Distributed ledger technology (DLT) is being heralded as the next great technology – acting as a catalyst for a new technological revolution and creating the first truly digital economy. In 2017 the world watched as the price and market capitalisation of Bitcoin skyrocketed by over 1,300 percent .

Excitement brought with it claims that 'distributed ledgers are the way of the future'. With the World Economic Forum predicting that 10 percent of global GDP will be stored on blockchain by 2027, it's hard to dismiss a key role for distributed ledgers in future systems.2

The hysteria surrounding Bitcoin, the first and most well-known application of DLT, has led (rather misleadingly) to the terms Bitcoin, Blockchain and DLT becoming synonymous. These terms aren't interchangeable - Blockchain is simply one form of distributed ledger design.3 Appreciating the disruptive potential of DLT requires an understanding of its underlying characteristics and its distinctions from traditional ledgers.

Historically, the evolution of ledgers was restricted to improvements in the material on which it is recorded – from clay to papyrus, vellum, paper and most recently onto computers. Distributed ledgers represent something new altogether – the collaborative creation of an asset database which can be shared across a network of multiple sites, geographies or institutions.4

The Evolution of DLT

2017 was a milestone year in the evolution of DLT. Industry and government focus began to shift to the unique qualities of DLT. In August 2017 Labor senator Sam Dastyari and Liberal senator Jane Hume co-convened a new 'Parliamentary Friends of Blockchain' group intended to champion the use of blockchain technology within government and private industry.5, 6 As the core technologies supporting distributed ledgers have become better understood an explosion of creative potential has ensued, acting as a catalyst for newfound capacity to deliver trust across a wide range of services.4 For example Blockchains are now regularly grouped into three categories which satisfy specific situations: permissioned public, permissioned private and permissionless public.7 Some estimates suggest at least 25 percent of the Global 2000 will implement blockchain services as a foundation for digital trust by 2021.

A comprehensive analysis of major technological revolutions by Perez (2009) uncovered three common drivers of revolutionary change: substantially lower cost inputs, a new method of communication, and altered infrastructure and logistics.8 You could strongly argue that DLT satisfies these criteria and that we may in fact be at the dawn of a new technological revolution.9 In that case, what changes might we expect to see?

Use cases around the world provide some insights into this question, with each capitalising on one or more of the benefits distributed ledgers offer: resilience through decentralisation, enhanced trust through immutability, near real-time reconciliation of transactions, value storage of native digital currencies and typically lower costs than traditional centralised systems.4, 7, 10

Financial institutions in particular have been working to unlock efficiencies created by DLT with expectations they may become the new market infrastructure or backbone of the financial system.11 In 2018 it is likely that we will see a number of projects move out of a proof of concept stage and into production. IBM along with five banks - UBS, Bank of Montreal, Caixabank, Commerzbank and Erste Group Bank - are working together on a blockchain based global trade platform, Batavia.12 Its release is due sometime this year and could have massive implications for trade finance and cross-border payments; the new platform is designed to be openly accessed by organisations worldwide and support more efficient, transparent and cost effective transactions.13

The Adoption of DLT

In December 2017 the Australian Securities Exchange (ASX) became the first major bourse to announce the adoption of blockchain to record shareholdings and manage the clearing and settlement of equity transactions.14 The decision is momentous in that it presents DLT as the new technological benchmark. In reference to the decision, ASX Chief Executive Dominic Stevens remarked that the Clearing House Electronic Subregister System (CHESS) was world leading when it was introduced in the 1990s. After testing, Stevens said "We believe that using DLT to replace CHESS will enable our customers to develop new services and reduce their costs, and it will put Australia at the forefront of innovation in financial markets".15 According to IDC estimates, 20 percent of trade finance will incorporate blockchain alone by 2020.16

The ability for distributed ledgers to store digital representations of real-world actions is already being used to improve traceability along supply chains – providing documented evidence of the provenance of an asset or object.17 This is especially important to Australian food exporters, who can derive more income by proving Australian origin.17 There are successful pilots of blockchain technology application in the grain industry by CBH group and Agridigital with an expected commercial solution to launch in 2019.19

[On a black background, a pale green hexagonal pattern wipes down the top of frame and out of the bottom of frame, as the logos for Data61 and the CSIRO appear above the text, "Creating our data driven future" with the website address "www.data61.com.au"

In an animation, on a pale green background, a cow wears a blue prize ribbon.

On a map, lines arc from locations in Australia to locations in New Zealand and throughout Asia.

Blue prize ribbons are stuck on crates. A masked figure pushes a crate marked "Fake Meat" toward them. A ribbon falls off a crate.]

