Depending on who you ask, blockchain is either totally overhyped or its going to save the world, your business and your country’s economy in one fell swoop. It’s also wildly overcomplicated, confusing and often misunderstood.
Put as simply as possible, blockchain is a series of digital information (the blocks) stored in a public database (the chain).
Blocks are made up of three things: information about transactions; information about the people or entities involved in a transaction, using a unique digital signature devoid of any identifying information; and information that distinguishes blocks from other blocks so that identical transactions aren’t mixed up with one another.
When a new block is added to the blockchain, it becomes publicly available for anyone to view and users can sign up to connect their computer to the blockchain in order to receive automatic updates when a new block is added.
Each computer in the blockchain network holds a copy of the blockchain, creating thousands of copies and making the information incredibly hard to manipulate.
Cryptocurrency protocols are often built on blockchain – they are essentially electronic cash systems that are fully peer-to-peer, without the involvement of a trusted third party, such as banks or governments who are usually involved in such systems.
Despite the continued inaccessibility of the technology, companies and countries alike have already started finding new, innovative applications for blockchain. Here are just a few of the ways that blockchain is being used in the UK.
In 2018, the UK government’s “innovation agency” pledged a total of £19 million to fund innovative ideas for new products, processes and services in the fields of “emerging and enabling” technology, including distributed ledgers or blockchain, and health and life sciences.
The government specified that the projects must have the potential to transform a wide range of markets and generate significant economic growth, and provide business growth, productivity or an export opportunity for at least one small or medium-sized enterprise (SME) and be applied in more than one industry, sector or market.
Alongside blockchain, the government also considered projects looking at bio films and energy harvesting, big data and cybersecurity, robotics and sensors, and satellite communications and Earth observation, among many other topics.
Isle of Man Global Hub
Earlier this year, the Digital Isle of Man, an advisory body based on the self-governing British Crown dependency located in the Irish Sea, launched a global hub for the development of blockchain initiatives.
The body also opened the Blockchain Office to “guide blockchain businesses through current and future regulatory landscapes”, and Isle of Man Sandbox, a “testbed” for innovative new blockchain projects.
The Office’s main function is to “facilitate a dialogue between business and local and international regulators”, and to “help blockchain platforms design and future-proof their concepts” in-line with regulation. It will also provide guidance and marketing support, and encourage collaboration.
Meanwhile, the Sandbox is intended to be “a collaborate space” for companies to “live-test” their product, service or delivery mechanism in an environment where risk to “ordinary financial consumers” and the financial systems are contained.
“The response . . . has been tremendous, with a number of premium blockchain businesses and emerging starts-ups approaching the Office for early participation,” Lyle Wraxall, CEO of Digital Isle of Man, said in a statement issued by the island’s government. “There are no signs of interest slowing, and we look forward to collaborating with these innovative pioneers…”
The UK government convened a Cryptoassets Taskforce in May 2018 to research and outline the country’s policy and regulatory approach to cryptoassets and distributed ledger technology in the financial services sector as part of the government’s overarching FinTech Sector Strategy.
The taskforce consisted of Her Majesty’s Treasury, the Financial Conduct Authority (FCA) and the Bank of England, and released its final report in July of the same year.
It commits the authorities to take actions to “maintain the UK’s reputation as a safe and transparent place to do business in financial services”, ensure high regulatory standards and protect consumers in financial markets, guard against potential future threats to financial stability, and allow innovators in the financial sector who “play by the rules to thrive”.
This is a sandbox initiative set up by the United Kingdom’s Financial Services Authority (FCA) which allows companies to request support and also test out their service within a regulatory sandbox. Although the project is not explicitly focused on blockchain, 40 percent of the firms selected for the initiative’s fourth cohort were blockchain based.
For example, Fineqia is a blockchain-based digital platform that enables companies to issue and administer debt and equity securities, including bonds backed by cryptoassets, and 20|30 is a distributed ledger-based platform that allows companies to “raise capital in a more efficient and streamlined way”.