When the Blockchain Takes Over

By now, we suspect you’ll have heard of the ‘blockchain’.

Even if you’re not sure what it is, in all likelihood, you associate the blockchain with bitcoin. After all, the blockchain is what makes bitcoin possible.

If you’re new to the idea, the blockchain basically describes the transaction process of moving one ‘block’ of information to another. As each block moves along the chain, it retains the old information. However, the new block also takes on new information and data.

It’s important to note, though, that the blockchain isn’t stored in any one place. The digital information is kept on what’s called a distributed ledger. Think of the ledger like an old-school accounting ledger book. Each monetary transaction is noted on a side of the ledger. In this example, that would be called a centralised ledger, because all the information is in one place.

A decentralised — or distributed — ledger means the information on the blockchain can be stored anywhere in the world on a global computing network. The computing code that drives blockchain enables all these transactions to take advantage of the massive global computing infrastructure.

So, just because you use blockchain technology in Australia doesn’t mean that the digital data is stored on the nearest server. It could be in Greenland, the US, Canada, Iceland. Any country in the world that has the digital infrastructure in place to handle large volumes of data.

Now, the blockchain was originally created to record bitcoin transactions. But the happy accident of Satoshi Nakamoto’s bitcoin coding is that it has the potential to be used to store and record any transaction.

Looked at another way, while its purpose was specifically designed for bitcoin, it has the ability to radically overhaul how we record transactions. Bitcoin and blockchain technology have been around for about eight years now, but industries are just starting to embrace the potential of this game-changing innovation.

Even Bob Greifeld, the chief executive of NASDAQ, has pointed out the exponential capabilities of the blockchain, saying, ‘Blockchain technology continues to redefine not only how the exchange sectors operate, but the global financial economy as a whole.

A couple of years ago, the financial sector caught on to the fact that bitcoin would shake up how payments and other financial transactions would be logged. However, the tech can be applied to virtually any industry in the world. 

Opportunity for energy industry

The energy industry is one of the first to commercially adapt blockchain technology on a global scale.

BP’s UK operation is working out how to adapt the blockchain technology for the oil and gas sector. But not just for how payments are made between buyers and sellers. They want to use blockchain tech to record shipping data as well. One of the partners who worked on the BP pilot program said that blockchain tech could lead to ‘…reduced risk, better protection against cyber threats and ultimately significant cost savings.

And you have the other major oilers working together to bring blockchain tech to life in order to create their own commodity-trading platform.

Shell, BP and Statoil — with the financial backing of ABN AMRO, ING and Société Générale — reckon they could get the platform up and running as early as next year.

The first ‘energy trade’ already took place in January this year — a successful shipment of African crude to a ChemChina shareholder.

Here’s what makes the blockchain tech for the energy sector so disruptive:

Applying it means no paperwork, bills of lading, or letters of inspection. Moreover, it removes the potential for human error. Each block in the transaction secures the data in real-time. The data can’t be changed or altered. And as the information uses the distributed ledger, it minimises the risk of falling victim to cybercrime.

In Deloitte’s ‘Blockchain Application in Energy Trading’ report, the company wrote:

If all parties to a transaction have access to the same verified transaction record, available through a distributed database, the impact on the speed and costs of transacting would be immense. In addition, credit risk could be reduced to almost zero through faster settlement times and lower collateral requirements.’

First it was the banks chasing this tech. Now the oil and gas sector wants in.

That means we are on the precipice of blockchain becoming the biggest tech disruptor of this century. The 20th Century gave us the internet, and today, with blockchain technology, we are looking at this century’s major breakthrough.

As Ryan Dinse, editor of Exponential Stock Investor wrote recently, ‘Now we will see the real technology revolution. Just like the railways revolutionised the movement of people and goods, blockchain will revolutionise the movement of data.

So convinced that blockchain is about to drastically alter the way information is exchanged between businesses, he convinced our publisher to dedicate a newsletter to this once-in-a-lifetime investment opportunity. In this report, Ryan reckons he’s found the ideal opportunities for investors to get in at the early stages of the blockchain data shakeup.

If his analysis is right, it could be like buying Amazon.com, Inc. [NASDAQ:AMZN] or Apple Inc. [NASDAQ:AAPL] shares before the dotcom boom. Imagine telling that story to the grandkids one day? Here’s how you could.

Kind regards,

Shae Russell,
Contributing Editor, Money Morning

Since starting out in the financial markets over a decade ago, Shae has extensive experience across various aspects of the industry. Shae cut her teeth in the derivatives industry, teaching clients basic trading techniques with technical analysis.

Joining Port Phillip Publishing eight years ago, Shae has worked across a number of publications, such as Australian Small-Cap Investigator, Gold Stock Trader and Microcap Trader. She’s spent the past two years however, honing her macro analysis skills alongside Jim Rickards, showing Australians how to invest and profit form global macro trends.

Drawing on her extensive experience, Shae is a contributor to Money Morning, and lead editor of sister-publication Markets & Money, where she looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

Money Morning Australia