By Philip Ryan for Bank Innovation,
You might be using a blockchain to order detergent within the next few years.
That’s because blockchains, or more properly, distributed ledgers, are likely to be used to authenticate users of IoT devices, according to Chris Skinner, author of the forthcoming book ValueWeb. Skinner told Bank Innovationtoday that he foresees a world in which the Internet of Things, which is the future of mobile, and shared ledger technology, connect to enable a “realtime, almost-free system for the exchange of value.”
Skinner sees the next five years as the time to rationalize and standardize the use of distributed ledgers in financial services, and the five years after that as the time for banks to get the systems in place and functioning — “a decade of development,” Skinner said.
The big banks will lead the way, revising and reinventing back-office standards, alongside entities such as Digital Asset Holdings, SWIFT, R3, and The Clearing House. Midsize banks will follow as best they can, perhaps leveraging the services of the larger players. On the retail side, distributed ledgers may first touch consumers’ lives through smart contracts for auto loans or legal documents.
To say Skinner is bullish on the blockchain would be an understatement. He sees it revolutionizing banking — and not just banking, but governance, with the role it can play in managing identity. And that brings us back to that detergent: “A shared ledger structure can identify your things as yours,” Skinner said, obviating the need for typing in your password (one uppercase letter, one special character…) on the washing machine, car dashboard, or television set. Perhaps a mobile device will help identify one’s identity, or perhaps the device’s location or proximity to other IoT devices will suffice. Distributed ledgers will be able to record devices’ transaction histories, and even monitor supply levels, reaching out to Amazon or the local grocer for resupply.
Later this year, Skinner says he will help launch a venture capital fund that will identify worthy blockchain companies on behalf of banks. It’s a way to spread bets, Skinner said, avoiding putting resources in a company or standard that later fails, much as banks continue to place multiple bets in mobile payments.
“We’re entering a new age in terms of systems of value,” Skinner said. “The first age, agriculture, saw the invention of money. The second, industrial, brought about banks and paper checks. The third, it’s hard to say exactly what, but we will see a chip-based realtime nearly-free value exchange spanning the globe. And it will be transformational.”