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Bitcoin and the Arctic Seed Bank

Sometime people ask what Bitcoin is actually useful for. This post focuses on explaining the importance and use of Bitcoin as a store of value by comparing it to the Arctic Seed Bank.

First of all, the Arctic Seed Bank, or Svalbard Global Seed Vault, is located on an island in the Arctic Svalbard archipelago, part of Norway. Seeds from about half of the known plants on earth are stored inside this extremely remote and safe vault. The idea is simple: seeds are kept safe from global disasters and available if needed.

While we’ll have the Norwegians to thank if we ever need to use these seeds one day, we might want to think about how this examples compares to money.

This is where Bitcoin comes in. The Bitcoin network is like the Arctic Seed Bank for our money.

Like the seed bank, the Bitcoin network is designed to be extremely resistant to external events. As long as a computer somewhere is storing a copy of the full blockchain and is connected to the internet, we will be able to access our funds. And even better than the seed bank, it has no central point of failure. 

To continue with the analogy, similar to a potential catastrophe like a supervolcano eruption or nuclear war, governments or banks are at risk of collapsing. And they would take your hard earned money down with them. The point of Bitcoin is that this isn’t possible, we are the only ones in control of the funds we hold, making it today’s safest place to store value whether physically or digitally. Plus, it’s a lot more convenient to move around than the historically preferred store of value, gold.

So if you feel like having an arctic seed bank is a smart thing to do despite the very low-chance of a global disaster, you might think Bitcoin is a smart place to store a portion of your money, “just in case”.

Preventing counterfeit goods with blockchain

This post aims to show how blockchain, the technology behind Bitcoin and Ethereum, can prevent counterfeit goods. We’re not delving into anything too technical so rest easy. In fact, we’re going to use an example scenario to help us through this to make it as ‘real world’ as possible: malaria pills.

Counterfeit malaria pills

This is a critical problem in Africa. Imagine a relative is suffering from malaria and you head out to buy the life-saving pills at an extortionate price. Only to find out they’re fakes. There is a way avoid this life or death gamble.

Hint: the key is not to prevent production of fake pills, it’s to prevent anyone from selling fake pills.

Let’s look at the situation more closely:

  • The problem: bad actors sell counterfeit pills, taking advantage of a desperate buyers unable to verify the pills’ origin.
  • A solution: identify and track every pill to verify ownership before purchase. 

In our ideal system, every pill (or individual pack) made in a legal factory is registered on a database. The manufacturer is the owner of all these pills until it sells in bulk to registered dealers, who sell them on to other dealers, and so forth. At each step, the owner of the pill/pack is updated on the ledger.  This would provide full transparency on where each item comes from and who owns it, in real time.

In the diagram above, we can see how pill boxes are distributed. So how do we know who owns what at any given time?

To make our ideal system work we need a shared database that:

  1. Anyone has access to; everyone can participate and check a seller is indeed the owner of legitimate pills
  2. Everyone can prove their identity; only the seller can prove they are the rightful owners of the pills they claim to have
  3. Anyone can submit valid changes; when pills are sold, the owner is correctly updated
  4. No one can change past records; such that you can’t have someone ‘make themselves’ the owner of pills they never bought

And that is precisely what blockchain allows you to do using a distributed ledger. Additionally, on blockchain it is impossible to change a record once registered on the network, and it’s also impossible to impersonate someone else without having their private access information.

So how does this prevent counterfeit goods?

You might think that someone with legitimate pills on the network could sell you fake pills in real life. Sure, they can, but they won’t be able to sell the real ones they kept as everyone can see they don’t own these anymore!

In a market where the stakes are this high for a buyer, it is simply not worth the risk to buy from someone outside the system. Unverified sources are effectively prevented from placing (and thus selling) their products on the market.

Final remarks

Malaria pills are just one example among many. Any product where buyers need to know the origin of an item would greatly benefit from a similar system. This also includes digital goods like songs, images, video game items, and more.

To implement such a system is not easy and raises loads more questions: how do you verify legitimate companies? Who gets to verify legitimate companies? Does everyone need a smartphone to participate? Can this work offline in remote areas? To track items do you use a bar code, integrate a chip or just use a serial number? The list goes on, but each question also represents an opportunity for innovation. Let’s get to work!

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Hello, World

This website for my thought pieces. Writing helps me understand things better which in turn helps me write better. Topics covered include personal and professional observations or ideas. I try to reference information correctly but please email me directly if anything seems off.