Goldman Sachs recently released a report suggesting that blockchain is moving past the hype and that the decentralized ledger technology that Bitcoin is based on will be used across a variety of applications in the near future.
We covered blockchain last year and here is our description:
... blockchain is a shared, distributed ledger — really a new type of database structure — that runs without a single centralized operator. It is a secure, public and external system of record that participants can inspect, audit and update, and within it, all transactions are recorded.
Information stored in the blockchain system is boiled down into a code or “hash.” If someone tries to change the information, the hash will appear different, making it easy to detect any foul play.
This transparency provides a security layer that is designed to prevent anyone from altering information being exchanged via blockchain, which is why everyone is excited about its use for transactions.
Goldman Sachs is suggesting 5 transaction oriented applications where blockchain's decentralized ledger technology could have a major impact by 2020:
1. Peer to Peer Digital Payments: Blockchain technology could promise a secure and superior system for record-keeping and managing digital payment histories in peer to peer applications such as directly renting a car from someone.
2. Decentralized Power: Goldman suggests that blockchain could be used to "facilitate secure transactions of power between individuals on a distributed network who do not have an existing relationship."
3. Property Title Insurance: These are classic ledger applications, so they are potentially right up blockchain's alley.
4. Stock Trading: By using blockchain to record the clearing and settling of equities trades, Goldman estimates the industry could save some $12 billion in annual costs due to fewer errors and mistakes. This would be true for other types of trading also.
5. Preventing Money Laundering: By storing account information on a blockchain, it could reduce the number of invalid or fraudulent transactions that get through.
Blockchain is still at least a year or so away from being generally used beyond Bitcoin. So we continue to advise small businesses not to invest too much time or effort on it (unless, of course, your business is using bitcoins).
But we continue to think it's worth small businesses knowing about because it is a very compelling technology that is being developed by both well funded startups and major corporations.
For those wanting more information on blockchain, the Strategy & Business article A Strategist's Guide to Blockchain provides a good overview.
***Update*** An alert reader pointed us to the article Here's Why Blockchains Will Change the World, which was also came out today. It's another good overview of the topic.