Beyond Bitcoin – The Applications of Blockchain Technology

Matthew Howells-Barby: Hello and welcome to Decrypting Crypto. This is Series 1, Episode 5, Beyond Bitcoin. The Applications of Blockchain Technology. I’m Matthew Howells-Barby and I’m here with my co-host, Austin Knight.

Austin Knight: Hey Matt. Hello, everyone. So today we’re going to be taking a deep dive on the blockchain. We have hinted at this for the past four episodes, talking about how cryptocurrency and the blockchain are two separate things. And if you really want to understand the importance of cryptocurrency, you actually have to understand the importance of blockchain technology, and how this is the true innovation.

And the big conversation here isn’t these huge monetary gains, but it’s the technological innovation that’s taking place right here before our eyes. And the blockchain is what’s powering all of that.

So we’re going to run you through the differences between the blockchain and cryptocurrency, specifically the bitcoin blockchain versus bitcoins. These have different capabilities, so we’re going to talk about how some blockchains can do some things, other blockchains were intended for different things.

And then we’re going to give you a few really compelling use cases. What can the blockchain do beyond cryptocurrency? This is where things start to get really crazy. And finally, we’re going to own up to the fact that sometimes blockchains aren’t the answer to our problems and we shouldn’t try to appropriate a blockchain for a use case that it’s not intended for. It’s not the end-all, be-all solution in every case.

Matthew Howells-Barby: Yeah, I’m excited to dig into this episode. I remember when we really first started talking about blockchain in general. This was what really got you excited, wasn’t it, Austin? This is when you had, kind of I say, your like Eureka moment, where it’s like thinking less about how bitcoin is interesting and more about the broader applications of the blockchain technology.

Austin Knight: Yeah. This is where you start to think about your involvement in all of this and how big it can become and how much this can not only transform currencies, which is what everybody is talking about, but transform the entire fabric of society.

Matthew Howells-Barby: Yeah. And on that point, it’s probably worth us explaining the difference between the actual currency, the coins that are on top of the technology, the blockchain, right?

Austin Knight: Absolutely. You really have to think of them as two separate things. In our mining episode, episode four, we talked about mining on the blockchain. That’s one entity. The blockchain is itself, and then the reward that comes from mining on the blockchain, which is the token, or the cryptocurrency, another separate entity.

So you really have to, in the case of bitcoin, think of the bitcoin blockchain existing as its own thing, and the bitcoin token, or the bitcoin currency, existing as its own thing, separate from that blockchain.

Matthew Howells-Barby: And it’s interesting when we talk about bitcoin, which we have a lot, in all fairness in the start of the series. And I think that’s primarily because bitcoin is probably most in the public eye, at least at the moment. Some people hear about bitcoin before they hear about blockchain. I would say that’s it for a lot of people, right?

Austin Knight: Oh, absolutely.

Matthew Howells-Barby: And bitcoin is the oldest and most arguably, the most dated also, technology within the blockchain’s sphere. And this is an interesting point because it brings us into okay, well, Matt, Austin, if you’re saying to me bitcoin has dated blockchain technology in the grand scheme of things, that kind of means that other blockchains are doing something different, right? So they have different capabilities.

I think one that comes to mind that me and you are both interested in is ethereum. And we’re going to be doing a whole deep dive in ethereum in episode eight. But ethereum has got to be probably like the polar opposite to bitcoin. Ethereum, to give a top-level view here, does not strive to appear to be a payment method. They’re not looking to power payments.

Instead, ethereum is more of a platform to build what we’re calling DAPS, decentralized applications. Kind of like, think about it as the Apple app store for the blockchain. And already, there’s been tons of projects that have built on top of ethereum. And that’s when we get into things like other cryptocurrencies have built their own blockchains as well, and have, what we call forked, off of existing blockchains. That is, to take an existing blockchain, make some slight modifications to it, and change it for your own that will run completely separately to that.

Austin Knight: For example, Litecoin did this exact same thing with bitcoin.

Matthew Howells-Barby: Yep.

Austin Knight: Litecoin is a fork of bitcoin, so it was originally based on bitcoin’s blockchain and then it broke off into its own version of a blockchain, completely separate blockchain, just originating from the bitcoin blockchain.

