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An Overview of Applications that Could Be Empowered by Bitcoin

Published on August 18th, 2014 by CrimsonRoze


You may be familiar with the idea that money is only the first application of Bitcoin. Lately, I've started understanding what this really means. Bitcoin began purely as a monetary instrument, and eventually everyone will have a bitcoin wallet. When that happens, the revolution truly begins, as that means everyone has the ability to create and maintain digital identities that they can use across multiple different platforms.

Identification could be a big stepping stone in a long chain of innovation that will truly change how mankind handles almost all social and economic activity. For example, in voting, identification is crucial to ensuring participants are eligible to vote. Voting is a powerful way to agree upon decisions and is, in terms of security, often handled poorly today. Once everyone has a bitcoin wallet, and thus functioning digital identities, voting as an everyday means to solve disagreements could become a reality.
 
The process might be simple: Alice sets up a poll and asks her friends, coworkers, or fellow citizens to sign the option they prefer most.
 
Or the process might be complex: Alice, the head of a big multinational corporation, sets up a poll and each department gives her a multisignature key to authorize. Alice controls which departments can vote, but each department decides on their own what to vote.
 
Or the process might be secure: Each born child in a state willfully donates to the state a sample of their blood that contains their DNA, which sets up a register of citizens. Once each year, citizens would go to a medical facility with a newly generated key pair and go through a two-step process with separate rooms. In the first room, citizenship is proven by donating blood, and referenced against the genetic registry. In the second room, the citizen gives a public key to an official, who in turn gives a new randomized message to sign so that the citizen proves they are in control of the private keys. 
 
Each year, old keys are discarded and the voting process starts over. The citizens’ identity and the keys are not linked; in the first room, only identity is checked before voting eligibility is determined. In the second room, a voting key is generated and given to the citizen without linking it to their genetic identity. Once done, the key can be used on the government’s voting website, where citizens can choose who to trust (relay your vote to) or how to vote, without concern that their identity would be associated with their vote.
 
Another application for the use of Bitcoin as an identity mechanism is insurance. The way insurance works today is you pay a fee, and when an event you're insured against happens, you ask for monetary compensation. With Bitcoin, not only can the costs of handling claims go down thanks to provable identities and decentralized networks, it also opens up the possibility for a distributed insurance where each participant is both the insurer and the insured. 
 
This could allow for a separation between the escrow agent who handles the money, and the authority who decides if the event truly did happen. Imagine an insurance system where you are the counterparty to your friends and where you and your clients mutually agree that Bob is a trustworthy agent to decide if an event did happen.
 
So not only does Bitcoin allow for global trade and distributed identity verification, it can also allow for powerful voting and insurance models. But lets not stop there!
 
Having a provable identity mechanism that is also your payment address opens up the possibility of a world where work is traded, not to companies, but between people. A job offer could be posted online using an escrow service, and money could be put into a multisignature wallet to prove that the job offer is valid. A worker could then produce the required work, show proof of completion that it has been done, and then sign a transaction with their payment address and send it to the escrow, or the person who is paying for the work to release the funds.
 
Regardless of what shape these applications take, it’s evident that money truly is only the first application of Bitcoin. It has the potential to change the way we do almost everything, from voting and identity verification to insurance and assigning labor.

Cover image courtesy of zbyg, licensed under creative commons. The image has been cropped to fit the LTB network requirements.

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