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The operating system of the networked world

How blockchain could change our lives

© istock/farakos

22 February 2018

From banks and insurance companies to the music industry and the transport of goods, blockchain is set to transform virtually every area of our lives. #explore goes into what's behind the technology and how it can already make our lives more convenient and secure.

Picture this: A food producer in Argentina sells beef steaks to France. Every cooler comes with a smart sensor. This records at all times the journeys undertaken by the meat, where it has been transshipped and, in particular, the temperature at which it has been transported. These data are automatically saved in a kind of digital cash book of which all the parties involved in the supply chain automatically get a copy. If the refrigeration system in the lorry should fail en route, no-one can retrospectively tamper with the papers and sell the rotten meat as fresh merchandise. After all, it's possible for everyone involved to prove that the meat was transported for hours at a temperature of 30°.

The digital database with a crucial twist

The digital cash book in this future scenario is a good way of picturing a blockchain. The blockchain is best known as the technological backbone of the bitcoin cryptocurrency. However, although the media are not alone in their daily anticipation of the bursting of the bitcoin bubble, the blockchain is already being feted”, in the words of strategic adviser Karl-Heinz Land, as the “operating system of the networked world”. And the special thing about this technology? At the heart of the blockchain is a digital database with a crucial twist: Whereas a classical database can be changed at any time by its owner or manipulated by a hacker, the entries in the blockchain are distributed over all the computers in the network. In this way, every participant in the blockchain will receive a copy of the entry, so any retrospective change will immediately be flagged up. “What this means is that you can generate trust among all the participants in the network concerning the correctness of the data,” explains Sebastian Förtsch, who works with new business models in the TÜV NORD Innovation Space.

“The blockchain won’t completely replace existing industries or activities; it will change and complement them.”

Sebastian Förtsch, Innovation Manager in the Innovation Space of TÜV NORD in Hamburg

All imaginable transactions can in this way be processed faster, more transparently, more securely and more directly. And this applies in all those areas in which middlemen or brokers have until now been required to guarantee that everything will work as it should when it comes to transfers. This goes for everything from the banking sector and the insurance industry through to the real estate market and the exploitation of music rights. For instance, if piece of land changes hands, as things stand the entry in the land register has to be changed by a notary public. This could in principle happen automatically with blockchain, an idea which is actively being considered by the Swedish government. The drivers of Syscoin want to develop a kind of eBay without eBay: an online marketplace in which buyers and sellers can trade directly with each other, and where they can do so more cheaply than on previous platforms because the fee is considerably lower. The Peertracks start-up wants to use blockchain to bring order to the tangle of rights and licensing issues that bedevil the music industry, thereby ensuring that musicians get their royalties faster and more transparently without going through record labels or rights managers. “As far as the technology is concerned, it is in principle possible to map such business models using blockchain,” confirms digitalisation expert Förtsch.

How do the data get into the blockchain?

The bold promise of blockchain is that it will generate trust through fraud prevention. But the mere fact that entries can't be manipulated doesn't mean that everything that ends up in the blockchain is automatically correct. The crucial question for the TÜV NORD experts is therefore always this: How do the data get into the blockchain? “If this happens automatically and verifiably, then that has to be a good thing.” In this way, for instance, flight insurance provider Fizzy from the Axa group wants to improve the lives of passengers. If the blockchain policy offered on the website is taken out, both the purchase of the flight and any later claims are handled via the system. This is because the software compares the actual and notional takeoff times for the flight, automatically sending the airline an invoice for any delay. Bothersome forms, telephone calls and emails to the claims department could thus be a thing of the past.

Security checks via blockchain

The networking of electronic devices using a blockchain could also be useful when it comes to testing the security of products. This is the object of research project SAMPL, which is working with a blockchain platform for 3D printing. The principle is this: Someone develops a print template and puts it on SAMPL. Another individual acquires a license to print out the component twice. The blockchain doesn’t only record whether this individual has kept to the terms of the agreement but also automatically reads the metadata of the printer and stores them in the blockchain. This makes it possible to check whether the printing went according to plan. “If TÜV NORD were to be presented with such a product for certification, the testers would automatically have precise information as to how it was produced,” Sebastian Förtsch explains.

The blockchain could also be used for the exchange of real goods, such as homes or cars. This is the idea behind Slock.it. According to this idea, any object that can be controlled via Bluetooth or Wi-Fi could become a block chain-compatible “slock”. For example, the smart door lock of an apartment that is rented out to tourists over the weekend. The use of what is known as a smart contract, a kind of automatic contract protocol, would allow the apartment to be let out and securely paid for. This would always make it possible to hire out cars without the need to involve car sharing providers.

The use of what is known as a smart contract, a kind of automatic contract protocol, would allow the apartment to be let out and securely paid for.

So might this spell doom for online brokers such as Airbnb, eBay and car sharing providers? Sebastian Förtsch has his doubts. After all, many of these platforms owe their success to the ideas of their founders and the ways in which they are implemented. “Incorporating new functions or giving a website a visual makeover can be difficult and protracted if every single change requires the majority of the participants to agree on a specific variant. Which is why it can be beneficial in some areas for there to be a central authority which can determine what particular processes should look like,” Förtsch says.

Anyway, large companies are not hanging about waiting for blockchain start-ups to steal the food from their plates. They are themselves experimenting with the opportunities offered by the technology to improve their products and accelerate their processes. The financial sector, in particular, is witnessing a proliferation of blockchain projects. Major American bank JPMorgan is using a blockchain to test new ways for the bank to interact with its customers. IBM is working on over 400 projects with different companies across the globe. The company has for instance joined forces with supermarket giant Walmart to work on a blockchain supply chain for the improved traceability of food. The travel group TUI has rolled out a trial of the “BedSwap” project. This shows the allocation of all beds in real time, thus making it possible to use any available bed capacity more effectively. TUI is for itself looking to circumvent middlemen such as Booking.com or Expedia and to save customers and providers both time and money.

Sebastian Förtsch does not however believe that bankers or estate agents need to fear for their jobs. “The blockchain won’t completely replace existing industries or activities; it will change and complement them.” In Germany, in any case, the law does not allow a blockchain to make entries in the land register. And even if this should change one day, it won't render notaries obsolete, Förtsch adds: “If a notary public needs to spend less time on run-of-the-mill routine work in the future, he'll have more time for the important cases.”

ABOUT

Sebastian Förtsch is Innovation Manager in the Innovation Space of TÜV NORD in Hamburg. Here, he is working intensively on new business models, future technologies and their role for TÜV NORD. His pet topics include Blockchain and Industry 4.0.

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