Blockchain Application, is it Overhyped?

Applications that could Justify Blockchain’s Hypeness

With the value of bitcoin plummeting from $1.80M to $0.99M within 2 months, without a doubt, cryptocurrencies’ sharp rises and falls are getting people’s adrenaline pumping. However, we must recall the core technology that brings bitcoin into the game, and that is blockchain. Acting as a shared, duplicate, append-only database, blockchain is a decentralized digital ledger that allows all participants in the “chain” to access and attach additional information as “blocks” of data. Due to its nature of transparency and security, the claim that blockchain will revolutionize business and redefine economies is trending across major social media and websites. Even though we are enthusiastic about its potentials, it is more sensible to calm down and reflect on the transformative breakthrough that has been made by blockchain. Is the technology living up to its name? Or is it merely an overhyped buzzword?

Struggling to find its purpose?

Some experts in the tech field criticize that blockchain has struggled to find a purpose other than powering cryptocurrencies. Instead of a disruptive technology, which can attack a traditional business model with a lower-cost solution and replace incumbent firms, blockchain is a foundational technology, meaning it has the potential to reform our economic and social systems. Given that most representative foundational technologies (e.g, mobile phones, computers) took more than 20 years to pervade the world, it is plausible to take decades for the whole concept to be reified and seep into the population. Even to some specialists within the field, the day when blockchain redefines our tech world is still not on the horizon.

Nevertheless, I am convinced that behind swarms of clout chasing startups are ideas that could potentially bring true values and efficiencies to our daily lives.

This article discusses some of my personal views regarding where this technology could take us in the near future, which assumes prerequisite beginner knowledge on blockchain framework. If you are unfamiliar with what exactly blockchain is, feel free to check out this article.

Its application fields

A. Voting System

A cryptocurrency firm called Zcoin applies blockchain technology to the election voting system, allowing members of the Thai Democrat Party to cast their digital votes for new leaders. Voters would have to submit a photo of themselves as a “digital fingerprint” in the system.

Personally, I feel that applying blockchain to the voting system is by far the most effective and feasible use of the technology aside from cryptocurrency. Instead of relying on a central authority for vote calculation, the highly secured, the public-trusted ledger can ensure all the legal votes are carefully counted toward the final result, or at least convince the opponents of the winning party that the election is fairly executed. With 70% of Republicans disagreeing with the latest US presidential election result, the application could fix the controversies and polish the deserved one’s success.

B. Financial Databases

A startup called Tradle is working on blockchain solutions for know-your-customer (KYC) data, which will allow customers to take their personal data from one financial service provider to another. This makes filling all the personal information in your first bank become a once-and-for-all process. So how does this framework work? Customers would grant their service provider access to identity data when a contract is terminated, and the customers can bring the verified KYC profile (stored as a block in the network) to another company, avoiding the need to repeat the full identification and verification process, which increases the efficiency of new onboardings.

Blockchain opportunities could also be extended to financial applications. For example, a McKinsey & Company report once discussed opportunities and threats of applying blockchain into the insurance industry. The following are a few processes regarding financial databases that could be eased up with the help of blockchain:

1. Simplify the data entry process

Imagine one day you no longer need to go to a bank and fill in pages of personal information to have access to all the services provided by the bank, wouldn’t that save so much hassle for every single one of us? From my most recent experience, it took me about 1 hour to sign the contract with a bank and for the banker to input all the details into their system, let alone the time I was waiting in a long queue.

Even though financial service providers may not be happy with this application being on board, as it drastically reduces financial switching costs between competitors, the overall benefits that KYC data will bring onto the table still seems very positive.

2. Streamline the fraud detection procedure

According to the FBI, the total cost of insurance fraud in the U.S. (non-health insurance) is estimated to be more than $40 billion per year, highlighting the importance of fraud detection. In this instance, using blockchain as a cross-industry database to validate the authenticity of documents (e.g., police theft reports, medical reports) and ownership of goods would be the fundamental solution to fix the entire system. All the transaction details are safely stored and ready for the authority to do cross-validation, which effectively streamlines the traditional detection procedure.

The difficulty of the aforementioned modernized process is that it requires intensive cooperation among many parties (i.e., between insurers, manufacturers, and government, etc.), indicating a significant amount of effort and resources that must be injected into building up the system. How long would this application pay off the loss from insurance fraud is still unknown.

Other than using it in the insurance industry, the startup Blockverify is working on the product authentication framework, by including goods’ information (storing history and supply chain) in the blockchain. Consequently, customers can identify whether their Veblen goods (electronics, pharmaceuticals, and luxury items) come from legitimate sources or fraudulent transactions. But again, the cost of establishing the whole network would be inestimable.

Is it an indispensable creation?

Does it deserve so much attention nowadays?

Although solution providers mostly claim that their “blockchain-related” systems will push the technology to the next level, a debate remains as to whether blockchain is absolutely necessary for these thought-provoking ventures.

“In many cases, there is a cost-saving to be made once you’ve got past the initial hurdle — obviously bringing in any new system is expensive,” — entrepreneur Helen Disney.

Some say that a blockchain-dominated system is going to be the most efficient option for organizing data at scale; however, no relevant reports suggest that blockchain would provide more value than what it would cost in the initial establishing stage.

It provokes a large scale of individual thinking, but it hasn’t changed the world yet.

The day when it creates more value than its overall costs, blockchain will gradually and steadily justify its “overhyped” reputation and be accepted by society.