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Blockchain’s first Revolutionary product

It could be online ID

| LUCIAN TIPI | In an interview, PayPal’s chief executive, Dan Schulman, recently discussed the prospects for blockchain – the encrypted, decentralised online ledger system that underpins Bitcoin and myriad other cutting-edge projects.

While talking about blockchain’s potential for improving how people make payments around the world, Schulman said: “ We think there’s a lot of promise to blockchain technology … but it really needs to do something that the traditional rails [of the interntional payments system] can’t do. Most people think that blockchain is about efficiency, but the system today is pretty efficient. There are middlemen sometimes in between, but the rails of it are pretty efficient. So we think a lot of the neat stuff that can happen on blockchain is around identity, for example”.

Schulman was referencing a debate around payments that has been going for a few years. Without getting too technical, the main benefits of blockchain payments are that they are not controlled by middlemen, so there are no fees to pay; and transactions can’t be hacked and changed once they are on the ledger.

But at the same time, they are not yet as quick at processing transactions as the traditional system – which, as Schulman argues, is fast enough in any case. Regulation is also a major issue: people on either end of a blockchain payment are completely anonymous. This presents major issues for everything from money laundering to being able to reclaim payments if you accidentally credit the wrong address.

In short, blockchain-based payments technology is very easy, but policy and regulation are much harder. For PayPal, which relies on the international banking system, there is still no contest.

The real you

So why was Schulman much more bullish about the prospects for blockchain around online identity? Interestingly, it relates to one of the technology’s weaknesses in payments: anonymity. Much of the cybercrime that takes place results from the fact that we don’t know who we’re talking to. If we could all encrypt our online identities on blockchains so that we could completely trust who were are dealing with, it could overcome this problem.

This isn’t just theory: there are numerous interesting developments in the offing. Take the UK government, which like many countries is increasingly moving interactions with the public online. This includes benefits, taxation and other services such as passport and driving licence applications. Yet like all governments, it faces a major challenge from the fact that citizens lack a unique online identifier. This is helping fraudsters to steal nearly £50 billion worth of government services every year in the UK. For this reason, the government is currently exploring blockchain as a potential solution.

Another very interesting application, currently being explored by the UK government as part of the same project, is voting systems. Blockchains could provide a way of guaranteeing that every person queuing up to vote is who they say they are – or allow people to vote online, potentially with big benefits to turnout.

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