By Joachim Marc Christensen
Blockchain is long associated with Bitcoin and understood by few. However, some opportunity leaders are looking for new ways to use this technology as a route to social impact.
For three consecutive years, technology has been a key driver behind the opportunities we have identified in the Global Opportunity Reports. This year we are addressing the major global challenge of cybercrime; a risk that solely exists in the digital sphere. In an interconnected world with increasing cyber dependency, the risk of online crime has risen dramatically. In the most recent Global Risks Report, the World Economic Forum placed data fraud and theft in the top ten of the biggest risks in terms of likelihood, and hackers have repeatedly demonstrated that even the most protected servers and secure systems are far from unbreakable.
Most cyber threats stem from the centralization of data, from small servers to massive databases. Monetary transactions, for example, must be verified through third parties such as banks before they can be completed, which makes financial institutions particularly vulnerable to mass theft of data. This major cyber scam in the UK shows that there is no such thing as a safe house for sensitive financial data today – or any data, for that matter.
The collective stamp of approval
Blockchain technology responds to this risk by distributing and sharing data amongst users, instead of relying on centralized data. The most famous (and infamous) blockchain is the one that runs the digital currency Bitcoin. This system relies on decentralized verification, which allows two parties to trust one another because a transaction or a ledger cannot be successful unless independent users verify it. Transactions are then bundled together using advanced cryptography by so-called miners, which ensure that the transactions are irreversible, permanent and tamper-proof. Moreover, as the data is shared among all users, no central database is vulnerable to data theft or fraud. Therefore, if John from London wants to pay Sophie from Sydney five bitcoins, he can log on to the blockchain using bitcoin software and send out a request to change the blockchain slightly to increase Sophie’s bitcoin wallet by five bitcoins. The transaction is then packed and timestamped by cryptography, verified and shared by blockchain users, and locked to ensure John cannot retrieve the five bitcoins he has given Sophie.
With such a secure system, no wonder the majority of tech experts believe the blockchain technology will become mainstream by 2025, as concluded in a survey from World Economic Forum. Global Blockchain Innovation Leader at EY, Paul Brody, explained in an Energy Gang podcast:
“The blockchain really is a technological and mathematical breakthrough because it’s the first time we’ve ever been able to figure out how to reliably coordinate action amongst many parties without having any central authority.”
That said, some experts point out that financial institutions might adopt their own private and closed blockchain systems, which could result in less security and increased risk of criminal inside jobs. Moreover, the consultancy giant Accenture just filed a patent for a blockchain that is editable, which – at first glance – undermines the fundamental concept of irreversibility and decentralization of data. In short, blockchain technology could be transformed into systems that are much closer to the centralized banking models we have today, which leaves us open to ongoing cyber threats.
Blockchain – making the most of a true opportunity driver
It is clear that blockchain’s full potential has yet to be realized. It could, for example, help found a new paradigm of finance that allows citizens more control of private funds, which we desperately need in the wake of the 2008 financial crash.
Furthermore, the applicability of blockchain goes further than the finance sector. For example, the technology could significantly halt rising land inequality, as exemplified by new land registry systems in Honduras. Previously, poor Hondurans were at risk of losing property and land because of inefficient and insufficient land registry systems that were frequently corrupted. Now, the American start-up Factom is developing a blockchain-based land registry system that reduces this risk and provides Hondurans with time-stamped and irreversible digital rights to their land, as reported by the Economist last year.
Blockchain has the potential to create a new digital world order that redistributes power. The question is whether the technology can be used the right way, for the right purposes and by the right people. Already we can see that blockchain could play a central role in most of the risks we are focusing on in the new Global Opportunity Report.
If it is an accepted truth that technology is an opportunity driver, then we have only scratched the surface of where blockchain may take us.