What’s the big story in software patent applications in 2016? Does it by any chance involve a tamper-proof, virtual decentralised verification ledger? In other words, does it use blockchain?
Blockchain is a technology that uses an internal database element to monitor transactions without the need for a trusted middleman or a third party. It has been widely-distributed, potentially running on many millions of devices and accessible to anyone.
The technology enables virtually anything of value – money, titles, deeds, music, art, scientific discoveries, intellectual property, and even votes – to be moved and stored securely and privately. Blockchain ensures trust and integrity between unknown users and helps to minimise fraudulent actions.
This creates some serious new opportunities for cloud based technologies, particularly those where trust is all important. Blockchain changes things. It was created to support digital currencies like Bitcoin, but blockchain is itself rapidly overtaking these crypto-currencies in importance. It is drawing interest across various domains, including equity finance, shipping, manufacturing, entertainment, loans, insurance, gambling and property rentals.
In recent months, blockchain has been shown to work for almost any type of transaction involving value, including money, goods and all types of property.
Blockchain has hit headlines in the transaction based banking world, but many other applications for the technology are now being considered. And in some cases blockchain has already been tested to the point where it is being declared a genuine revolution, as fundamental as the Internet itself.
Over the past two years there has been a meteoric rise in the number of patents involving blockchain. The chart shows the increase in the use of the word ‘blockchain’ in all international patents filed under in countries that are signatories to the Patent Cooperation Treaty (PCT) over the past few years.
Currently, only a very small proportion of global GDP (around 0.025 percent, or $20 billion) is held in blockchain, according to a survey by the World Economic Forum’s Global Agenda Council. But the Forum’s research suggests this will increase significantly over the next decade, as banks, insurers and tech firms recognise the technology as a way to speed up settlements and cut costs.
Companies moving quickly to adopt blockchain include UBS, Microsoft, IBM and PwC. The Bank of Canada is also experimenting with the technology. A report from financial technology consultant Aite Group estimated banks spent US$75 million last year on blockchain. Silicon Valley venture capitalists are queuing up to back ventures that use it.
Just some of the unexpected ways blockchain might change the world include distributable cloud storage, unbreakable contracts and electronic voting. Maybe there is even a census application!
Blockchain technology could also take networked business models to new heights, by supporting a whole host of breakthrough applications. Local payment systems, credit card companies and other mediators will all be able to cut costs and time from their transactions. People unknown to their business partners (‘trustless partners’), will easily be able to do business because the integrity of the transaction will be protected and guaranteed, not by a middleman or any centralised party, but by the system itself.
Blockchain will be used to prove digital identity and ownership, giving people more protection over their personal data.
Blockchain technology provides a new platform for creators of intellectual property to derive value from their development. Look at the example of a new startup called Ascribe which runs on the blockchain. It lets artists upload digital art, watermark it as the definitive version, and transfer it so that it moves from one person’s collection to another’s – similar to a Bitcoin transaction.
Similarly, startup Blockai is helping artists, photographers and other creators register their work so that they can protect it from potential copyright infringement by providing proof of creation. And it seems Goldman Sachs might want to create its own version of Bitcoin, filing a patent in October 2014 for SETLCoin – a cryptocurrency built using blockchain technology, to be used by Goldman traders as a settlement system for trading stocks, bonds and other assets in real time.
JPMorgan, the London Stock Exchange Group, Wells Fargo, and State Street recently announced that they have joined a consortium with IBM, Intel, and Cisco and blockchain startup Hyperledger (now owned by Digital Assets Holdings) to develop a new blockchain technology.
Some venture capitalists are also interested in supporting finance-centric blockchain companies. Chain, a blockchain company working with NASDAQ on a new trading platform, raised US$30 million dollars from finance giants like Visa and venture capital firms like Khosla Ventures. Bank of America has filed approximately 15 patent applications based on blockchain technology and is planning to file more in the future.
Where there is fintech, there is blockchain. The country that is making the largest investment in fintech.at US$31.6 billion, the US, is also the initiator of the great majority of blockchain related international patent applications.
Blockchain holds huge potential across a wide range of industries, and it seems likely that blockchain technology will become essential across many sectors. As this nascent technology is ripe with potential for innovation, we can expect new related technologies to continue to emerge.
Any inventive application of blockchain technology may be eligible for its own patent rights, offering entrepreneurs the opportunity to corner the market on its use for specific purposes, and the potential for substantial commercial gain.
Blockchain is here.