Blockchain – the automation of trust
Whether a bank facilitates a payment or investment or whether an insurer pays out a claim they are basically delivering two trusted services:
- Keeping record of their clients’ asset balances
- Enabling changes to these asset balances based on a specific set of circumstances
The vast majority of these asset balances are stored digitally. As we know digital information, unlike other value stores such as precious metals, can be copied. Financial institutions need to go to great and expensive lengths to keep their digital files scarce. Their trusted services therefore depend upon the maintenance of digital scarcity.
In 2008 the digital currency Bitcoin was invented. Bitcoin’s underlying technology, the blockchain, dealt with the issue of digital scarcity by recombining well-known and well-used cryptographic methods into an immutable digital ledger. This was done in such an efficient means that digital scarcity could be achieved through the reliance on cryptography and computer code alone instead of third parties. Not only could this technology be described as the automation of trust it is also highly accessible. Accessible to the point that it can be used to transfer value without reliance on third parties.
Apart from the abovementioned financial service providers these attributes make remittance, foreign exchange and ancillary services such as record keeping, accounting and auditing ripe for blockchain-powered disruption.