VOICEOVER: Australia's high-quality beef is in high demand, particularly in Asia. However, food fraud, like counterfeit Aussie beef, costs the global food industry an estimated US$40 billion each year. This erodes the reputation of Australian brands.

[On a menu, "Premium Beef Steak" is marked with a blue prize ribbon.

In a restaurant, a couple eat steak.]

VOICEOVER: So how can consumers and businesses trust that their premium Aussie steak really comes from the paddock promised on the label?

[Long dotted lines run from skyscrapers into the air. Handshake symbols appear on some of the lines. The logos for Data61 and the CSIRO sit above the buildings.

Text: Blockchain Technology.

Oblong symbols are connected in a chain. Each symbol contains five coloured pentagons. Five pentagons move into the open oblong at the end of the chain. The oblong closes and a new empty, open oblong appears at the end of the chain.]

VOICEOVER: To solve this problem, CSIRO's Data61, Australia's leading data innovation group, is working to help industry adopt revolutionary Blockchain technology.

[Pictures appear in a series of six arrows representing a supply chain - a cow, a factory, transport, a warehouse, a shop, and a plate. Silos appear above the arrowsDotted lines move from the the arrows to silos. Some silos are not connected to some arrows.]

VOICEOVER: Agricultural supply chain transactions are typically recorded in isolated data silos, making it difficult and time-consuming to audit the origin of products and prevent imitations from sneaking in.

[The blockchain graphic replaces the silos. When a coloured pentagon appears above one arrow, then pentagons of the same colour soon appear above all the other arrows, and then inside the open blockchain oblong. Blockchains appear below the arrows as well. These blockchains are also coordinated with all the arrows.]

VOICEOVER: Blockchain technology, on the other hand, is not owned by any single party. Rather, it's operated by a collective. It provides neutral ground for all stakeholders in the supply chain to record their interactions on a distributed ledger.

[In the blockchain above the arrows, the dots are replaced by padlocks in every oblong. The blockchains below the arrows are replaced by blue prize ribbons and handshake symbols.

A magnifying circle highlights a blockchain's oblong. Ticks appear inside all the pentagons.]

VOICEOVER: Blockchain's transparency and inherent resistance to tampering creates a distributed network of trust and integrity. Which means anyone can check every step in the history of the goods throughout the supply chain.

[Circles containing food, then a cow  a factory and a truck are surrounded by concentric rings of dotted lines.

A handshake symbol is labelled 'Trust'. A tick inside a decorated circle is labelled "Food Safety". A prize ribbon is labelled "Quality Brands".

A padlock inside a circle is labelled "Secure Trade". A dollar sign in a circle is labelled "Finance".]

VOICEOVER: When it comes to food, having reliable data that shows exactly where and how ingredients were grown, processed and distributed is essential to establish trust and food safety, as well as build high-quality brands, improve efficiency and secure trade. It also creates opportunities for new kinds of finance and insurance. To collaborate with Data61, visit data61.csiro.au/blockchain

[On a black screen, the logos for Data61 and the CSIRO appear above the text, "To collaborate with Data61, visit data61.csiro.au/blockchain."]

What’s the beef about blockchain?

Ensuring data integrity while sharing between parties will likely transform the way in which the healthcare sector operates — with implications for health records, medical credentials, pharmaceuticals and more.20 Scalamed is an Australian start-up offering a new and mobile way to manage personal prescriptions by utilising a cryptographically secure blockchain network to store and access personal data and information in a manner which is private and immutable.21 

DLT is likely to have a critical role in the enablement of a true peer-to-peer economy.22 PowerLedger may offer the greatest insight into this disruptive capability, fundamentally changing the balance of power between consumers and large, long-standing centralised authorities.23 The PowerLedger Platform, supported by Power Ledger Tokens, is a trustless, transparent and interoperable energy trading platform which allows peer-to-peer trading of surplus energy from rooftop solar PV systems between neighbours.23

DLT continues to find application beyond cryptocurrency – in trade and finance, cross-border payments, data sharing, traceability and provenance, facilitation of smart contracts and enablement of the peer-to-peer economy. There are a number of functional, operational, governance and legal aspects that need to be carefully considered before the mass adoption of any new technology.24 A technological revolution requires the development of accepted standards and procedures to provide market and industry confidence and encourage interoperability. In 2017 Standards Australia released a roadmap for Blockchain Standards in an effort to develop a collective Australian position on DLT standards to instil industry, consumer and market confidence in their use and application.25 The International Organization for Standardization (ISO) created ISO/TC 307 Blockchain and Distributed Ledger Technologies in 2016 and held its inaugural meeting in April 2017 in Sydney.26 There are currently 4 ISO standards under development and ongoing research by formal working groups into use cases, governance and interoperability.25, 26

2018 is shaping up as another exciting year in the evolution of DLT. Its application has paved the way for widespread innovation which promises to offer ongoing opportunities in Australia and all over the world.

