The conversation about the use of digital currencies is far from over, but increasingly blockchain, the technology behind the new generation of cryptocurrencies, is gaining recognition. Blockchains automate interactions, allowing parties to a transaction to bypass the necessity of third parties for the management and enforcement of financial transactions. The technology has received increased attention because it allows for irreversible transactions across open networks with minimal risk of interception. The decentralised nature of a blockchain means it is harder, although not impossible, to hack. Simply put, financial transactions via blockchain are cheaper, simpler, faster and more secure.
From an information governance perspective, the real innovation of blockchain technology is that it ensures the integrity of the ledger and removes the necessity of a central authority. The permanent and immutable record of the blockchain allows for collective knowledge of transfers of information. Blockchains resolve the double-spend problem of digital currencies by making it possible for a decentralised network to come to a consensus on a sequence of events. Before its addition as a block to a blockchain, a transaction must first have its integrity collectively confirmed. Code replaces the role of institutions, and once set up, blockchains run themselves and allow people anywhere to conduct transactions through peer-to-peer technology. Blockchains create a permanent and immutable record because they preserve the integrity of data. Expect to see them used to archive legal, financial and governmental records.
Like the internet, blockchain technology relies on an open architecture that allows for permissionless innovation. Smart contracts are one such innovation. In these agreements, a blockchain validates performance, as specified in the smart contract, and self-executes the management, enforcement, performance and payment of an agreement. Smart contracts may soon create a new stock market, manage energy grids, or become the basis for a new model for democracy.
Information governance practices can use blockchains and smart contracts for countless purposes. For example, parties to blockchain transactions can enjoy heightened data protection and see fewer instances of fraud by virtue of only having to share essential information with each other. Smart contracts can be particularly effective when it comes to the future of digital identity management. An individual could use a smart contract to trace, manage, protect and monetize the personal information they share online. Similarly, a smart contract specifying IP rights and attaching a payment system to creative content could ensure that the creator receives direct compensation.
The potential of blockchains is complex and transformative. As observed by Pavel Abdur-Rahman of IBM Canada, “To harness game-changing technologies including artificial intelligence, blockchain and quantum computing, innovators need to champion methods from experience-led design to multidisciplinary problem-solving.”
Contributors - Jessica Sheehan and Catherine Chen