Matthew Howells-Barby: I think it was around 2011 that that happened as well. So this was like an early days fork as well.

Austin Knight: And so now you have the Litecoin blockchain. It’s its own entity now.

Matthew Howells-Barby: Yeah. And they basically added a bunch of new features on top of bitcoin, like hey, bitcoin, this is great. But we’ve got some ways that we can improve the functionality of this and we’re gonna fork off our project off of this existing code and make it better.

Austin Knight: Yeah, it’s like product iteration. It’s like Palm first came out with the little Palm Pilot. And then Apple said-

Matthew Howells-Barby: What a technology.

Austin Knight: How great was that?

Matthew Howells-Barby: So whose the Palm Pilot at crypto?

Austin Knight: Well, perhaps not the sexiest technology. It was a huge innovation and then you have other companies coming along and saying, oh, we’re Blackberry. We’re going to do this differently. Or we’re Apple, we’re going to steal your innovation and then capitalize on that and build our own iteration of it.

A lot of these forks could almost be viewed like iterations of previous blockchains.

Matthew Howells-Barby: Oh, yeah, for sure. And because of the fact that a large majority of the cryptocurrency space, blockchain technology space is actually open source code, which means anyone can use, modify it, change it, improve upon it, kind of like the whole Linux movement, which was a huge contentious point around the time of operating systems. It’s evolved into a space that’s very positive, I would say, around open source in general. So this is helped develop things. It’s probably worth also mentioning that not all forks necessarily improve the blockchains.

There has been, out of 2017, has been full of drama. There’s been the bitcoin cash, or BCash, depending on how much you want to annoy people who follow bitcoin cash. It was forked off of bitcoin in the summer.

Austin Knight: And the reason for that was because they couldn’t agree.

Matthew Howells-Barby: Yeah, they wanted to, so the long and short is they wanted to increase the block size on the core bitcoin blockchain, and that’s what bitcoin cash did as one of the changes. It was a hugely divisive decision to create bitcoin cash, and since bitcoin cash, there have been a flurry of forks that have happened off bitcoin. A lot of them could be argued that, well I think it makes a clear argument on some of them, that they are completely useless and just there to make the owners rich.

We’ve had–and not to say that these necessarily are–but we’ve had things like bitcoin gold, bitcoin diamond, like we’re going through all of these different bitcoin variations and trying to ride on the bitcoin name, all building off of this core blockchain. But before we fall into a hole of the dynamic of forking bitcoin, I think we’ll come back to why this is even important in terms of functionality.

In my opinion, probably the most interesting developments that we’ve had since probably the dawn of bitcoin has been smart contracts. And that came with ethereum. Smart contracts are very interesting. So what we have with when bitcoin was just around, it was like, the really interesting thing here is I can send transactions between one person to another–at the time–at very low transaction costs at very high speed and without the need of like needless intermediaries.

Austin Knight: Like a bank, for example. No bank involved.

Matthew Howells-Barby: Exactly. What smart contracts have came in and done is said, okay, what if we take that a step further? What if we can code contractual agreements, written in code, to process transactions or at least be able to enable deals to be made that often require a trusted third party. And I’m not talking about here in making, say, just a straight up payment. I’m talking about something like, let’s imagine I want to buy your house, Austin. Right? We could trust each other and just say, hey, Austin, you know, I’ve got a bag of bitcoins that I’ll trade you for your house.

Austin Knight: I’m totally gonna give you those.

Matthew Howells-Barby: But more often than not, I need I to go through a broker, who brokers the deal between me purchasing a house. That broker will manage all of the contract, will have like a lawyer come and draft some stuff up. Each of these parties will basically act as a trusted third party and they’ll take a nice slice of the fee.

What happens if you could still maintain trust but not require a third party? That becomes incredibly powerful and that’s where smart contracts come in. And in short, what this does is, a contractual agreement between two parties can be created, hard-coded into, for example, in ethereum, into the ethereum blockchain. When one party fulfills their end of the bargain, the other party released the cryptocurrency to pay them.

Austin Knight: And they don’t have control over this once it’s hard-coded.

