Blockchain is the technology that underpins the bitcoin digital currency phenomenon. It is a decentralised, distributed, and self-proving database which has the potential to revolutionise many different forms of data sharing.
Blockchain consists of blocks of digital ledgers or accounting records arranged in data batches linked or chained together using cryptographic validation, hence the name ‘blockchain’. The technology is attractive as the distributed nature of the technology means that it is transparent and virtually impossible to tamper with the data. This technology therefore is ideal for transactional processes hence the initial use being in financial and insurance markets.
It also has the potential to make ‘smart contracts’ a reality. Smart contracts are self-executing contracts with no human intervention and have the potential for applications in a number of different sectors to validate large transactions, including financial services, insurance, real estate, heath care, hospitality, media and legal (to name a few). For legal contracts it would simplify transactions and make them more efficient and less susceptible to tampering especially for high volume standard form contracts. However, users will require legal and technical advice on the implementation of any smart contracts and this stage will be critical to the process.
The technology will have a greater impact in the short-term on business to consumers as opposed to business to business transactions.
As blockchain is relatively new there will be a requirement to adopt common approaches to enable a standardised way of working. Depending on the sector different existing regulations will be relevant and any use of block chain smart contracts must be considered in light of such regulations.