notary – only in an electronic way.”

Lightweight finance

Financial blockchains like bitcoin demonstrate blockchain’s first use-case: transacting. The second public blockchain to receive attention, Litecoin, was marketed as a better channel for lightweight transactions than Bitcoin, which had been understood by many to be a type of ‘digital gold’.

Proponents cite blockchain’s cost savings, efficiency, security, flexibility and competitive advantage as the reasons why it could transform diverse industries. For now, provenance, company record keeping and lightweight finance are the frontiers of blockchain closest to legitimate use cases.

Picture from Wikimedia Commons.