Even bitcoin’s boosters acknowledge that cryptocurrencies aren’t a sure thing.
Just in the past month, China and South Korea signaled that they might be cracking down harder on trading in digital currencies, which caused bitcoin prices to tumble from a peak of nearly $20,000 per coin to around $12,000.
“For any of you that own cryptos, this was a rough week,” said John Utley, an IBM sales executive who focuses on blockchain and software-as-a-service verticals.
But the uptick is much steadier for blockchain — the digital technology that underlies cryptocurrencies as well as other recordkeeping applications.
“At the enterprise level, our lead-in item is blockchain,” Utley said last Wednesday at Seattle University, during a presentation organized by MIT Enterprise Forum of the Northwest.
So what is blockchain?
It’s a system of recording and encrypting a series of digital transactions (“blocks”) in such a way that anyone involved in the transaction can follow the chain of those transactions back to the source.
Theoretically, the encryption method guarantees that the record is reliable, without the need for a central authority to be in charge of securing it. That’s why blockchain-based currencies such as bitcoin and ethereum have such high appeal, especially for folks who have idealistic or not-so-idealistic reasons to avoid traditional banking transactions.
There are potential downsides. Some cryptocurrency exchanges, such as Moolah, Mt. Gox and Cryptsy, have fallen prey to fraud, hacking and glitches. Converting the cryptos back to real money can be problematic, and there’s also concern about the megawatts of power that’s required for data-crunching cryptocurrency mining operations.
At its current growth rate, the electricity required for crypto mining is projected to exceed the world’s current total power consumption by 2020. Some counties in Washington state that deal in inexpensive hydro power, such as Chelan County, Grant County and Douglas County, are already facing a capacity crunch.
“People are getting paid to save and write data … and you’re getting paid quite handsomely. The more miners you have, the more you can get paid,” Lawrence Lerner, chief growth officer for RChain Holdings, explained. “Eastern Washington has the cheapest power in the nation, as you probably know. That’s why there’s lots of mining operations out in Moses Lake.”
The pluses and minuses of the cryptocurrency crazy may be debatable, but the benefits of blockchain beyond bitcoin are much clearer. Lerner, Utley and others at the Seattle University event pointed to some straightforward applications of the technology:
- Boeing is using blockchain to document the supply chain for the thousands of parts that come together in airplane manufacturing. The aerospace giant is also seeking to patent a blockchain application aimed at countering GPS spoofing, a technique for hacking into an airplane’s navigation system.
- Maersk is working with IBM on a blockchain-based system for tracking shipping containers as they make their way around the world.
- Everledger has created a blockchain registry for verifying the origin and authenticity of diamonds and other luxury goods.
- Walmart has teamed up with IBM and a wide range of partners on blockchain projects aimed at tracking Chinese pork, Mexican mangoes and other international food shipments.
At each step in the flow of goods, another block is added to the supply chain, showing everyone who’s involved in shipping those goods what’s been done. “Blockchain is a way of keeping track of stuff, without having a single party responsible for keeping track of it,” Utley explained.
So what’s next? Blockchain is already being used to create “smart contracts,” which execute the terms of agreements automatically when digitally coded conditions are met. The Gartner consulting firm predicts that the traditional banking industry will derive $1 billion worth of business using blockchain-based cryptocurrencies by 2021. And the technology may ultimately serve to secure your medical records and credit score.
Utley, who is president of the Seattle chapter of the Government Blockchain Association, said the voting process could be a future frontier for blockchain-based security. There’s already a venture called Follow My Vote that’s working on a platform for secure online voting.
“We all know how many people vote today. We know how difficult it is, right?” Utley said. “But with blockchain and voting, you can do it from your PC, you can do it from your home. … Once we have blockchain, we’re going to see a completely different set of people in the White House.”
That comment was met with applause.
The next Innovation Forum presented by MIT Enterprise Forum of the Northwest is set for March 21 at Seattle University’s Pigott Auditorium and will focus on AI and automation in the workforce of tomorrow.