Why all the hype?
In our society, we normally rely on trusted third parties, such as lawyers, courts, banks and governments to process and keep authoritative records about commercial transactions.
These transactions aren’t just about financial transfers, but also include the creation or transfer of physical assets, shareholdings, certifications, digital rights, intellectual property or even votes.
How will blockchains be used?
Because blockchain technology is so new, it’s difficult to predict exactly how they will end up being used. This is why we at Data61 in CSIRO are exploring new ways blockchains can be used across industries.
To understand the economic and societal opportunities presented by blockchain technology, we also need to understand its technological risks and limitations. At Data61, we plan to identify, develop and evaluate some “proof of concept” systems using blockchains to investigate them.
A recent UK government report on blockchain technologies provides a good overview and examples of the use of blockchain.
One of these is Everledger, a company founded by Australian woman Leanne Kemp.
Smart contracts
Computer programs are a special kind of data and so can be stored in a database. That means we can store programs in the distributed ledger of a blockchain system, and execute those programs while later transactions are being processed.
In the Ethereum blockchain, these programs can be highly complex. These programs are normally called “smart contracts”.
Smart contracts can carry value, and can conditionally transfer that value according to complex business conditions based on the latest state of the distributed ledger.
This means blockchain systems can do more than store information about commercial transactions; they can also process commercial transactions too. This greatly expands the opportunities for using blockchain systems.