A Glimpse Into The Not-So-Distant Future Of Blockchain and IoT
We’re still very much in the early stages of this disruptive new technology, but the use cases for it are seemingly unlimited.
Aug 31, 2017
When Bitcoin was first introduced to the general public in 2009 as the first decentralized digital currency, very few people took the idea seriously. “Who would ever use digital money instead of real money?” A single Bitcoin was worth just a few dollars.
Fast-forward to today, almost a decade later, and Bitcoin is all over the news. For the past six months, cryptocurrency advocates and investors have been on a rollercoaster ride, watching Bitcoin climb to a peak value of $4,450, simultaneously competing with its first true market threat, Ethereum.
What makes Ethereum such a threat to Bitcoin is its unique underlying Blockchain technology, not necessarily the fact that it’s just another digital currency. The model of Ethereum utilizes what are called Smart Contracts, essentially automating any sort of existing process in a trusted manner. What makes cryptocurrency as a whole so enticing is the fact that I can send you (or you can send me) money without needing a third-party mediator like a bank. Now, imagine being able to have that same sort of direct, trusted transaction with any product. That’s the value of Ethereum’s Smart Contract technology. You can program a set of rules in the form of if-then statements, where If certain qualifications are met, Then the next step is released, etc.
Except the difference is every contract is permanently and publicly recorded and cannot be tampered with, making it more trustworthy and reliable than any third-party mediator every could be.
Let’s look at a simple example: selling your car. Simple, right? Wrong. Selling your car is a hassle. First, you’ve got to find a buyer. Then you need to exchange money, transfer the title, record all of this through the DVM. What if the transaction could be directly linked with smart contracts on blockchain? Once payment is received, the title of the car is transferred from party A to party B. Imagine how easy it would be if your AutoTrader app had a built in blockchain system to track VINs and ownership, your Carfax record, titles, registration, past registrations?
This is what has me so excited about the future of Blockchain and the impact it will have on IoT — the Internet of Things. We’re still very much in the early stages of this disruptive new technology, but the use cases for it are seemingly unlimited. Product authentication, especially, is one of the areas I’m particularly interested in, since ownership of products can be tracked at every stage of their existence.
Let me give you another example.
Counterfeit wine is a big problem, with the largest counterfeit market existing in China. It’s estimated that approximately 70% of all “imported” wine in China is fake. How this happens is counterfeiters buy up old, empty bottles from renowned vineyards so that the wine passes a sample test from the bottle’s glass or label. The bottles are then filled with much cheaper alternatives and passed off as luxury goods — a 1958 Château Lafite Rothschild or a 1928 Château Margaux, for example.
Counterfeiting causes all sorts of problems for both brands and consumers. Fake wines that circulate the market cause consumers to lose confidence in purchasing certain brands, leading to revenue losses of approximately $2.7 billion per year, as of 2015.
This was a problem we actually tackled at my firm, Chronicled, knowing that the benefits of using Blockchain’s Smart Contracts technology could provide a viable solution. We thought, “Why not attach encrypted microchips to the wine bottles to create an unforgeable digital identity for each bottle?”
So that’s what we did.
We embedded microchips into the wine bottles that could not be copied, cloned, or corrupted. This way, collectors could easily verify the authenticity of a wine by scanning the microchip with their smartphone. For brands, this provided security against counterfeiting practices, and for consumers, they could instantly learn more about the history of any registered wine — such as the complete provenance, history of the product as a whole, notes and even the intentions of the winemaker.
The uses for Smart Contracts are never-ending. Another example is what’s happening in Germany, where they’re piloting a charging grid for electric vehicles built right into the asphalt. When your car stops, it charges for the amount of time it’s at the stoplight. And then the car itself, which has an identity on the Ethereum Blockchain, can issue a micro-payment to another device embedded in the asphalt. It’s this machine-to-machine interaction that is the big step toward a new future, especially when combined with the concept of having a cryptocurrency wallet functioning as the backbone for this machine economy.
Of course, it’s worth noting that with all the glorious improvements that come with technological advancement, there is also an element of moral hazard (if we can call it that). Take something as innocuous as your toothbrush, combined with product authentication connected to the Blockchain. We very well may see the day where the usage of your toothbrush could be stored as public data. An insurance company may see that you have been using your toothbrush less often this month, and slightly increase your dental premiums as a result.
I know this sounds far-fetched, but that’s how every technological advancement begins: it’s all theory, until it’s not.
The good news, and what keeps me optimistic about the future of Blockchain technology, is the fact that there is already a global discussion around data ownership, with steps being taken to put ownership back in the hands of the people. Using the toothbrush example, the future may very well involve consumers granting access to their personal data and teeth cleaning habits in exchange for an insurance premium discount. At least this way, the consent is the choice of the individual.
What’s important through this wave of new technological advancement is that more of the general public begins to educate themselves on what innovations are happening with Blockchain technology. Ten years ago, we thought the concept of Bitcoin was laughable. Bitcoin now has a market cap of about $41 billion.
The not-so-distant future of Blockchain is happening a lot faster than many realize.
And it’s only going to move faster from here.