BUY-IN: HOW BLOCKCHAIN IS BEING USED ALREADY
The most well-known use of blockchain so far is to underpin the digital currency bitcoin. Created in 2009, the price per bitcoin – each unit is in effect a unique number that requires tremendous computing power to create, which makes it scarce and thus preserves its value – has now exceeded £3,000, although there is no shortage of analysts predicting a crash. Bitcoin transactions are recorded on a blockchain, meaning that bitcoin is out of the control of any national government or bank. As such, it is seen as a cheaper, fee-free way of transferring money around the world.
In some ways, blockchain technology could be seen as a threat to banks as it removes the need for a trusted middleman to handle transactions – one of the key roles of a bank. People who are not accepted for a bank account could still carry out digital transactions, using a currency such as bitcoin, for example. However, banks have taken a keen interest in the new technology to see how they can use it themselves. Earlier this year, IBM announced that it was building a blockchain system for a consortium of seven banks to make it easier for small businesses to trade internationally. Others hope that by reducing the cost of sending money online, blockchain will allow tiny payments, allowing readers to pay a few pence to read a newspaper article, for example.
Blockchain also allows users a certain degree of anonymity when using bitcoins to buy things, meaning it has been associated with criminal activity online. It was one of the ways that users bought drugs from the Silk Road, a kind of eBay for banned items, before the site was shut down in 2013 after the arrest of its founder. On the flip side, others see it as a tool that could help combat money laundering, as it creates a public, permanent record of transactions that regulators can investigate for discrepancies with relative ease.