Written by Philip Boucher,
At their simplest, blockchains can be described as lists of all transactions that have ever been executed in a specific domain. They are organised into ‘blocks’, connected in linear, chronological ‘chains’, and – unlike traditional records of transactions – public, and decentralised. This means that, instead of having a central ‘middleman’ controlling access, all the information is held by all users, and new transactions are added by a process of consensus. The technology is complicated, controversial and fast-moving, but is of increasing interest to citizens, businesses and legislators across the European Union. A new report, ‘How blockchain technology could change our lives’, provides an introduction for those curious about blockchain technology, and is aimed at stimulating reflection and discussion.
The best-known use of blockchain technology is for digital currencies such as Bitcoin, which announced itself to the world with a headline-grabbing 1 000 % increase in value in the course of a single month in 2013. This bubble quickly burst, but steady growth since 2015 means Bitcoins are, at the time of writing, valued higher than ever before.
There are many different ways of using blockchains to create new currencies. Hundreds of such currencies have been created with different features and aims. The way blockchain-based currency transactions create fast, cheap and secure public records means that they can also be used for many non-financial tasks, such as casting votes in elections, or proving that a document existed at a specific time. Blockchains are particularly well suited to situations where information on ownership histories is necessary. For example, blockchains could help improve supply chain management, offer certainty that diamonds are ethically sourced, that clothes are not made in sweatshops, and that champagne comes from Champagne. Blockchain technology could help finally resolve the problem of music and video piracy, while enabling digital media, such as books, vinyl and video tapes, to be bought, sold, inherited and given away second-hand legitimately. Blockchain also presents opportunities in all kinds of public services, such as health and welfare payments, while self-executing contracts, at the frontier of blockchain development, pave the way for companies that run themselves without human intervention. All these examples, and others, are discussed in the report.
Blockchains shift some control over daily interactions with technology away from central elites, redistributing it among users. In doing so, they make systems more transparent and, perhaps, more democratic. That said, blockchain use will probably not result in a revolution. Indeed, the governments and industry giants investing heavily in blockchain research and development are not trying to render themselves obsolete, but to enhance their services. There are also some wider issues to consider. For example, blockchain transparency is fine for matters of public record such as land registries, but what about bank balances and other sensitive data? It is possible (albeit only sometimes and with substantial effort) to identify the individuals associated with transactions, potentially compromising their privacy and anonymity. While some blockchains do offer full anonymity, some sensitive information simply should not be distributed in this way. Nevertheless, although blockchains are not the solution for every problem, and even if they are unlikely to revolutionise every aspect of our lives, they could have a substantial impact in many areas. Preparation for the challenges and opportunities they present is needed.
The report looks at eight areas in which blockchain has been described as having a substantial potential impact and explains how the technology could be developed in that particular area, the possible impacts this development might have, and what potential policy issues are to be anticipated and concludes with some broad options for policy action.
Read the complete in-depth analysis on ‘How blockchain technology could change our lives’.