Potential Uses of Blockchain Technology

Many people claim that the “blockchain is great, but Bitcoin sucks!” Even though the word blockchain wasn’t used in Satoshi Nakamoto’s whitepaper, it has become quite the buzzword.

A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to manipulate the ledger in a secure way without the need for a central authority. – WSJ

A blockchain is essentially a secure, distributed, and shared database. Even Bitcoin matches this definition: it is nothing more than a shared ledger of data.

With Bitcoin, Satoshi Nakamoto demonstrated how a blockchain could be applied to currency. Some of the world’s wealthiest and smartest are betting big on this technology’s ability to disrupt other industries, just like Bitcoin has done with currency. Since 2009, more than $1 billion of venture capital invested in Bitcoin startups.

Digital Assets & Stocks

Assets, stocks, and other digital tokens on the blockchain are perhaps some of the more powerful and exciting use-cases for blockchain technology. It would allow stocks, bonds, tickets, reward points, digital keys, and other assets to be exchanged securely in the same way as bitcoins. Many of these applications use Bitcoin’s blockchain to take advantage of its security.

Stocks are one basic example of digital assets on the blockchain. Instead of issuing shares through exchanges like NYSE or NASDAQ, a company could issue its shares as colored coins on the Bitcoin blockchain. The shares could then be sent, received, and traded digitally with very low friction. No middle-man would have to approve or verify the shares. Users in restricted markets would instantly have access to the same financial tools and systems found in more developed countries.

Another easy-to-understand example of a digital asset on the blockchain is a car key. Today when we purchase a used car we must physically deliver the car, title, and key. In the future, car titles may be public on the blockchain and the key digital. All data could be publically and trustlessly verified through a blockchain. To sell a car, the seller would simply send the digital key to the new owner, who would use it to turn on and start the car.

Exchanges like ShapeShift.io already demonstrate how simple the exchange of stocks, bonds and other digital assets will be should blockchain technology take hold.

Smart Contracts

Smart contracts enable trustless financial services like loans, automatic execution of trade agreements, micropayments, and more. Rootstock aims to bring smart contracts to bitcoin via sidechains. Rootstock is backwards compatible with Ethereum, which is another blockchain aiming to bring Turing-complete contracts to finance.

Smart contracts on the blockchain can also build on top of digital assets and stocks. If financial contracts can be automatically executed with no third parties, it will lessen the need for lawyers, banks, and other professional services.

Record Keeping

Data embedded and hashed into secure blockchains like Bitcoin create immutable and unforgeable data. Projects like Tierion use the Bitcoin blockchain to create “blockchain receipts”. All data can be verified through the Bitcoin blockchain without the need to trust a third party. Factom is a similar project that also verifies and hashes data into Bitcoin’s blockchain.

Identity

Onename is a New York based startup that has created an ID system using the Bitcoin blockchain. Its first service allows users to create blockchain IDs, which will soon be used to login to websites without the need for a password.

Cloud Storage

Projects like Storj intend to use blockchain technology to share files in a decentralized network. Users with extra disk space will automatically be able to rent out unused storage space. Users in need of cloud storage space can pay to store files on computers across the network. Storj estimates that this system will cut costs of data storage by about 80%.

Ride Sharing

Uber has disrupted the entire transportation industry. Some governments, however, have been quick to limit its reach in order to protect existing taxi companies. La’Zooz is a blockchain based ride sharing solution that rewards its users, developers, and drivers with tokens called Zooz. Unlike Uber, La’Zooz has no central authority and cannot be blocked or shut down by governments.

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uses of blockchain technology