Much has been made of Malta’s new regulatory framework concerning blockchain. From being dubbed ‘the Blockchain Island’ to various crypto giants deciding to relocate to our shores, the reputation that blockchain and cryptocurrencies have made for themselves certainly precedes them.

While a fruitful discussion may easily be held among the tech-savvy investors, fund managers and other members of the financial services sphere, the layman often struggles to truly understand what blockchain itself actually is, let alone its application in practice and how it may help them.

A way of simplifying blockchain is through the idea of a shared ledger, a term repeated often, as reflected in its namesake. The idea behind this is a ledger shared by all the users of a blockchain, on which every transaction is recorded. Each transaction is a ‘block’ and when one follows another, it is attached to the previous block chronologically, thereby forming a chain. These blocks can be programmed to record any transaction or thing of value, depending on the desires of the users of the blockchain network.

So what would happen if a chain of blocks labelled A, B and C was edited, so that the data stored in B has now changed to X? Rather than B simply changing to X, an additional block is added after C that stores the record of the change from B to X. Essentially, the original blocks themselves cannot be changed, however additional blocks may be added to demonstrate that changes were made, thus keeping a record of all data, before and after any changes. It is a non-destructive form of a general ledger, where changes cannot be erased, overwritten or omitted.

Rather than this ledger being physical or virtually accessible through only one access point, the whole system is decentralised. This aspect of decentralisation is fundamental to the core principles of blockchain technology, as it allows all the data to be seen by all the users at the same time, in real time, creating an incalculable hindrance to data tampering. In order for a new block to be added to the chain, a computer intending to add the block must complete a difficult cryptographic puzzle, satisfying the proof-of-work requirement which allows all the other computers to verify and trust the data added by the new block. By doing so, users on the network may trust the data added to be reliable and accurate.

What is the scope of all of this? One of, if not the most fundamental aspects of trade is trust. Transactions today are carried out between people, with the addition of an independent intermediary to ensure smooth sailing. But what if we could eliminate the middleman, save on time and costs, and be able to trust those who we do not know?

One of, if not the most, fundamental aspects of trade is trust

In a booming property market, buyers and sellers of property rely on banks and agents for assurance that the person selling the property is actually the owner, and the person buying has the funds to complete the transaction. With the implementation of a blockchain system to the property market, the need for an intermediary would be nullified, as a comprehensive system of records would exist, freely accessible to all parties involved, with the blockchains guarantee of reliable information. Checks could be reliably carried out on a direct, peer-to-peer basis, doing away with hefty agency fees and bank commissions.

Smart contracts are an application of blockchain in which code is programmed directly into a contract, and upon satisfaction of the conditions in the contract, the contract is executed. For instance, if a musician is guaranteed a commission for each sale of a song, the instant a song is sold, the conditions of the contract are satisfied and the musician receives their commission. This way, the musician need not trust his manager to get paid, as they can trust the blockchain to pay them immediately and directly. In essence, the code itself enforces the contract.

Blockchain also has the potential to revolutionise voting and elections. An election process based primarily on a blockchain is extremely difficult to tamper with. Governments can gauge the exact number of voters, and the content of the vote almost instantly, rather than after a lengthy and possibly faulty manual process. This way, voters need not trust ballot counters, as they can trust the blockchain.

Additionally, the potential application of blockchain to the healthcare industry would mean that patient records and medical information could be securely stored on blockchain, immediately accessible to doctors and nurses in hospitals all over the world, if necessary.

Referrals by professionals for examinations or operations would be immediately stored on the blockchain. Such sensitive and personal data needs a system that can present it to healthcare professionals easily, while adequately protecting it, and blockchain satisfies these requirements perfectly.

Blockchain will prove itself in time and emerge as a fundamental tool in allowing parties to collaborate without having to trust each other, as they can simply trust the blockchain. The risks of being defrauded, or taken advantage of, are highly improbable, if not virtually impossible.

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