It’s been the hype of the tech world for a good few years now. Every “Top 10 technologies to watch out for this year” has it listed. But is Blockchain really everything it’s hyped up to be?
What are its actual benefits? Who is using it? These are all valid questions that need further investigation. Let’s look at the benefits, use-cases, and challenges of Blockchain now that the hype has died down a bit.
What is Blockchain?
In simple terms, think about blockchain as a ledger of information. This “ledger” is distributed and available to all parties involved in a particular blockchain ecosystem. By using Cryptographic techniques and other such cutting edge technology the encoded data within that Blockchain cannot be tampered with, making Blockchain a secure ledger of accountability that removes the need for a third party to get involved, be held accountable and verify transactional information between two parties or more. There are other nuances that we could delve into around this explanation of Blockchain, however, let’s keep it simple for now.
How Revolutionary is Blockchain?
Blockchain has the ability to disrupt many industries; with financial organizations and traditional payment systems first in the firing line. Traditionally, financial institutions would normally be the “trusted” intermediaries when transfers of value are made between two parties, overseeing the transaction and ensuring everything is secure (as it can be) and authentic (as it can be). Blockchain essentially removes the need for the financial institution or third-party authority completely.
However, it’s not all doom and gloom for financial institutions; Blockchain technology also provides them with the potential to lower heavy processing costs by employing certain features of particular Blockchains within their operational processes. This is especially relevant in the area of; Know Your Customer (KYC), Anti-money Laundering (AML), and Know Your Customer (KYT) processes which are currently a very resource and cost heavy operational procedure to undertake for a Bank or other such Financial Institution adding extra layers of complexity on top of an already complex set of processes. Using Blockchain to undertake a centralized/sharing model on KYC/AML and KYT would drastically reduce operational expenses in this sphere.
Current Use Cases of Blockchain in Action!
Blockchain has brought forward an age of digital ownership where we can now purchase and own digital assets, digital goods, and data. Here are some real-world use cases:
Data Security: There is a lot of data, both personal and financial circulating online that is prone to malicious use by hackers and fraudsters. Blockchain offers a safer alternative for data protection and has the ability to keep private and financially sensitive data safe and secure.
Money on the Blockchain: In some countries having your local currency devalued due to government corruption or incompetence is a constant realistic threat to your financial health. In these countries, digital tokens could offer a more stable, secure option for those looking to safeguard their financial stability or diversify.
Haven Asset: Despite the known volatility of certain digital tokens, we are starting to see indications that Digital Tokens like BTC, ETH etc… Are being viewed as a ‘safe haven’ asset like Gold or Silver, this is due in particular to the fact that when you hold a Digital Token you have direct ownership over it as opposed to holding money in a financial institution where counterparty risk is inherent. Haven assets still have risk although the risk is reduced somewhat hence the catogorisation.
Social Media: Social media giants such as Facebook are looking at launching their own digital token this year (Libra). This would enable people to share digital tokens almost instantly around the world via Facebook, WhatsApp and other Facebook’s subsidiaries. This has been a major move forward for Cryptocurrencies and a clear path to mass adoption, once one large corporation adopts the use of Digital Tokens then I would expect the rest to follow to keep up with the competition.
Developing Use cases for Blockchain
I have had the pleasure of being in the Digital Industry for around 20 years now and when I started off it was very difficult, almost impossible to see what the internet would develop into today, how it has become a deeply integrated part of our daily lives in every aspect, empowered people and connected people like never before. Blockchain Technology also has this same potential to develop innovation far beyond what we can imagine at this present point in time and its current demonstratable use cases, and this is a fascinating comparison to make. Below are some of the current uses making big waves:
Expansion of the Digital Goods Market: When I was young I loved to collect Panini football cards. My friends would swap, trade and even sell them to each other in the playground. Years later, according to Forbes, the collectibles industry today is worth over $200 billion. It’s predicted that blockchain will further unlock this market by opening a new digital world for collectors of all types. There is a possibility for people to own digital avatars, digital art, digital anything! All on the blockchain.
Mortgage Blockchain: Blockchain has the potential to completely revolutionise the home loan industry. Anyone who has applied for paid off or investigated getting a home loan knows that it is a drawn out and arduous process as it currently stands. There have been issues in the past where systematic nuances have resulted in people being denied loan extensions which have resulted in them losing their homes. The transparency and security implicit with blockchain technology would ensure this never happened, creating a more stable environment for customers.
Smart Contracts: Think of a smart contract as a small bit of code used to form an agreement between two parties or more. A good example would be an insurance policy that automatically pays out recipients in the event of a policy breach e.g. a canceled flight. We will see more of these smart contracts pop up as blockchain becomes more mainstream.
What Role Does Blockchain Play in the World of Digital Tokens?
Currently, there are 1000s of digital tokens (this list continues to grow every day) using different blockchains; both private and public, centralised and decentralised, and each one fulfilling a different use case. There are, however, only a handful of digital tokens that currently have solid real-world applications. Most digital tokens available now have been developed as a security token or equity swap mechanism to raise funds for growing businesses. This doesn’t discount their current value, but it does raise questions about whether they will have real applicable economic value in the future.
Blockchain technology can be essentially categorised separately from digital tokens, as blockchain technology is the underlying technology that drives and validates the purpose of digital token usage as a mechanism of exchanging value.
Is Blockchain Regulated?
Given the revolutionary nature of Blockchain there is no concrete regulatory framework in place. Although the regulation does exist in certain jurisdictions there is not one conclusive global regulatory framework in place to govern the use of blockchain technology in financial transactions. This is actually quite a complex area and very hard to govern the use of a Technology like Blockchain, I foresee that this regulation will come more around Cryptocurrency usage and not the underlying technology of Blockchain itself.
What are the Legal Implications of Blockchain?
Blockchain is revolutionary; but are people, organisations and governments prepared to adopt and embrace it? Currently, digital token trading is the most effective use-case we’ve seen of blockchain in action. The ease of which users can trade digital tokens across the globe on platforms such as Binance and Coinbase highlights the power of this technology. Other examples of real-world developing use cases include XRP for cross border payment bridging solutions between financial institutions and currency swaps, and ETH for powering decentralised applications.
In as far as the legal implications of blockchain, issues are often raised about personal data protection standards and who is liable to ensure those standards are adhered to in the world of blockchain, especially if there is no definable central person or organisation answerable to that blockchain.
Another consideration is the irreversible nature of blockchain ledger entries. Once a transaction is in a blockchain it is there for good. So, what happens when a fraudulent or accidental transaction needs to be reversed? These are questions that need to be answered as Blockchain develops in real-world use and digital token trading increases in popularity.
Where to from here for Blockchain?
The potential for Blockchain to shake up the operation of industry is undeniable. We’ve already seen the impact the technology has had on the rise of digital token platforms and speculative trading, with new applications and use cases being developed every day.
Again, when the internet became mainstream, we never imagined we’d have the likes of Uber, Netflix, and Amazon playing such instrumental parts in our everyday lives. So, who knows what blockchain will bring us next? With the seemingly endless applications across various industries, there are limitless unimagined possibilities waiting, and as always it is the innovative, savvy problem solvers and developers who will show us the way!
About Johnny Huntington
A driven self-starter, enjoying a 20-year journey in the fields of Tech & Digital Innovation. Immersion with over 350+ leading enterprises has enabled me to hone vital expertise in leadership, collaboration, transformation, and adding value in a sector I have always been very passionate towards.
For further information and insight on refining your digital transformation objectives within your organization to yield great results, feel free to contact me and I will be happy to provide advice and insight to get you up-to-speed quickly.