References

  1. WEF. Deep Shift: Technology Tipping Points and Societal Impact. Global Agenda Council on the Future of Software & Society; 2015.
  2. ASIC. Evaluating Distributed Ledger Technology. In: Commission ASI, editor. Sydney, Australia: Australian Government 2017.
  3. OGL. Distributed Ledger Technology: beyond the block chain. In: Science GOf, editor. London, United Kingdom: UK Government Chief Scientific Advisor; 2016.
  4. Australia Po. Parliamentary Friendship Groups (non-country). In: Australia PotCo, editor. Canbera, Australia: Australian Government; 2017.
  5. ADCA. Australian Blockchain Sector Welcomes Formation of Parliamentary Friendship Group. Sydney, Australia: Australian Digital Commerce Association; 2017.
  6. Maull. Roger; Godsiff PM, Catherine; Brown, Alan; Kewell, Beth;. Distributed ledger technology: Applications and Implications. Briefings in Entrepreneurial Finance. 2017;26(5):481-9.
  7. Perez C. Technological revolutions and techno-economic paradigms. In: Dynamics WPiTGaE, editor. Tallinn, Estonia: Tallinn University of Technology; 2009.
  8. IDC. IDC Futurescape: Worldwide IT Industry 2018 Predictions. Framingham, United States: International Data Corporation; 2017.
  9. Deshpande AS, Katherine; Lepetit, Louise; Gunashekar, Salil;. Distributed Ledger Technologies/Blokchain: Callenges, opportunities and the prospects for standards. In: Institution BS, editor. London, United Kingdom: British Standards Institution; 2017.
  10. ECB. Distributed Ledger Technology. In: Eurosystem, editor. Frankfurt, Germany: European Central Bank; 2017.
  11. Keller F. Bank of montreal, CaixaBank, Commerzbank, Erste Group, IBM and UBS Collaborate to Advance an Open, blockchain-based Trade Finance Platform2017.
  12. IBM. Bank of Montreal, CaixaBank, Commerzbank, Erste Group, IBM and UBS Collaborate to Advance an Open, Blockchain-based Trade Finance Platform2017 11 January 2018.
  13. Eyers J. ASX to upgrade to Blythe Masters' blockchain Digital Asset Holdings technology2017.
  14. SBS. The ASX plans to upgrade its transaction clearing and settlement systems with distributed ledger technology similar to that which underpins bitcoin. 2017 8 January 2018.
  15. DeCastro MA, Michael; Fearnle, bill; Freeborn, Lawrence; Majukumar, Sabitha; Massey, Karen; Parker, Robert; Silva, Jerry; Wester, Fames; Zink, Thomas;. Worldwide Financial Services 2017 Predictions. In: FutureScape I, editor. Framingham, United States: International Data Corporation; 2016.
  16. Hanson R, Reeson A, Staples M. Distributed Ledgers. In: Data61, editor. Canberra, Australia: Commonwealth Scientific and Industrial Research Organisation; 2017.
  17. BeefLedger. BeefLedger Token - white Paper. Sydney, Australia: Sister City Partners Ltd; 2017.
  18. AgriDigital. Agridigital - Trust and Transparency for Global Agricultural Supply Chains Sydney, Australia2018 [
  19. Krawiec RH, D; White, M; Filipova, Mariya; Quarre, florian; Barr, Dan; Nesbitt, Allen; Fedosova, Kate; Killmeyer, Jason; Israel, Adam; Tsai, L;. Blockchain: Opportunities for Health Care. In: Development D, editor. New York, United States: Deloitte; 2016.
  20. ScalaMed. The future of healthcare: ScalaMed PTY LTD; 2018 [
  21. Huckle SB, Rituparna; White, Martin; Beloff, Natalia;. Internet of things, Blockchain and Shared Economy Applications. Procedia Computer Science. 2016;98:464-6.
  22. PowerLedger. PowerLedger WhitePaper. Perth, Australia: Power Ledger Pty Ltd; 2017.
  23. ECB. Distributed Ledger Technology: role and rleevence of the ECB. In: Eurosystem, editor. Frankurtt, Germany: European Central Bank; 2016.
  24. Australia S. Roadmap for Blockchain Standards. Sydney, Australia: Standards Australia Limited; 2017.
  25. ISO. ISO/TC 307 Blockchain and distributed ledger technologies. In: Committees T, editor. Geneva, Switzerland: International Organisation for Standardization; 2018.

Contact Data61

Your contact details

First name must be filled in

We'll need to know what you want to contact us about so we can give you an answer.