Matthew Howells-Barby: Exactly. And it’s also worth knowing we’re going to dig into smart contracts in way more detail in episode eight, but I personally find this very interesting. So it’d be like you’d basically agree on a price. You’d agree on a timeframe that that price has to be accepted and actioned within. If either the contractual agreement–the thing that you had to do, for example, give me the keys to the house–doesn’t get held up on your side, you will not get paid.

It’s actually a super interesting application that’s happening right now with a company called Slock.it. So they developed, using smart contracts, an application for when you rent apartments. So they have basically, this lock system, locking system on the door of an apartment. I’m a landlord, I install this Slock.it stuff and you, Austin, are my renter. Now you come up to the lock and you put in your private key or your password that hooks up to the blockchain and the smart contract is triggered to check, one, if you’ve turned up at the right date. Two: if you’ve paid the deposit on the apartment. Checks that you’ve already verified your proof of identity, and if they all match, the smart contract is triggered, and the door opens.

It’s pretty awesome, right? Like, getting you thinking like renting in that whole space, it’s incredibly, it’s actually full to the brim of third parties, really, real estate in general. That’s just one example of how smart contracts are coming in, using the blockchain to actually facilitate all this stuff.

Next up: Digital identities. This is a space that near-enough 90% of all the talks that I’ve been to, the meet-ups, the conferences around blockchain and surrounding cryptocurrencies, every one of them talks about digital identities and their applications  for blockchain.

When you talk about the like, in particular, why this would be the case? Why is there a need for this?

Austin Knight: Think about your personal identity. Your data online and how incredibly fragmented it is. You don’t have control over it. In fact, you might not even know where your identity is. I know that I probably put some stuff in Facebook in 2006 and Friendster in maybe 2003. I’m sure that my old MySpace profile is floating around somewhere.

Matthew Howells-Barby: I bet that’s full of gold.

Austin Knight: Yeah. Oh, you know it, man. I think I might, I might even have a bank account floating around somewhere. Who knows?

Matthew Howells-Barby: Right.

Austin Knight: It’s totally possible. You might have academic achievements that are owned by educational institutions. Health care records that are owned by your general practitioner. Credit scores that are owned by individual financial institutions, which now we know, those guys aren’t trustworthy. They lose that stuff all the time. Maybe you’ve got identity records that are owned by the state. You don’t have control over any of this, and you don’t even fully know where it’s living or how it’s being treated, or even how secure it is.

Matthew Howells-Barby: This is the craziest part of all of this is, you touched on this, you don’t own your identity. When you actually think about money as well, when you put money in the bank, what a lot of people don’t realize is, you’re not just like, hey Mr. Bank, I’m just gonna put this money in this box. It’s mine. You just like, make sure I open this box every time and it’s kept there safe.

What you’re actually doing is you are giving the money to the bank and trusting that they will give you back that money that they now own. They own your money, that they will give you that back when you need it. It’s like, when the bank goes down, it’s not just the bank that goes down, it’s the money that they own, which is your money. And when you think about what you touched upon with health care, this is an incredibly tough thing.

Personally, I’ve moved from England, I moved to Ireland, and I moved from Ireland. I moved to the U.S. Every single one of those times, I’ve had to register with like the local doctors and the hospitals and the process for getting my medical history has been insane. You would just think that you would just log into a system and it would be like okay, well, if Matt’s got like this medicine that he probably shouldn’t have, we’re going to tell everyone that is a doctor in the world that you probably shouldn’t give him that medicine.

That is not the case. To get my records, I have to ask in the U.K, my doctors there to release those records to me. And I had to go through a bunch of loops to be able to do that. Then I can give them to the new doctors that now own them. And then they have to be released from them and given back to me.

The dynamic of ownership is pretty poisonous, in my opinion. And when you think about it from a health care point of view, pretty dangerous.

Austin Knight: Yeah. Now what if I told you that we could personally own all of our records. That they could be stored on a public blockchain and the individual could choose to release or share them, so that record that you were trying to procure from the U.K health care system, could just belong to you. It’s your information. It belongs to Matt. And then you can come over here to the United States and release that from a public record.

