Digital Currency, Bitcoin and Blockchain Technologies Advance

Blockchain is a revolutionary technology that creates a tamper-proof and lasting record (you might call it an electronic accounting journal, or a distributed ledger) of transactions with a very high level of encryption designed to deter hacking or alterations. It works on a peer-to-peer data communication basis.

Blockchain initially gained notoriety as the enabler for the bitcoin digital currency (a virtual repository of wealth that some people are willing to consider as an acceptable substitute for dollars, Euros and other traditional currencies). Bitcoin enables users to exchange values or payments directly, without the intermediation of a bank.

It is conceivable that the central banks of the world’s nations could eventually authorize and issue their own cryptocurrencies using blockchain. In fact, the Bureau for International Settlements (BIS), a global financial exchanges consortium, issued a report in 2017 discussing the pros and cons of such an action. The United States Federal Reserve Bank has conducted research along these lines, as have the banks of India, Sweden and other nations.

As of late 2019, Facebook was considering launching a cryptocurrency called Libra, along with several other founding members that are leaders in the financial field. Regulatory authorities in both the U.S. and Europe were highly skeptical of the Libra project. Facebook scaled back its plans for Libra in 2020, and later renamed it the Diem Association. About the same time, the company rebranded its cryptocurrency wallet project from Calibra to Novi. As of late 2021, Facebook launched a small pilot of Novi for a limited number of people in the U.S. and Guatemala.

Unfortunately, bitcoin was an instant hit with people engaging in illegal activities. The fact that cryptocurrencies have been used as financial havens for criminals and tax avoiders, along with the fact that a global crypto network could be used, to some extent, as an alternative to well-established currencies, banking systems and financial networks, makes governments extremely uncomfortable with the concept. Nonetheless, it has proven the potential of blockchain as a versatile technology that can solve many problems in the sectors of finance, logistics and trade. A small number of hedge funds invest in bitcoins, seeking to take advantage of increases in value of bitcoin units, which are known as “tokens.” Elsewhere, a small number of firms have created brokerages for bitcoins. CME Group, a highly respected commodities and derivatives exchange, launched bitcoin futures on its exchange in May 2021.

The bottom line is that blockchain makes it possible for organizations to share and store data in a highly secure environment. Blockchain tracks and links transactions in “chains,” which are verified cryptographically into lists (known as “blocks”). The result is a consistently verifiable record of when and how transactions occurred, and thereby who owns what as of which date. There is potential here to reduce fraud while increasing transaction efficiencies. An open source collaborative known as Hyperledger has been formed to encourage the use of blockchain in a wide variety of industries beyond the financial sector, such as manufacturing and distribution. Hyperledger envisions blockchain used in advanced industrial and information systems in order to create “smart contracts and other assistive technologies.”

For example, blockchain may offer a revolutionary way to track the origin, shipping and arrival history of all types of merchandise and commodities, from foods to electronics to apparel. Shipping giant Maersk recently tested such a system. Blockchain could be a big boost to efforts to increase port security and customs efficiency.

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