Blockchain is more than just a payment method for buying illicit goods via online marketplaces, according to Adam Ryan, CEO of Australian-based e-procurement software-as-a-service provider Think.
Blockchain technology, the underlying system that facilitates bitcoin trading, is considered by Ryan to be one of the most sound and secure transaction avenues. He believes blockchain has a lot more to offer than just finalising a payment -- it has the potential to redefine a banking archetype and enable new business models.
"What you're really doing with blockchain technology is enabling two parties to complete a transaction almost as efficiently as you possibly can because it's automated, processed by someone who doesn't really factor in overheads at the transaction cost, and it's almost infinitely scaled," he said.
"The transaction is like a lolly wrapper, it's used once then you throw it away."
Despite advocating that the transaction itself is secure, Ryan believes the risk lies with the storage of information.
"If you look at the way banks are transacting today, they use a similar concept through tokenisation with credit cards so that only certain organisations have the capability of storing all the credit card information that could be used to complete a transaction," Ryan said.
"We need to find better ways of storing information because encryption is so powerful now; it's very hard to intercept a message and encrypt it without the other party knowing it has happened.
"The weakest link is not generally the technology, it's things like physical access -- the people who are trusted. It comes down to trust."
Ryan believes one cannot dispute the soundness of blockchain technology but said its success lies within the uptake.
"I think that it's now growing up like most things and once it grows, once it gets to a certain size, these value added services that you wrap around it need to come into play," he said.
"I think where innovation really kicks in is that the technology enables new business models, not necessarily the technology itself; it's really the enabler for us to do the same things that we used to do faster, better, smarter, cheaper, all of those things. Otherwise there's no value.
"Obviously we already have really good infrastructure in place in the banking system. What they need to do is probably redefine their business model on how they use this technology because ultimately even if blockchain technology is utilised, but the same business models are held, we haven't really progressed.
"All you've really done there is migrate to a newer technology."
The cryptocurrency bitcoin requires blockchain technology to operate. Ryan believes that while bitcoin will not replace currencies, it will have a place in the market.
He said that micropayments and small trade scenarios where two parties are engaging in a barter-like transaction will be a comfy fit for cryptocurrency, but added that as the bitcoin market evolves, it will start to find further ways to engage that were previously not thought of.
"It's like squeezing a balloon -- when you squeeze it with your hand a little bubble pops up somewhere through your fingers and you squeeze that bit and it pops out somewhere else," he said. "Until you squeeze it, you don't know what shape it's going to form."
Ryan believes that just like with any currency, tangible or not, it is still conceptual.
"It's a promissory note -- the paper or plastic itself is of less value than the trust that we have on the value that's on that note," he said. "It's still conceptual, regardless of whether it's something I can fold up and put in my wallet."
"In some ways you could argue that bitcoin is more liquid because it is value that I have and that you have and no third party really tells me about that liquidity -- we do as a market," Ryan said. "It will be the market that squeezes the balloon that will create a new shape."
The bitcoin cryptocurrency has been tied up in controversy since its involvement with the now-closed online black marketplace Silk Road. Silk Road was shuttered by the FBI in October 2013, with the online drug bazaar's mastermind Ross Ulbricht, also known as Dread Pirate Roberts, sentenced to life in prison for his involvement in the platform that prosecutors said had facilitated at least $180 million in sales of illegal drugs.
Ryan believes that with further uptake bitcoin and blockchain technology will require regulation. Whether that regulation comes from the government, the market, or the community, Ryan said it will be needed to lift it to a certain level for more mature payments rather than just transactional type payments.
The Linux Foundation partnered with financial and tech giants last month in a bid to advance the blockchain technology.
The collaboration, which the foundation said will develop an enterprise grade, open source distributed ledger framework, will include companies such as ANZ Bank, IBM, Cisco, CLS, Credits, Digital Asset, Fujitsu, IC3, Intel, London Stock Exchange Group, Mitsubishi UFJ Financial Group, State Street, SWIFT, VMware, and Wells Fargo.
The foundation expects the initiative to help identify and address important features and requirements that are missing when it comes to having a cross-industry open standard for distributed ledgers. The foundation said it believes such a standard can transform the way business transactions are conducted around the world.
Last year, the bitcoin community published an open letter to its community to share an action plan on reaching a consensus on improving bitcoin security and scalability.
"The bitcoin developer community is dedicated to the future of bitcoin, looks after the health of the network, strives for the highest standards of performance, and works to keep bitcoin secure on behalf of everyone," said the letter.
"We have worked on bitcoin scaling for years while safeguarding the network's core features of decentralisation, security, and permissionless innovation.
"We're committed to ensuring the largest possible number of users benefit from bitcoin, without eroding these fundamental values."
The letter was published ahead of two bitcoin scaling workshops -- one in Montreal and the second in Hong Kong -- that were aimed at collaboratively reaching the best outcome for scaling and securing the cryptocurrency.