Matthew Howells-Barby: That is incredibly interesting to me. And I think really the way the world should work, right? And more importantly, not only will that be stored, but it’d be stored very securely using blockchain technology, which is encrypted at such a high rate, which we’ve talked about in the past. But I now have ownership of this stuff and it can be transferred easily. And one of the things that’s really interesting here that I’ve heard about is when you think about personal data used for commercial purposes. Right?

So you talked about having all of your data in MySpace, Facebook, all this. Now, Facebook uses all of your data to sell to you. Not only that, but they sell that information without you necessarily being able to see what they’re selling. Yeah, you agreed on some terms and conditions way back when, and that basically signs over your life to them. But they push that data to people who want to understand, okay, what does this people do? What do they like? What do they tend to purchase directly from there? And companies use that to sell then and advertise to you.

What if you also owned that data? And instead of companies going to Facebook and saying, hey, so we want to know about, everything about Austin Knight and what his buying habits are, et cetera, et cetera. What if they go directly to you and say, hey, Austin, would you be okay in actually sharing a bunch of your buying habits and spending data with you? And maybe you’re like, well, you know, I’m fine with that. And they’ll be like, okay, well we will pay you to have access to that data. And you release some of that from your records on the blockchain and you profit from it.

Kind of makes that whole dynamic of people advertising to you feel a little bit more palatable, doesn’t it?

Austin Knight: It does and this could even theoretically be applied in the Facebook world. Where Facebook could set up an agreement with its users, if you release this data to us, then we have a profit-sharing approach.

Matthew Howells-Barby: In Zuckerberg coin.

Austin Knight: Yeah, exactly. Like that’s going to happen. But I think that the compelling thing about this right now is, we’re all relatively unclear on where our data is and how it’s being used. And a lot of the time it can feel like you’re powerless, like you just don’t have control over it. And especially tech companies, as they grow and mature and move faster than entire governments and legislation can, increasingly, it’s unclear what’s being done with our data and what data we’re even providing to these companies or institutions.

I like the idea of bringing that power back to the individual and taking that power away from corporations, so that I can say I choose what information is going to be released to you, and I also choose how it’s going to be used.

Matthew Howells-Barby: 100%. I think there’s the whole like, I want to own my data. I don’t want companies to own it. And I should have this in a modern world where I should be able to at least be in control of who gets to spy on me, et cetera. There’s also just like, let’s just take a step back away from like the whole, I should own my own data. I’m really obsessed with this from a health care point of view, because I just see so many applications here for curing diseases.

One of the biggest challenges, I’ve spoke to a bunch of AI companies in the health care space. It’s like a space notorious where people joke that like companies go to die, because it’s so difficult, right? But they’re doing some of the most important work. And some of the things that they’re trying to do is say, okay, we’re going to gather huge quantities of health records of people that have ended up, say, I don’t know, have gone on to develop a form of cancer. And what we want to do is, we want to collate all of their medical records and the things that have happened to them during the times of their life, and try and use machine learning and artificial intelligence to find patterns that we can then say, hmm, there’s a clear pattern that’s causing this thing. We could maybe help solve it.

The biggest challenge is having to, these individual institutions to get that data, they have to go to all of these individual institutions, get access to this. And most institutions don’t want to give out that data, and there’s also a lot of money to be made in that data, a.k.a the pharmaceutical industry. And it means that actually, a lot of diseases that don’t end up getting cured, don’t get cured because it’s not necessarily profitable to cure them. And that’s a super poisonous thing.

What can happen with the blockchain is, if everybody owns their data, one day we could just literally all say, hey, everyone is gonna submit their health record data so that we can find patterns in this illness. Well, let’s just say we did that. All of a sudden, you have the wealth of the world’s data to go ahead and solve some of the biggest problems facing humanity from a health point of view.

That to me, is a world that I want to move towards. And what something like blockchain technology facilitates. Not only that, but it can be done in a safe way because you can also do things layering in smart contracts, so that, hey, if I release this, you need to hold up your end of the bargain by actually doing something with that data. And then I get access back to it afterwards. It’s certainly something for me I personally feel very passionate about and would love to see blockchain kind of like move towards.

Austin Knight: If I could ask, some of these use cases I imagine, while extremely compelling, may also terrify people. As a landlord, the idea of having locks that are controlled by a smart contract might be very compelling, but as a tenant, it might be terrifying. Like, one day am I going to show up to my place and then I’m gonna be locked out in the cold?

