Blockchain and the implications for doing business online

It would be very brave or foolish, depending on your point of view, to try to predict whether this incredible increase in the value of these cryptocurrencies is a bubble. This could end up being another Dutch tulip bubble when in the 17th Century speculators were prepared to pay the price of a house for certain tulip bulbs, just prior to a spectacular crash in values. Only time will tell.

What most expert commentators agree on is the technology underpinning them, the blockchain, is here to stay. This is likely to be a game changer for the future in which businesses conduct their business online.

So what is blockchain and how does it work?

Blockchain is essentially a digital ledger, but unlike a ledger stored on your PC or network the data is split into blocks and distributed across thousands of computers across the internet. These blocks are encrypted using a process called "hashing" and are linked together in a "chain", hence the name blockchain.

Once a transaction has taken place the ledger cannot be altered making the technology very secure. Information stored in the blockchain is decentralised meaning that anyone with the appropriate key can view the records.

For businesses the blockchain means almost instant transactions and a much greater level of security than existing systems.

How are business currently adopting blockchain?

The obvious place to start would be the cryptocurrencies such as Bitcoin that has already been adopted by many companies as a means to transact online. This is already well documented, there are many other interesting applications of blockchain.

Kodak for example, famous for its photographic film and cameras for over 100 years, recently announced the introduction of Kodakone platform and Kodakcoin. It creates a digital ledger of photographers work that they can then licence through the platform, getting paid immediately their work is sold.

It could be argued that photographers already have platforms to market their work such as the numerous stock libraries, but anyone who has used these channels knows the drawbacks associated with them such as the problems in managing multiple platforms and the delay in actually getting paid.

Another application is use in the mining industry where blockchain technology is starting to be used to track the journey of precious gemstones from the mine right through to the delivery to the consumer. Pioneers in this area are Everledger who are using it to identify and track diamonds.

What is the future?

We are already seeing multinationals such as IBM and Oracle investing heavily in blockchain technology. IBM state that 91% of banks are investing in blockchain solutions by 2018. An area that has massive untapped potential is the healthcare sector. Blockchain technology has the potential to radically shake up many aspects of healthcare such as the way that medical records are stored and the way drugs are tracked.

Another area that has huge potential to change the way that we do business is "smart contracts". Using the blockchain technology they will allow automated transactions to occur when specific criteria are met. An example might be a legal or financial transaction that currently requires an intermediator to carry out the transaction could now in theory be processed almost immediately.

For SME's a key area that blockchain is likely to play a part in the future is in the management of contracts and transactions be this between businesses or business and consumer, speeding up transactions and improving security.

What is sure is that  the growth in the use of blockchain is going to continue, for some sectors such as financial services we are likely to see the technology impacting on business whereas other sectors it may take a significant time before it is widely adopted. Ultimately, it's going to have a positive effect for all businesses doing business online.