As is evident from a spate of recent high-profile hacks on some of the world’s largest and ‘most-frequented’ companies including Facebook, Target and Equifax, the very ease that the internet has enabled is increasingly becoming a source of concern. Its foundational openness that facilitated successful transactions of value between strangers—a quality pivotal to business—is being challenged daily by ever-more sophisticated cyber-attacks that are laying bare the public internet’s multiple vulnerabilities.
It is in this context that blockchain holds promise in offering a safer, more reliable alternative. This is because as a secure, public ‘record book’ of digital transactions, it allows users to prove their identities, protect ownership of digital assets, and verify transactions without a high-cost intermediary. Unlike its predecessor, the public internet, which acts in many ways like a giant copying machine, blockchain works by organising transactions into discrete “blocks” of data that are then organised into fool-proof chains that link to other similar blocks (of data). These links make it possible to see when any changes are made to any part of the chain, helping the system as a whole prevent and flag nefarious transactions.
Which is why I’d argue that blockchain promises to do the one thing that individuals and businesses are increasingly looking for when they choose to initiate a transaction whether with another individual or company—to be able to count on their interaction’s confidentiality and privacy. This is because blockchain is designed to not only enable a sense of trust in the sanctity and immutability of interpersonal or inter-enterprise exchanges, but also assure safety in the wake of multiple attacks on companies that have built their presence and customer-base, largely online.
The way that blockchain creates trust is by effectively answering three fundamental questions that lie at the heart of trustworthiness: Who’s who? Who owns what? What is true? It addresses the first of these by providing digital signatures to establish identity, the second by offering tamper-proof records to establish ownership and the third by enabling the verification of transactions to establish veracity. As a result, anyone who deploys blockchain gains three key values: transparency, a tamper-proof record of data, lowered counterparty risks and the efficient provision of digital identities.
In a study that I led on Blockchain for Social Impact I found that the transparency this ledger-based architecture enables has the potential to accurately track money trails including in the field of aid distribution. The UN World Food Programme (WFP) for example has used blockchain for aid distribution in Jordan to pay vendors, facilitate cash transfers for over 10,000 Syrian refugees, and audit beneficiary spending. In the initial pilot itself, they found bank transfer fee costs lowered by up to 98%! This ability to track money trails also makes blockchain highly valuable to any transaction that involves payments. Users can easily see where their money has reached, the hands that it has though, and be rest assured when it arrives at its intended destination.
Similarly, blockchain’s immutability offers itself for potential impact in areas as diverse as voter registration, land title registration and healthcare supply chain optimisation. In each of these domains, what blockchain does is offer tamper proof data critical to a fair forecast of voter turnout (which can have a crucial impact on election projections), the veracity of private ownership (in the arena of real estate) and optimal and cost-effective functioning of healthcare firms (in the healthcare sector). When used in the context of payments and money transfers, we found that blockchain’s most popular primary benefits were its ability to reduce risk and fraud in every possible business setting and improve efficiency. But more than anything else, blockchain is demonstrating the proven ability to restore trust in transactions. – Financial Express