Matthew Howells-Barby: It’s a bit Minority Report, isn’t it?

Austin Knight: It is, yeah. Or is a government or a pharmaceutical company going to say, hey, if the whole world just gives us everybody’s data, we can use this to solve cancer. Probably a lot of people are gonna be ready to buy into that, but then what if that company or that government organization or whoever it may be decides, actually, what we’re gonna do is create like the two thous-

Matthew Howells-Barby: Super Viagra.

Austin Knight: Exactly. Yeah. Super Viagra may be a new Agent Orange, whatever it is that you want to make. What are the fail safes that need to be built in order to make sure that this doesn’t turn from being such a beautiful opportunity into a weapon that can really, really hurt people?

Matthew Howells-Barby: Yeah. And that’s why this can sometimes be quite an unpopular opinion, but I feel as equally passionate about the progression of the blockchain and all of these technologies towards moving us to more of a decentralized place in time that can facilitate all these things. I also feel that we need regulation. Regulation is a bit of a kind of controversial term within blockchain. Because people think, well no, all right, so what you’re telling me here Matt is that the benefit of all of this is that like the state doesn’t get to control it? And now you’re telling me that you want someone to come in and create rules that I can and can’t do within this?

Yeah, actually. You know, like people tend to go and really tear apart things like the SEC, that kind of tries to protect investors. Okay, look, they’re not perfect. It could be better. But we still need to have bodies, institutions that are put in place to safeguard some of these things. For every wonderful, amazing idea that could be done through blockchain technology, there is its evil brother. Right?

There needs to be really strong community focus and regulation in place to make sure that we don’t just create an evil army of basically, like, horrible entities that can control masses of direction, using the blockchain as kind of the platform to facilitate that. It’s kind of like when we came back in our very first episode and we were like, all right. A lot of people say to me, well, isn’t bitcoin just used by criminals? Right? It’s kind of a bit like that.

But for me, like with, and we’re going to touch on ICOs, initial coin offerings, in our next episode. That’s another place where I feel we need regulations but we’re not going to open that can of works just yet.

Austin Knight: Is there ever a time where a blockchain isn’t the right solution?

Matthew Howells-Barby: Yes. Like probably 90% of the ICOs that have been blockchained, I would say. There is a frenzy right now. And I mean, it was only I think a month ago where Kodak announced–yeah, that camera company that yeah, it still exists–they announced that they are now pursuing a blockchain project. Or I think that they’re doing something where they’re creating their own cryptocurrency. Overnight, their share price went through the roof. And all they’ve done is announced that they were gonna do this.

It’s been like drinks companies that have been like, hey, do you know what? We’re just going to become blockchain company, by the way. And then their prices just skyrocketed.

Austin Knight: It’s like these foods in supermarkets. Today if you like go in an American supermarket, that they say non-GMO on the package? They’re advertising non-GMO and there’s not even such thing as a GMO version of whatever that food is.

Matthew Howells-Barby: My favorite is gluten-free.

Austin Knight: Yeah.

Matthew Howells-Barby: It’s like, hey, this is gluten-free orange juice. It’s like, no shit. There’s no fucking gluten in normal orange juice. Right? And actually, it’s a really good point because there’s so many blockchain projects that are popping up right now. And I’m not gonna call any of these out, but like a lot of the projects never worked in a centralized way. And they have even less of a chance of surviving in a decentralized way.

People are just like, how can we use blockchain technology on top of what we’re doing right now? Because you know what? We can launch an ICO and it’s gonna be a way that we can generate millions in funding. It’s going to be like replacing the need for VC and we can almost feel like going public on the stock market overnight. But it doesn’t need to exist. I think the tough thing is here for everyday person, who’s not necessarily as tech-savvy or is close to the technology, it is in all honesty very tough to determine whether this should use a blockchain or not.

It is a bit of a minefield and there is a lot of, basically, ulterior motives to people that are saying that this is a great project. You should invest in it.

Austin Knight: Intentional misinformation.

