Blockchain’s first Revolutionary product

Australia is looking at idea this, too, having recently trialled allowing voters in South Australia to identify themselves via blockchain technology for a minor council election. Meanwhile, New South Wales conducted a trial earlier in 2019 using a blockchain for identity verification based on people’s driving licences. It enabled participants to prove their identity and age for things like buying alcohol and gambling without the need for a physical ID card.

The trials concluded that the technology is not yet mature enough, and that ID-verification can still be achieved better with current technologies. Nonetheless, New South Wales is going ahead with a new large-scale trial of a driver licence registration system based on a blockchain platform at the end of 2019, covering some 140,000 licence holders.

Another country to watch closely is China. It sees blockchain products as a good mechanism for regulation. Given the huge market that China represents, if the government decides to sanction (or indeed mandate) the use of online identity underpinned by blockchain it will give a phenomenal boost to the technology. It also raises the worrying prospect of the government being able to monitor all the purchasing transactions of its citizens, were it to introduce a system in which it knew the identities of everyone on the blockchain.

The business opportunity

Numerous blue-chip tech companies are vying to be part of this blockchain ID future – pointing to the potential for a very big market. IBM is trialling the “alpha” version of IBM Verify Credentials, an ID system underpinned by blockchain technology aimed at both businesses and governments. If typical software industry production cycles for large projects are anything to go by, a market-ready product could be two to three years away. Microsoft, too, is developing blockchain identity systems based on its well established and very successful Azure cloud computing platform.

Either of these systems could potentially provide the kinds of services that governments are starting to envisage. As for corporate clients, one application could be online retail, which attracts a lot of cybercrime. These systems might provide a reliable means of identifying a buyer to confirm they are authorised to pay. Presumably this would be underpinned by something akin to transaction fees per payment. Given the hundreds of billions of transactions that take place every day, the potential revenues could clearly be enormous.

This is why companies like PayPal cannot stay on the sidelines. Blockchain hype or not, you don’t want to be the Kodak of this industry, if or when encrypted ID becomes the next killer online technology.

Until governments of major economies around the world are prepared to significantly overhaul financial systems to accept cryptocurrencies as mainstream payment methods, the less glamorous business of taking an ID-verification cut from billions of payment transactions might be the safer bet. And since this is very similar to the fee-taking business model that made PayPal a giant, it will be very interesting to see what Schulman does next.

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Lucian Tipi is Deputy Head of Department (Finance, Accounting and Business Systems), Sheffield Hallam University