Jul 1, 2016

Technology solution to the authenticity problem - Blockchain applications

I had blogged three years ago about the Bitcoin and the associated blockchain technology and how it might be used to create an international currency in place of the existing SDRs of IMF. 
A lot of icecaps have melted since that post and I thought of revisiting the topic of Bitcoin, chiefly relating to the interesting tail of the Bitcoin; the blockchain, and the potential applications that the world has since discovered. 
For starters, Bitcoin is a digital cryptocurrency, stored and exchanged electronically to buy/sell whatever can be dealt online. More about Bitcoin here
The Bitcoin runs on a public ledger called a blockchain. The blockchain is the interesting part that has applications beyond running a digital currency. The blockchain per se is a dry piece of code that grows with every transaction of the underlying asset (e.g. a Bitcoin). The beauty of the blockchain lies in its ability to generate trust of authenticity of the underlying asset, without resorting to any government/semi-government/autonomous agency to do the verification. The verification is based on the peer-to-peer sharing of this blockchain which resides on multiple servers and readily tells if the Bitcoin is genuine or not. You may find a simpler explanation about how all this works here.
The block-chain has number of interesting applications. Let me give one example here.

In a country like ours, verification of documents to title (land, apartments, sites etc) is an important aspect in sale transaction. The verification process is cumbersome. The land title for example needs to be verified from the land revenue records of state government in addition to registrar's office to verify the last sale. Also, one needs to check for legal issues, if any, due to inheritance related matter. Similarly, the residential sites needs to be verified from town plan sanction authority, registrar's office and so on. In case of apartments, one needs to check property tax matters in addition.
Despite these verification, one is never sure that the title being transferred is clean and will come without encumbrances. The blockchain may be used to tag each unique property document issued and any change of hands would reflect in blockchain, leading to easier online verification. The blockchain may include all information related to the underlying asset including details such as payment of property taxes, sale registration and so on. One look at the blockchain would give a complete picture on the title. Also, in case of litigation, the blockchain may add a link that stops sale transactions immediately. No sale allowed till the litigation link is broken by the court. You get the drift.

Similarly, borrowers may be tagged with a blockchain in a credit system. The individual links of the chain are created with each repayment of loan by the individual/corporate(Aadhar/PAN). A chain is built up through such links which contain complete repayment history (in time/delay, full repayment/partial, default details etc) and the banking network might maintain it on peer-to-peer basis. That would eliminate the credit information agencies.

A newborn may be tagged with a blockchain with an aadhar that builds up immunisation/vaccination record. It might also contain all illnesses and health check details as one grows up, leading to an impressive record for later stage diagnosis or for building a database of individuals for big data analysis .

You again get the drift.

The applications are immense. While the Darknet may be the major Bitcoin land today, it is just a matter of time before people find application of crypto-currency, and associated block-chain technology, in other areas. It has already started happening. Somewhere, as long as there is a peer-to-peer faith maintained, or an institutional arrangement is built up for privacy purposes, the idea is very workable. After all, money is what you call as money. It can be sea-shells, peacock's feather, bits of silver, paper currency, leaves of a tree, or a Bitcoin.

BitSDR idea was one such idea I had explored 3 years ago, for international currency application. The time has probably come for the policymakers to take up Bitcoin a little more seriously and look at it from the application point of view to solve day to day verification problems. That would just be a start.