Blockchain technology is at the heart of cryptocurrency’s existence due to its core properties, such as the ability for untrusted parties to come to a consensus and the ability to prove secure ownership of digital assets via encryption and digital signatures. Cryptocurrencies like bitcoin are the earliest and best-known applications of blockchain technology. Blockchain technology, which underlies bitcoin, stablecoins, and other digital assets, continues to gain prominence.
Bitcoins and others make up a large portion of cryptocurrency market shares, and we see a lot of new technologies emerge and rapidly grow. Ten years after the first bitcoin transactions, bitcoin remains one of the best-known cryptocurrencies, with the generation-one-style coins still being created (though not necessarily used or traded) to this day. Cryptocurrencies may have gained initial traction because of their transaction freedom and security, but they are most valued today because of their investment potential.
People’s willingness to attach value to them – whether, as with Bitcoin, because they are believed to possess specific characteristics of cash or because they are at the heart of the online networks that could someday underpin new decentralized digital currency trading – has fuelled the cryptocurrency frenzy. At the centre of mania are cryptocurrencies and digital tokens embedded within blockchain networks. The critical innovation in the transaction blockchain is the Ethereum Virtual Machine, which allows smart contracts to execute, making it easier to issue crypto-assets or tokens and develop distributed software applications.
In recent years, a foundational digital economy infrastructure has been built, including Internet-native institutions for money and payment systems, CFD trading in Australia, asset registration and exchange, financing and contracts, etc. Distributed ledger technology (DLT), of which blockchain is one form, is now being developed for a number of applications worldwide, the most apparent being finance. One important feature of blockchain technology is smart contracts, which are poised to play an essential role in a shared market in all industries.
We already see transactions in the world’s commerce using blockchain efficiencies to provide real-world benefits. Trade finance is another fascinating application for the agriculture industry: companies have been able to use blockchain to increase efficiency in what is usually a cumbersome process. Investors could also create new forms of income by making it easier for trades across cryptocurrency.
From cryptocurrency to private assets backed by a token, digital assets may benefit investors’ portfolios due to their potential for lower correlations to publically traded instruments. Professor Saurav Dutta says that the blockchain provides cryptocurrency with several critical advantages over traditional currencies and bank transactions.
The real question will be how fast the Australian agriculture industry can identify applications and adopt blockchain. An increasingly critical problem in the Australian agriculture industry, which would greatly benefit from blockchain implementation, is the issue of food provenance. Blockchain technology currently provides for a transaction capacity orders of magnitude below that required by the widespread use of a payments system in Australia, let alone for a global payments system.
Digital technological changes to come are automated commerce solutions and AI. Part of the drive is to build new efficiencies, which can sometimes stem from adopting new technologies like blockchain. The shift marks a critical moment in adopting blockchain technologies, placing Australia ahead in a traditional finance industry race to understand, experiment and deploy distributed ledger technologies.
The Australian Stock Market announced that it would start using blockchain technology for the clearing and settlement of trades. The ASX — working in conjunction with Digital Asset, which provides the technology — will become the first stock exchange in the world to use Blockchain technology for its primary services. The Australian Securities Exchange (ASX) has put on hold its multi-year efforts to replace its main trading system with a blockchain-powered platform, cancelling up to A$255m ($171m) worth of work. It has been advised to reconsider whether distributed ledger technology has any role in the project.
Supporters argue that the blockchain – the open one – and the cryptocurrency used to verify updates – would form the basis of a new set of online services where users, not corporations or governments, are in control. For example, one of the commonly touted changes may see Proof-of-Work mechanisms (which involve miners competing to solve cryptographic puzzles to verify new entries in the blockchain and which use vast amounts of energy) replaced with Proof-of-Stake systems (where the people who already hold a cryptocurrency have control over how the network is run).