Innovation begets innovation. That’s because new technology – mechanical or digital – doesn’t just provide a quicker way of doing the same thing, it presents an opportunity to rethink the process.
The melding of cloud, mobile and big data, for example, is transforming business models for services as diverse as private taxi hire, movie rental and healthcare. From an earlier age, the introduction of the electric motor did the same for manufacturing.
But it was only when the process changed – an individual motor powering each machine on the factory floor rather than a single motor replacing a centralised steam engine – that true productivity gains were realised.
The story of the electric motor is cited by the Bank of England in a Quarterly Bulletin report published late last year. Innovation in payment technologies and the emergence of digital currencies focused on crypto currencies and Bitcoin in particular. Here is another example of technology innovation and process transformation.
To understand how this applies to digital currencies, a little context is required. As the report helpfully explains:
“In order for money to function as a medium of exchange, there needs to be a system to enable transfers of value — that is, a payment system — and for any system other than the exchange of physical banknotes or coins, a means of recording the values stored — a ledger.”
For much of history, that ledger was characterised by two things – it was paper-based and centralised. Yet even when banking systems were computerised, the ledger remained centralised. New technology, same process.
What is truly innovative about Bitcoin, among most other digital currencies, is the use of a distributed ledger. This decentralised record of transactions – called the Blockchain in the case of Bitcoin – is underpinned by three things: cryptographic techniques to verify the validity of transactions; peer-to-peer networking for efficient distribution of labour and effective pooling of computing power; and an adherence to game theory which encourages consensus over corruption.
Where Blockchain gets really interesting is how it might be applied to other services. It could, for example, provide the distributed ledger for company shares or a peer-to-peer stock exchange. But the application of the technology needn’t stop at financial services.
This highly secure, highly distributed transaction processing platform could be used for land registry, monitoring the provenance of precious stones or works of art, an internationally-recognised global identity card system, perhaps even something as prosaic as a dishwasher warranty.
“Currency,” writes consultant Dave Birch, “is probably the least interesting use of the ledger.”
For broadcasters, meanwhile, Blockchain could support the authentication and identity management needed for digital media distribution frameworks of the future. If a broadcaster has ambitions to launch a global version of the BBC iPlayer, say, then the management of digital rights is going to be key, especially when those rights to a particular series have also been sold on tenancy-basis to the likes of Netflix and Amazon. If adoption of the distributed ledger is being seriously considered for banks, there’s no reason why it can’t be considered for broadcasters.
So a system that was developed to underwrite a cultish currency possesses a technology with the potential to transform any number of businesses including broadcasting. And as it happens, some proponents of Bitcoin would positively encourage the move.
As one early adopter recently noted: “We need to develop more non-currency applications for decentralized ledgers such as the Blockchain, and let the public get comfortable with the ease and security of it. Once that’s happened, crypto currency will seem an obvious next step. That’s when things will take off.”
Image credit #1 Jason Benjamin on Flickr.
Image credit #2 Jason Rogers on Flickr.
He is a former Management Consultant, having spent five years at A. T. Kearney, advising and leading on IT Outsourcing and operational efficiency solutions across a broad range of sectors.
He is a graduate of Manchester University, Electronics and Electrical Engineering, FIET, holds a Dip. Law from City University and completed his Bar Finals in 1995. He is the former Chair of the City of London Citizen's Advice Bureau and Liveryman of the Worshipful Company of Information Technologists.
He is married, with one son, and lives in Islington. Outside of work, his interests include music, and writing screenplays.