Defining blockchain is usually best done using analogies and especially emphasizing what blockchain is not. For a start, blockchain is not a one-size-fits-all, magic-potion solution to all of life’s problems. Ledgers existed long before the first century. They were, however, centralized, under the control of a single authority, and access is given to specific people.
In simple terms, blockchain is a distributed ledger technology (DLT) hosting digital ledgers which are replicated on several computers (called nodes). Whatever data is entered into the ledger cannot be altered or deleted, the reason a blockchain is immutable. The several computers (nodes) making up the blockchain network are in different locations around the world, the reason a blockchain is distributed. In a blockchain network, decisions are reached via a consensus system because it is not controlled by a single authority, the reason a blockchain is decentralized.
Satoshi Nakamoto, the Bitcoin founder, was the first to develop a use case for the new technology in the financial services industry. Bitcoin, a digital currency, lets people transact without the need for banks and other middlemen. It can be argued that blockchain is not a new technology, but just a combination of several other existing technologies such as peer-to-peer, cryptography, hashing, mining, and consensus algorithms.
Here’s a sidebar: Bitcoin is not synonymous with the blockchain. One can liken blockchain to electricity, and bitcoin to a bulb. Blockchain is to bitcoin what electricity is to a bulb. Without the blockchain, there would be no bitcoin. Just as lighting bulbs are not the only thing electricity can be used for, so also, bitcoin is not the only thing a blockchain can be used for. There are numerous use cases already developed or being developed worldwide. But first, let’s see why businesses should even bother with the blockchain.
Why Blockchain Applications
Beyond the hype, there are various reasons why the blockchain has become attractive to individuals and entities, private and public. Here are a few of those reasons, being the features of the blockchain.
It’s easy to get lost in the euphoria of how blockchain applications can benefit businesses, as we will see in the use cases to be outlined shortly. Hence, it’s also important to see the whole picture. Following are the significant challenges with Blockchain Applications:
Blockchain applications in business can be clustered into three broad areas –
Accounting for 60% of market capitalization according to Meticulous Research, financial services are by far the most popular industry for blockchain applications. Financial services companies can deploy blockchain for payments, clearing and settlements, cross-border transfers, and trade finance. Traditional financial services companies charge as high as 10% in fees, while as low as $0.40 could facilitate a $40 million transfer using cryptocurrency.
The healthcare sector is one of those still laboring under an archaic system. Patient medical data are incomprehensibly entered into some paper file and carelessly shelved somewhere. Digital equivalents are centralized and prone to manipulations and cyber attacks.
According to CB Insights, there are short, medium, and long-term blockchain applications in healthcare. Using blockchain for tracking and authenticity verification of drugs and other healthcare products will drastically diminish the $188 billion drugs and other healthcare product's counterfeit market. Medical research equally has a lot to gain from implementing blockchain, as shown by this 15-year-old using blockchain to track genetics and DNA mutations.
Beyonce recently trending in the news brought attention to how she is smartly handling intellectual property in her works, from taking payment in stocks to negotiating partial payment in exchange for full rights. This is probably easy for someone who is already an established artist and can afford professional advisors. What happens to the upcoming ones? Most times they have to slave under a label until a big break comes, or risk being popular but broke.
We are now in the digital age where other people’s work can be copied and disseminated to millions with just a click and without the owner’s permission or knowledge. Current DRM (Digital Rights Management) measures have been largely ineffective due to the internet providing the tools for unauthorized infinite reproduction of people’s intellectual property. Implementing blockchain would remove the gatekeeper veil, allowing creators to connect directly with their fans, transparently track engagements and sales, manage the license of their copyrights, and conduct private auctions.
The future of work is fast moving away from suffocating cubicles to wherever creativity leads. But is the workforce ready or well equipped? Bear in mind that fellow humans are no longer the competition – Think bots.
Blockchain applications in HR include utilizing as an alternative system for data-sensitive and cumbersome third-party verification. Job seekers can easily prove the existence of a skill, certificate, or degree. HR managers for globally distributed workforces can now keep their sanity as they try to effect cross-border payment of employee salaries, allowances, and benefits. It’s also possible to create corporate currencies or tokens that employees can easily accumulate as they meet KPIs.
Remember the three blockchain applications/ use cases mentioned earlier? The supply chain industry ticks all those boxes. It’s no surprise then that heavy developments in that direction are ongoing. Most notable is the joint venture between IBM and Maersk. An estimated $634 billion is lost in one of the most opaque systems in global business, caused majorly by data being managed in silos. Leveraging blockchain technology features like time stamping, transparency, and immutability; merchants and consumers alike can track an item straight from the manufacturer to getting into the hands of the user.
When trying to explain the immutability of data entries on the blockchain, real estate is a favorite staple. A lot goes into the purchase of land or house; unending paperwork, high-rates hourly-billing lawyers, shylock banks, and the bureaucratic government. The obvious loopholes of this process mean there are times when it is impossible to prove ownership because possession does not automatically translate to ownership.
Industry 4.0 is picking up pace and with it, the rate of global energy consumption. However, more than half of the energy is wasted i.e. expended and billed for but not being used for anything. When a complete conversion to clean energy happens, here are some blockchain applications reprieve for the $130 billion lost in wasted energy. For instance, tokenizing energy means customers can sell off unused portions of their quotas and minimize waste. Also, there’s the use case of rewarding tradeable energy tokens to companies adhering to regulations relating to carbon emissions and energy waste disposal.
Richard Jarecki is likely a name you have never heard of, but in the 1960s, he won over a million dollars (about $8 million in today’s value) from betting at casinos. And he did not leave it all to chance. He beat the odds against casinos that always set up things in their favor. These days, most gambling and lotteries happen online, and they also have issues of trust and security to grapple with.
When a system is decentralized, it automatically levels the playing field for everyone involved. That’s what blockchain does to online gambling. Rules of entry become easy for virtually everyone to be able to meet. Also, using cryptocurrency to facilitate payments means legal restrictions imposed on payments in a traditional currency like dollars and Euros, no longer matter. Being a decentralized system built on the blockchain, everyone – operators, programmers, and players alike- would be able to monitor others' actions. Finally, online gambling players can take advantage of the anonymity offered by cryptocurrency in making payments or receiving their winnings, since they are only identified through a wallet address.
Imagine social sports communities where fans can engage with their sports idols and clubs directly. Today’s sports is an innovation team with key players like artificial intelligence, robotics, biometrics, machine learning, and analytics. Signing on the blockchain would score goals like incentivizing active contributors to the ecosystem, as new possibilities for sporting interactions are unlocked.
Law and government always play catchup to technological advancement, the reason we still vote by thumbprinting when we already have facial recognition technology. Be it for things like voting in elections or identity management, blockchain can track and verify votes cast and people’s IDs. Smart contracts could change the way governments run their nations and serve as the legal engine of a country. Countries like Dubai are already hard at work utilizing smart contracts in building an efficient automated smart city.
The above is not an exhaustive list of blockchain applications/ use cases, as new possibilities are discovered daily. Compared to the era of the birth of the internet, blockchain technology, which is just a decade old, still has a long way to go. As things get refined and the technology scales, we can expect its potential to exceed limitations.
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