2014 was an eventful year for cyber security with many cyber breaches, spying scandals, and privacy violations hitting the news. Crypto currencies, a new form of digital payment, have also made headlines of late. Mostly met with a degree of paranoia among the media, they have developed a reputation of being the preserve of cyber criminals and money launderers. This is one of the factors which has limited widespread adoption among the general public.
There is no denying that crypto currencies carry risk. There is always risk with new technology - the internet, for example, suffered from a lack of trust in the 90s. Crypto currency, however, is a new technology that has a lot more potential than just paying for items. By mitigating the risks and overcoming perceptions organisation could use the new technology in a wide range of business contexts.
While there are over one hundred crypto currency variants, it is the underlying technology that we are focussing on. The blockchain, a peer-to-peer protocol using cryptography, underpins the trust in Bitcoin payments and the many other currency variants. Aside from enabling payments, there are numerous other ways in which this technology could be used that you may not have realised. Here are seven of them:
1. Create an electronic contract
The blockchain can be used to set up a contract between multiple parties in a way that they do not need to trust each other nor a third party. A blockchain contract can be configured to only release the funds when certain conditions of the agreement are met. For example, you might wish to take a deposit for accidental damage to a loaned item. The deposit is only returned when both parties use their cryptographic keys to complete the transaction; neither can access the funds on their own.
2. Loan your property
You could loan out your property using blockchain contracts. In the same way that a pin locks your phone and a car immobilizer prevents theft, many devices can be modified to seek authorisation for use. Access to the function of the 'Smart Property', as it is known, can be controlled by a blockchain contract. This allows many different types of items, physical or virtual, to be shared with greater control over their use.
Blockchain tagging allows you to include, with your payment, a short message and a web link. Some companies have been using this to advertise their products by sending crypto coins to random addresses. Clearly, there is a fine line between spam and a legitimate advertisement, but at least the recipient would be paid.
4. Make money or help to cure diseases
By lending your computer processing power to a blockchain infrastructure, you can be rewarded in crypto currency payments. Otherwise known as Mining, the margins are dependent on the cost of electricity and can be slim. Alternatively, instead of a financial reward, some blockchain infrastructure projects are created to support a good cause. The distributed computing power can be used, for example, to help solve complex simulations of diseases.
5. Launch your own currency
Blockchain technology was invented over six years ago as an open source project and, over time, has been refined by many programmers. With the addition of new features, crypto currencies can be marked or tagged. This feature allows you to create your own redeemable currency using existing blockchain infrastructure. Having your own currency is like issuing credit vouchers and can give greater control over how the funds are used.
Money transfer services, such as online or mobile payments, have gained in popularity over the last decade. The cost of transferring funds using blockchain technology is currently very low. By contrast, a wire transfer charge can be a few percent of the total sent. As one example, the cost of transferring $81m was just 4 cents and was completed in less than 20 minutes using the blockchain.
Using blockchain technology to pay your employees in crypto currency may seem far-fetched, nonetheless, large crypto currency exchanges are already doing just that. Paying your employees virtually introduces the possibly of more frequent daily or even real-time payments. Not all employees will opt in straight away, but over time as crypto currency becomes a trusted medium, you may one day find yourself being paid in crypto coins.
In December last year PwC welcomed the opportunity to respond to HM Treasury's call for information, which invited views on the benefits and risks of digital currencies. You can read our response here.