(Bloomberg Opinion) — The divide is wide between people who say cryptocurrency will transform society and those who find no substance in the entire field. Lost between the extremes is the reality that hundreds of billions of dollars of applications are operating today, mostly in boring, niche “blockchain” applications few people notice. It’s worth taking a survey of them to get some idea of what the future might bring, at least in the near term. (Spoiler alert: the outlook is bright.)
A blockchain is a digital database, or ledger, used to record information and transactions in a collaborative manner. While it’s more complex and expensive to run than a traditional database created and maintained by a central party, it has important advantages in security and public trust. Blockchains are more secure, because no individual or entity can change or view any data except with the appropriate cryptographic private key. No company or IT worker or hacker or court order or disgruntled ex-spouse or drug company has access to your data without your permission. Almost all successful cryptocurrencies are based on blockchains, but blockchains need not have any ties to crypto to function.
One major application is personal medical information. Your medical data is fragmented among different providers, test companies, insurers, pharmacies, public health agencies and other entities, often leading to frustration, security breaches and mistakes. There are traditional database solutions such as MyChart, but they are being challenged by blockchain competitors like Patientory, Nebula Genomics, BurstIQ and MedicalChain. Instead of MyChart having to sign information sharing deals with every possible entity and every patient, blockchain solutions operate peer-to-peer. As long as any pair of participants use the service — you and your doctor, your insurance company and your testing lab, your pharmacy and your urgent care clinic — they can communicate seamlessly and securely.
Another area of rapid growth is elections. It’s true that elections throughout history have been rigged or stolen. Even with today’s technology, it can be almost impossible to determine a definitive winner in close elections. Plus, the process of voting can be tedious. And, of course, confidence is undermined because the process is designed and run by incumbent elected officials.
That’s why some states are looking to blockchain solutions. Voatz runs a blockchain for West Virginia military personnel and travelers. Another entrant is Follow My Vote. The state-run Illinois Blockchain Initiative uses a blockchain to secure voter registration information. With a public blockchain, every voter could see precisely how their vote was recorded — or not — and cry foul if there were any errors. But no one other than the voter could see that information. Losing candidates could check the totals and make sure there were no missing, unaccounted for or illegitimate votes. Recounts would be unnecessary, and totals would be available immediately upon the closing of polls. Blockchains could support any method of voting—machines, paper ballots, mail ballots or electronic — but are naturally suited to mobile device voting secured by biometric information like fingerprints and facial recognition.
MediaChain (acquired by Spotify in 2017), MadHive, Steem, Civil and the Open Music Initiative, along with other entrants, run blockchains for the media business, paying creators and editors — collecting fees from users and advertisers—without the need for centralized media companies to act as intermediaries. Another big sector is logistics, with companies such as DHL Worldwide Express (yes, the big shipper), Block Array, Maersk (yes, the big shipper, working with IBM) and ShipChain are using blockchains to track and manage supply chains all over the world.
There are even blockchains for non-humans. Filament, Hypr and Xage are three companies that hook your things—your refrigerator, car, video doorbell, Alexa and everything else with a chip and a signal—together securely. No one but you can see your information, but you can aggregate it and supply it to whomever you like. Your refrigerator can talk to InstaCart, your video doorbell to the police, your car to your mechanic.
This just scratches the surface of blockchains in current operation. While some applications use cryptocurrency and others don’t, if blockchain adoption continues to increase, it’s inevitable that cryptocurrency use will grow as well. Cryptographically protected distributed public ledgers are a powerful tool, and will replace many existing private centralized ledgers, with profound effects on business models and society.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Aaron Brown is a former managing director and head of financial market research at AQR Capital Management. He is the author of “The Poker Face of Wall Street.” He may have a stake in the areas he writes about.