Kiwis embrace blockchain, despite bitcoin bottleneck
One of the biggest tech trends of 2017 has been the rise of blockchain, the technology behind bitcoin.
But unlike with bitcoin, there are promising blockchain projects under development in New Zealand. That's because our government and banks can't use their red tape to stifle blockchain innovation, like they're doing with bitcoin.
A very quick explanation of blockchain, if you're unfamiliar with it. In a nutshell, a blockchain is a distributed database.
Bitcoin was the original use case. Every time someone trades bitcoin, it's recorded onto the blockchain. A key benefit is that no one entity controls that data. As fellow columnist Mike O'Donnell explained, blockchain has an extra layer of trust because you're not reliant on an intermediary.
READ MORE: Bitcoin bottleneck continues to frustrate Kiwis
Blockchain technology isn't just restricted to cryptocurrency – it can be used to record basically any digital data. Also there are many different blockchains out there; for example the Ethereum blockchain is completely separate from the Bitcoin blockchain.
Some of New Zealand's biggest corporations have begun to experiment with blockchain. Fonterra recently announced a partnership with Chinese e-commerce giant Alibaba, to build a food safety framework using blockchain technology. This will provide assurance to Chinese consumers that they aren't buying "counterfeit and fraudulent food products".
Put another way: currently Chinese consumers have to rely on a trusted intermediary – Fonterra – for those assurances. With blockchain technology, there will be more transparency into the supply chain that Fonterra uses.
As for the local startup scene, most of the blockchain developments in New Zealand are still early stage. But what they're building is often ambitious.
A New Zealand startup called Centrality wants to become a central hub for apps, using its own custom built blockchain platform. The basic idea is that local businesses can create an app that lives on Centrality's blockchain, allowing end users (that's you and me) to sign in just once and have access to all these apps. What's more, data is shared across the apps – which has benefits for both the businesses and the users.
In a way Centrality's hub is similar to using your Facebook credentials to log in to different apps. But with blockchain, you can make transactions and do other advanced interactions.
Perhaps it's better to compare it to WeChat, the Chinese messaging app that has built-in e-commerce and other interactive functionality.
Incidentally Centrality isn't the only company building an app platform using blockchain. A Swiss-based company called Status has a similar goal, and reportedly raised more than US$100 million earlier this year.
A promotional video from Centrality shows people in Auckland using a fitness app, filling up on fuel at a service station, receiving a digital voucher, buying shares, and more. So far none of this is live, but the company says it's working on 12 initial apps that will be released "before the end of the year".
The trouble that blockchain has had during its initial wave of growth is that it's difficult to understand how it works exactly. For instance when I went to check out Centrality's website, I didn't immediately understand what it was all about. The homepage talks about "scenes", "smart contracts", "tokens" and other terms that mean little to most people.
I often compare blockchain to the early web, when concepts such as "link", "html" and "hypertext" were unfamiliar to most of us. Eventually of course, we all came to understand these terms.
Centrality co-founder Aaron McDonald told me that understanding blockchain won't be necessary for people who will use their apps. "Users shouldn't really need to think about the blockchain per se," he told me, "just like most people don't understand how the internet actually works or how a cloud service actually works."
But why do we even need blockchain in an apps hub? After all, Apple and Google already have app platforms. What blockchain offers, said McDonald, is a way for users "to control their digital destiny". He also said that Centrality users "will own their own data".
According to McDonald, Centrality users will control their profile by way of a private key. "We don't hold the information ourselves," said McDonald, "and we don't have access to it unless we are given access by the consumer."
As well as commercial applications, blockchain technology is also being used for social enterprise applications.
Tauranga-based software architect Robert O'Brien is involved in a project called NZ Data Commons, which hopes to enable data sharing across disparate organisations. Its first project is to implement a "shared data infrastructure" for the Predator free NZ 2050 initiative of Biological Heritage NZ.
However O'Brien stressed that blockchain is just one part of the Data Commons system. Only the marketplace, which he described as "a place for the publication of available datasets", will be built on the blockchain. And it won't be about buying and selling data, but negotiating access to the data "irrespective of where it is held".
In summary, clearly blockchain is at an early stage. But I'm pleased to see that Kiwi startups and developers are using this technology in a variety of innovative ways. It shows what this country can achieve without the government and corporate meddling that is hampering bitcoin.