An Imperial centre will harness the technology behind cryptocurrency for wider global benefit.

Cryptocurrencies such as Bitcoin are a form of digital money. The underlying concept was first proposed in 2008 by an unidentified creator and the first working version was developed as open source software in 2009. Cryptocurrencies enable alternative financial frameworks that support global transactions without the need for a bank. There are now more than 200 cryptocurrencies in existence.

Scientists at the new Imperial College Centre for Cryptocurrency Research and Engineering (IC³RE) will explore how the technology can have applications beyond digital currency. Applying this technology to other transactions such as keeping track of property ownership could revolutionise how governments and businesses operate and how citizens carry out their lives.

Professor William Knottenbelt, Director of the Centre, said: “We are on the brink of the next digital revolution. The College is in a unique position to harness the potential of the technology that currently powers cryptocurrencies. Just as the industrial revolution and the internet spawned innovation, so too will this technology, opening the doors for new business models to be developed and helping existing companies improve the way they do business and the way communities live their lives.”

Cryptocurrencies are based on a distributed computerised ledger that acts like a digital book keeper and accountant rolled into one. They allow users who do not know or trust each other to automatically keep track of who owns what. The complex architecture underpinning them was designed to prevent financial transactions from being manipulated, making it extremely difficult for fraud to happen.

The creation of Imperial’s Centre comes at an important juncture for the further development of distributed ledgers as governments and companies around the world are exploring the potential of adapting them for wider applications. The multi-disciplinary team at the Centre will carry out the underpinning policy, technology, design and social research with governments and industry to enable its smooth transition into the wider economy.

Dr Catherine Mulligan, Assistant Director of the Centre from Imperial College Business School, added: “Cryptocurrencies have shown us that we do not need a third party – a middleman – to successfully process transactions between users. It can all be done digitally by a distributed computer network secured by cryptography, which makes transactions much more resistant to fraud.

“Many financial institutions are focusing on how they could use distributed ledgers to improve banking, but we feel the potential applications are much broader and far-reaching. It could spawn completely new modes of doing business. The opportunities are limitless and work at the Centre aims to make the adoption of distributed ledger technology by society as smooth as possible.”

The team say a successful rollout could help countries, industries and individuals reap a range of benefits. For example, for traders in precious commodities, distributed ledgers could enable them to authenticate the origin of precious stones such as diamonds. In the finance industry, reconciliation exercises between banks – which is where they compare records of transactions to determine discrepancies - could happen more rapidly and securely using a distributed ledger.

In the longer term, the Imperial team predict that distributed ledgers may enable the exchange of value by devices connected to the Internet of Things. This is where physical objects such as fridges and televisions will be embedded with electronics, sensors and wireless technology to collect and exchange data. For instance, distributed ledger technology could in theory enable a home, connected to the internet of things, to automatically predict the electricity consumption of its householders. It could then electronically set up short-term contracts to purchase energy from electricity suppliers, or even nearby houses producing their own surplus off-grid sources, ensuring the home’s electricity needs are managed in a cost-effective and sustainable way.

Research at the Centre is already underway and has appointed its first full-time researcher, Iain Stewart. Some of the technical themes that the Centre is exploring include making distributed ledgers more robust and scalable. Currently, the most popular cryptocurrency system, Bitcoin, carries out around two hundred thousand transactions per day, but for wider adoption the system needs to be able to cope with many millions.

The Centre is also exploring ways of using distributed ledgers within local and national government. For example, the technology could enable government agencies and departments to share data more effectively, reducing costs.  It could also enable local authorities to improve transparency for citizens and open up new channels for interaction.

The Centre has received seed funding from Imperial’s Faculty of Engineering and Department of Computing. It also hosts a research grant from the Engineering and Physical Sciences Research Council.