This article appeared in The Herald's Special Report: Wealth Management. Read the publication in full.

Bitcoin is now just one of more than 1000 crypto-currencies – and there is a huge range of business applications that blockchain technology can build, writes Anthony Harrington

Twenty years ago if you set out to compose a list of impossible ideas, the notion that a private "virtual" currency could be introduced that would create world-wide excitement despite being intangible and invisible to the eye, would have had to rank pretty high. Today, there are some 1,300 crypto-currencies in existence, with more springing up like mushrooms.

Moreover, the trail-blazer crypto-currency, Bitcoin, is now a household name and on December 17 2017 a single Bitcoin, which started life with a deemed value of around $10 was trading at almost $20,000. You do not have to look far to find experts predicting, variously, that Bitcoin’s value will crash to zero or that it will hit the $500,000 dollar mark in the near or very near future.

The phrase, "Tulip-mania" has been bandied about and warnings that we are well into either a full-blown or gathering crypto-currency bubble, abound. Governments have expressed anxiety. China has specifically forbidden Chinese banks from turning Bitcoins into hard currency and regulators are girding up to thwart attempts to use crypto-currencies for illegal transactions and money laundering.

For David Low, co-owner of the intellectual property on Scotcoin, Scotland’s crypto-currency, and Chairman of Lowdit Partners, which advises on both crypto-currencies and the block-chain technologies that underlie the cryptos, all this kerfuffle simply proves that crypto-currencies in general, and the blockchain technology (also known as distributed ledger technology) upon which the cryptos are based, are here to stay.

"All this hostility towards crypto-currencies from governments, and the attendant urge to bring them within the regulatory net, pleases me and makes me feel good. It makes me feel that crypto-currencies as an asset class have finally arrived," Low says. This situation, he says, was entirely to be expected as crypto-currencies matured.

Low has been involved in dealing and investing in crypto-currencies since 2014. "When I began dabbling in Bitcoin it was priced at around $150 or so. I used it as a speculative asset and as a learning curve for myself. Most importantly, it gave me a thorough understanding of the disruptive potential of blockchain, the technology underlying Bitcoin and crypto currencies.

There is a common misconception that blockchain and crypto-currencies are one and the same thing. They are not. Crypto-currencies are just one of a nearly limitless number of potential applications that can be built using distributed ledger technology.

"When I started working with blockchain technology there were perhaps 5,000 people on the planet who could have a semi-sensible conversation about Bitcoin and blockchain and the two were regularly conflated with each other. Now there is a large number of people who understand the disruptive potential of blockchain, and the same with digital currencies," he notes.

Low regards Bitcoin as a somewhat archaic crypto-currency, despite or perhaps because it was the first. "There are many different blockchain technologies and the one that underpins Bitcoin has some major disadvantages.

"The currency might become a store of value as the years go on – but it is not going to be popular for small value transactions. You can’t use it to buy a cup of coffee if it takes half an hour and £50 in transaction costs for the transaction to be processed," he notes.

Duncan Johnston-Watt, co-founder of Blockchain Technology Partners (BTP) along with David Low, says that while crypto-currencies have their place, the real interest for business lies in the huge range of business applications that can be built using blockchain technology.

"Basically, any time a business, or a supply chain, or an industry sector has a need for a way of controlling complex transactions involving parties spread out geographically, in a way that makes the transactions absolutely impossible for any of the parties to repudiate or to fraudulently alter, blockchain has a real role to play," he says.

The beauty of blockchain is that it is a decentralised way of ensuring that all the parties to a transaction have the full repository of documents involved, with a complete audit trail, while also ensuring that all the documents in the hands of the various parties, will be identical. The values on my invoice will match the values on your copy and so on.

Low and Johnston-Watt came together when Johnston-Watt’s former company was tasked with advising on the most suitable distributed ledger technology to underpin Scotcoin v3.

"Around the end of 2017, David and I had a series of conversations about the role that a company that really understood distributed ledger technologies could play in both advising companies who could benefit from adopting blockchain applications, and that could also build, maintain and operate those applications."

"BTP addresses this need and although we are still in the process of launching the company we already have three very interesting projects that we have been asked to respond to including a challenging hazardous waste management opportunity. In my view, this is a trend that can only increase as people see the value that blockchain applications can deliver," he says.

He points out that the goal is to deliver real world blockchain-based applications that reduce the cost and complexity of doing business. "As with any new technology, the IT industry is still exploring what blockchain is capable of. Already, however, it is clear that it is very well suited to tackling tough transactional problems where there are multiple parties involved and perhaps numerous individual documents, and where the integrity of the data is paramount," Johnston-Watt says.

Very often, this will involve types of transactions in specific industries that are quite heavily paper document orientated today.

By turning these into digital records and using blockchain to guarantee both their distribution to all the relevant parties and the integrity of the chain of custody for each document and for the collected portfolio of documents, huge efficiencies can be gained.

"Ideally, to see the relevance of blockchain in a new application environment, you want a problem where technology has the power to make a very significant difference. If you only have one such complex transaction a decade, you are not going to want to go to the trouble. If you have many such transactions, then you really will benefit from a blockchain approach," he comments.

BTP is committed to providing its customers with a production-ready, permissioned blockchain platform created from world-class open source components notably Hyperledger Sawtooth and Apache Brooklyn. Sawtooth was originally developed by Intel and contributed to the Linux Foundation Hyperledger initiative.

"Blockchain technology is far too powerful and valuable to be owned by any one company which is why we are committed to the open source approach.

"Also, adopting this base technology lets you build a wide variety of different applications and we expect to see many of these applications becoming mainstream very rapidly," he concludes.

This article appeared in The Herald's Special Report: Wealth Management. Read the publication in full.