Matthew Howells-Barby: Absolutely. Completely intentional to get people using it and bulk up the price. But I just think like with any way that you would think how is a company going to be successful, is this a useful thing or not? Does the world need this? Is there a clear audience for this and a clear problem that this is solving that couldn’t be solved any other way? That’s the starting point for this. If the answer to that is there isn’t really a problem here that this is solving, then it doesn’t need a solution. And that is the first red flag for any business. And I think it applies with any other business here.

One thing we didn’t touch that much on, we touched a little bit on some of the real estate stuff. One thing that I find quite interesting are some of the more basic use cases. One thing, especially in developing countries, that’s been, and this is often cited as a really cool interesting way of using blockchain technology almost in a digital identity-slash-real estate type play, is there are often land record disputes. So someone who’s a family in an underprivileged location in a developing country owned land for years. And it was agreed on, on say, a piece of paper that is no longer there or it is, but the government is decided, hey, you know, we want to actually own this land. So we’re going to dispute it, and it’s our word against yours.

Those people lose their land and it’s a huge issue, throwing them into an even worse economic situation. If we moved all land records into the blockchain, remember what we talked about when we talked about this public ledger. You can clearly see everyone, anywhere, on this public ledger that this person owns this piece of land, and it cannot be changed. That record is set in stone for everyone to see. No government can say that’s wrong. No individual. No entity. No company can say this is not the case. It is set in stone and it cannot change. And these people are protected.

The vehicle that’s going to actually be able to facilitate this is an easy to use interface. And people on the ground in these developed countries that can actually get this technology and make it more accessible for people. Especially–and I say less educated–even super educated people. This is tough, right?

Austin Knight: Oh, absolutely. I see that today, and this is why we often draw the parallel to the very earliest days of the internet when you were working on a command line.

Matthew Howells-Barby: Yeah.

Austin Knight: That’s kind of where we are right now and a lot of our hurdles that this community has to overcome and this technology has to overcome, they are design-related hurdles. As a designer myself, I feel like the opportunity is just never ending in this space because we can’t go anywhere but up from here.

But as soon as we put more thought into not just how these systems function, which there’s been a lot of thought put into that, but how these systems are practically used. How they are accessed. The actual visual representations of this technology. As soon as that starts to happen and that movement grows, the use of this technology will open up to the entire world. And that is, that’s very compelling to me, when you start looking at the data for how many people this technology can apply to.

The easiest use case that we’ve talked about for the longest time is of course, cryptocurrency. So you’ve got one billion unbanked individuals in the world, as in they don’t have a bank account.

Matthew Howells-Barby: Which is insane.

Austin Knight: Can you believe that? Yeah.

Matthew Howells-Barby: Insane.

Austin Knight: Insane. I mean, just imagine not being able to get a bank account. It’s scary. And then you’ve got two and a half billion under banked.

Matthew Howells-Barby: It’s even worth mentioning on that one of the main reasons is like some of these people either cannot afford to even set up a bank. There is fees attached to that. They don’t even have identities to like, I.D records to be able to do it.

Austin Knight: Yep. They don’t have an address.

Matthew Howells-Barby: Address? Like all of these things. 70% of the entire population of the world has a net worth of under $10,000.

Austin Knight: Yep.

Matthew Howells-Barby: Let that sink in. 70% of the world has a net worth less than $10,000. That is what we’re working with in terms of like an extreme inequality in wealth.

Austin Knight: Absolutely. There’s also plenty of those people in the tech industry. They’re paying all their money in rent.

Matthew Howells-Barby: Yeah.

Austin Knight: So yeah, one billion unbanked individuals. Two and half billion under banked. Imagine there are families attached to those people. As soon as this becomes accessible, and as soon as people can see how it can be used, that brings a lot more people to the global economy.

Matthew Howells-Barby: Couldn’t agree more. And I think hopefully, from some of the examples that we’ve walked through here, you’re starting to see how when we originally touched on the whole idea of, you know, this is not about bitcoin. This is about the blockchain. This will really start to open up and help you understand how that actually can be the case and why that might be the case.

In the next episode, we’re going to touch on something that we briefly talked about here, which is all about ICOs and this is going to be full of drama. I’m really excited to talk about it. There’s a bit of a frenzy going on at the moment. Make sure you don’t miss out on episode six.

But for now, hopefully you have a better understanding of what a blockchain chain is, and why it’s important for the future.