Creative Panama hats and Blockchain marvels

Having survived an agonising five-week election campaign, many are finding it difficult to erase the memories of men wearing Panama hats and alleged corruption which haunted the topics of conversations during the various TV shows and mass meetings. Now th

BBoth political parties have pledged in their manifesto (nobody reads these wish lists anymore) to take a ride on this exciting technology and promised more funds to agencies which are likely to use them. Two suggestions were the use of Blockchain in the Land Registry and hospital records. To the pleasure of some and the despair of others, technology never stays still and keeps on evolving year after year. Those who fear change are naturally hostile but technological advancement is unstoppable.

Today’s networks, such as Alibaba, AirBnB, or Uber are billion dollar operations but they are not using Blockchain as they run on traditional centralized systems. Conversely, blockchain uses decentralized networks that are working as a cooperative. What are potential business models of these new networks? To create a viable start-up in this fast-moving, exhilarating industry, differentiation is key. Blockchain technology has moved far beyond the initial hype of bitcoin, payments and financial infrastructure. New enterprises abound in sectors ranging from real estate to healthcare, to entertainment and energy. As more large institutions, think tanks and consultancies contemplate the ramifications of distributed ledgers, smart contracts and beyond, use cases will continue to come out of the woodwork. Decentralization, however, has its limitations. Readers who are still puzzled how Blockchain is used will be glad to hear that it works similar to a distributed database that contains an increasing number of records that are guarded against unauthorised modifications. This method of storing these records is referred to as ‘blocks’ – hence the term ‘blockchain’. Each block is time stamped and is linked to a previous block.

The point about Blockchains is that they are intended to be unalterable. A blockchain database uses a time stamping server connected through a peer-to-peer network to automatically update. The result is that transactions between two parties are updated instantly and once recorded cannot be altered.

The history line behind the creation of blockchain started with Bitcoin – a digital currency. The birth of the blockchain has already become a legend in the technology arena. Attributed to a white paper of 2008 presented by an individual bearing the name of Satoshi Nakamoto; he has never been identified. As the search for the identity of Satoshi Nakamoto goes on, the effects of his paper have been outstanding. The backbone of Bitcoin’s realization was the implementation of blockchain technology. The purpose is to give proof of every transaction existing on the network.

Each block contains a record of one or more transactions and once incorporated in the blockchain becomes part of the permanent database. Blocks are constructed successively; the completion of one block is followed by another. There is no limit to the number of blocks composing a blockchain. Each block is linearly placed in chronological order with each block containing a hash function of the previous. Comparing Bitcoin to traditional banking, the blockchain is the bank’s transaction history. Similar to a bank entering transactions in a chronological manner, so are the Bitcoin transactions. A bank statement can be compared to an individual block but of course use of crypto currencies is much cheaper than traditional banking.

This technology has the potential of revolutionizing the global economy but so far regulators are fiercely resisting it. Think of the Internet today as the exchange of information in Distributed Ledgers. Now imagine the digitization of assets and the creation of an Internet of value with the consequent capability of exchanging assets. This means the concept of cheap, safe value transfer and the elimination of intermediaries. In the place of a trusted third party is the consent of the transacting partners and an encrypted foolproof distributed database. Moving on one can describe the function of Distributed Ledgers as one of any transactions or contracts maintained in decentralized form across different locations and people, eliminating the need of a central authority to keep a check against manipulation. All the information on it is securely and accurately stored using cryptography and can be accessed using keys and cryptographic signatures.

While centralized ledgers are prone to cyber-attack, Distributed Ledgers are inherently harder to attack because all the distributed copies need to be attacked simultaneously for an attack to be successful. Furthermore, these records are resistant to malicious changes by a single party. Since times in ancient Egypt, scribes used Papyrean ledgers to record daily transactions such as contracts, payments, buy-sell deals or movement of assets or property. The journey which began with recording on clay tablets or papyrus, made a big leap with the invention of paper. Over the last couple of decades, computers provided the process of record keeping and ledger maintenance great convenience and speed. Today, with innovation, the information stored on computers is moving towards much higher forms – which is cryptographically secured, fast and decentralized. This technology, if introduced in Malta has great potential to revolutionize the way our government, institutions, and corporate community work. It has many uses that can help government in tax collection, issuance of passports, record land registries, licenses and outlay of social security benefits as well as vot- ing procedures. The technology is making waves in industries such as finance; music and entertainment; artwork; supply chains of various commodities; and the list grows daily. While the distributed ledger technology has multiple advantages, it’s in a nascent stage and is still being explored to adopt in the best possible ways. Certainly, applications of blockchain technology are not limited to financial transactions.

Unions complain that Blockchain if used in many functions both within the private and public sector might result in the elimination of intermediaries and this may affect negatively a number of industries and can lead to the perennial dilemma of job losses. However, adherents of the technology reply that the efficiency so created will exacerbate GDP growth and improve revenue streams in tax collection which in turn can finance better welfare and healthcare transfers. As always, Western countries tend to lament about the excessive bureaucratic delays which are a hidden tax as they impede the prolific flow of business. Through blockchain technology business dealings (in particular banking transfers) can be carried out directly between the parties involved avoiding intermediary formalities and reducing the chances of corruption and money laundering.

In conclusion, now that the electorate has chosen its government for the next five years, one hopes that the incumbent residing in Castille opens all doors and windows to the golden marvel. Visionaries dream about Malta becoming one of the pioneer countries exploring its benefits.