If the only thing you know about blockchain is that it has something to do with with the cryptocurrency, Bitcoin, you are in very good company: in fact you’re already probably better informed than 99.999% of the population. Blockchain is far from easy to explain. The simplest definition I found was on an excellent infographic produced by the accountancy firm pwc. The blockchain, it says, is ‘a decentralised ledger of all transactions across a peer to peer network.’
The key words here are ‘peer to peer’. Traditional transactions have always relied on middlemen of some kind, from brokers, agents, shopkeepers, and lawyers to, most crucially of all, the banks that guaranteed that the seller would receive the payment sent by the buyer.
But what happens when the bank goes bust, or makes a mistake? Those of us who now take frictionless online transactions for granted, need to be reminded that it was only as recently as the late 1990s that it even became possible to pay for purchases safely on the internet.
It was the insecurity of banks in the wake of the financial crash, that lay behind the invention of Bitcoin as ‘a digital currency experiment’ in 2008 and its implementation the following year Essentially, it removed the middleman and gave the task of guaranteeing the integrity of a transaction to a mass of computers.
If Janet wants to send John $1,000.00, for example, using Bitcoin, the transaction is defined as a ‘block’ and simultaneously transmitted to a large number of computers – nodes – across the network. These, in turn, confirm the validity of the payment. The block is added to the chain like a jigsaw piece being permanently glued to its neighbour and John gets his cash. Given the fact that the transaction has been recorded on all those individual computers, nothing can ever change or erase the information.
If all of this strikes you as abstruse and irrelevant, think again. The process I’ve just described has a much wider range of applications than bill payments. In early 2017, for example, the Harvard Business Review published an article describing how blockchain could provide an “open-source, community-wide trusted ledger” covering the health records of, well, almost everybody. Access to that information would be in the hands of the individuals concerned who would “be ultimately in control of where [their records] could travel”.
But let’s forget fanciful notions of how blockchain could ensure that you or I were never given the wrong medicine, and think about wine. Also in 2017, Forbes published a piece by Eric Annino, global corporate affairs of the software giant SAP, in which he detailed the way a UK blockchain company called Everledger had created a way to use the technology to help fight wine forgery.
After proving that it was able to track and trace over a million individual diamonds, Everledger entered into a partnership with Maureen Downey, the world’s most famous expert on wine fakery, and the creator of the Chai method of identifying bottles of wine.
Downey’s system combines purchase records, high-resolution photography and 90 ‘data points’ to create a unique block for any bottle. In December 2016, a block was created for a bottle of 2001 Chateau Margaux that had been authenticated by Downey. From that moment on, every time that specific bottle changes hands, the blockchain – an immutable record of its ownership and provenance - is automatically updated. If all fine wines were treated in this way by their producers - and provided the blockchain were respected by buyers and sellers at every stage, obviously - the chances of a forger like Rudy Kurniawan being able to get away with spinning lies about a wine’s provenance would drop to zero.
At the grubbier end of the wine industry, the same technology could just as easily be applied to bulk wine. A digital ‘DNA’, or a set of chemical analyses, could be established for a tankful of wine at the winery and updated at the bottling plant and confirmed through tests of retail stock.
And who knows? Now that Microsoft and Shopify accept payment in Bitcoin, maybe one day some of those tanks of bulk red might have been paid for in cryptocurrency rather than rather than dollars or Euros.