Digital notary and asset registers, the blockchain properties of Bitcoin, make it a perfect system for demonstrating proof of ownership. Blockchain technology can be a suitable and efficient solution for real estate property registers, shareholder registers, and other investment securities registers. It can be used to register the ownership and transfers of any kind of asset or property rights, including intangible property, such as trademarks, and intellectual property. Such implementations can be realized through separate dedicated blockchains, but the Bitcoin blockchain can be used as well.
The Bitcoin blockchain has some clear advantages over any alternative blockchains—it is the most secure, the most immutable, and decentralized one. This is the case because it is the first and foremost successfully operating public blockchain and has the largest pool of computing resources securing its decentralized consensus system. In this way, assets external to the blockchain can be digitalized and traded on it, in addition to intrinsic assets, such as Bitcoins.
Trade finance and crowdfunding campaigns are another possible use case for Bitcoin. Such applications are enabled by escrow, programmability, and smart contract functionality of a blockchain. Transaction scripts can be structured, so funds are released under certain conditions that can be time-bound or depending on achieving certain milestones.
Imagine that a retailer in Europe wants to import and sell merchandise from China (for example, consumer electronics, such as TVs, refrigerators, microwaves, and so on). The retailer orders the merchandise from the manufacturer, which then needs to be loaded on a cargo ship and sent to Europe. Both parties to this transaction need security and assurance that they will get what they expect out of it. Travel times for ships to deliver goods from China to Europe are around 1 month. This raises counterparty risk that one of the parties may not receive its fair share of the value exchange. From the perspective of the vendor (in this case, the Chinese manufacturer), they need to be confident that they will get paid, before they load the merchandise on the ship, because at this point shipping costs start getting incurred. The merchandise is also at risk of being stolen or otherwise compromised, while in transit. From the perspective of the buyer, the European retailer company, they need to be confident they will receive the merchandise safe and sound before they release the payment to the vendor.
This type of international trade transaction is currently managed by a trusted third party, such as a bank. International banks offer trade finance services, such as escrow accounts and letters of credit. The way this system works currently is that the buyer deposits the funds for the payment to the vendor in an escrow account held at a bank. The bank then issues a letter of credit to the vendor, guaranteeing the funds are there and will be released upon successful delivery and receipt of the goods. This is summarized in the following diagram:
You can probably see how this process can be automated with a single smart contract on the blockchain. This new technological paradigm will render such transactions much cheaper and more efficient. A single technological interface will facilitate direct interaction between buyers and sellers, thus eliminating any potential rent-seeking behavior by intermediaries acting as gate-keepers. Moreover, this interface can be a public, open source technology, such as the Bitcoin blockchain, which is not controlled or owned by any single third party.