Blockchain4EU will spend this year uncovering uses for blockchains and other Distributed Ledger Technologies beyond their use in cryptocurrencies.
Blockchains don't only underpin novel digital currencies that threaten to change the face of finance, they could also transform how businesses operate.
The technology has many potential applications that go beyond supporting cryptocurrencies like bitcoin, says the analyst in charge of the European Union-backed Blockchain4EU project.
Blockchain4EU will spend this year mapping the myriad ways that firms could use blockchains and other Distributed Ledger Technology (DLT) to improve how they operate.
Blockchain and other DLTs promise to provide a near-tamper proof, decentralized method for recording and carrying out transactions. These transactions could be financial, as in the case of bitcoin, but could also include a wide range of other interactions, such as the loading of goods onto a lorry or the use of a raw material when manufacturing a product.
"We're looking at how blockchain and other DLTs can potentially change how organizations operate in a digital world, and in particular how they can change how we produce and deliver goods and services," says policy analyst Susana Nascimento, who is leading the project.
"Across different use cases there is a series of benefits, in terms of communication, efficiency, security, transparency."
For example, she said blockchains could help track and monitor raw materials as they pass through supply chains, adding transparency and the ability to trace materials to source. In logistics it could help keep track of each stage of a transport container's journey from a-to-b, creating a clear record of who authorized its movement, who moved it and when.
According to Nascimento, potential benefits include "reducing fraud" and "lowering operational costs", improving "safety and security of transactions", "optimizing many manufacturing operations", and better managing data inside and outside companies.
How Blockchains work and what comes next
The technology that makes blockchains so useful for securing transactions was summed up by blockchain entrepreneur and researcher Bettina Warburg in her recent TED talk.
"Blockchain technology is a decentralized database that stores a registry of assets and transactions across a peer-to-peer network," she said.
"A public registry of who owns what and who transacts what. Those transactions are secured through cryptography, and over time that transaction history gets locked in blocks of data that are then cryptographically linked together and secured.
"This creates an immutable, unforgeable record of all the transactions across this network."
Blockchains have been around for years, with the ideas behind its core tech stretching back decades, so why does the EU feel now is the right time to investigate its uses?
"In the past three years the landscape has accelerated," said Nascimento.
"The FinTech, the financial applications, blew up a little bit, with private consortia of banks and insurers launching pilots.
"And in the last year we have seen more and more initiatives coming up beyond the financial world.
"There has been a surge of start-ups in the blockchain space, and growing interest from many different players in the industrial sector, big and small."
"The potential to reshape business models and how revolutionary it could be has started creeping up in discussions. Many of these potential blockchain applications are at a very early stage. It's the perfect time to understand what's happening."
The project will produce a report detailing the non-financial uses of DLT, which it expects to be used by EU policy makers and businesses.
As well as reporting on opportunities, it will also delve into the challenges and potential drawbacks of DLTs, which Nascimento says include scalability, power consumption, environmental footprint, interoperability of systems and the need for common standards.
Power consumption is a particularly common concern raised about blockchain, due to the heavy computation needed to add new blocks to the chain, as evidenced by the energy-hungry arrays of GPUs and ASICs [Application Specific Integrated Circuits] used in bitcoin mining.
As for the future of blockchains, Nascimento, is in two minds, saying that while there is a chance the technology could underpin online transactions, it's not guaranteed.
"Some say that it is foundational technology," she said.
"People even use the metaphor of the internet, where blockchain would be a basic protocol and then you build on top of it. There are others who say it's just one more technology that can be combined with others.
"Some say it's revolutionary, that it's fundamental, others say it's more incremental. This is the question that will take time to resolve."
Nascimento said that one possible "killer app" for blockchains getting a lot of attention is Initial Coin Offering (ICO) tokens, where blockchain tokens are used to crowdfund new ideas, although she added that the fast-moving nature of the field makes it impossible to predict exactly which uses will rise to the top.
"There's always some unexpected things that pop up because the field is very rapidly evolving.
"What you see now is maybe a surge in momentum, in companies and investment coming up."
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