Blockchain: The Invisible Technology That’s Changing the World
For upon |Blockchain is in the very early stages and people first need to understand clearly what the blockchain use cases are before mass adoption begins. At the moment the speed of development is very slow as a result of knowledge gaps and limited talent in the blockchain industry.
1. So what is blockchain?
A global network of computers uses blockchain technology to jointly manage the database that records Bitcoin transactions. That is, Bitcoin is managed by its network, and not anyone’s central authority. Decentralization means the network operates on a user-to-user (or peer-to-peer) basis.
2. What blockchain is not?
- ‘Bitcoin’: Although the most popular use case for blockchain is in the financial services many people have the misconception that blockchain is bitcoin, this is of course not true. Blockchain is not a cryptocurrency, it is the foundation that a cryptocurrency is built on.
- ‘Regulated‘: Blockchain is a technology being adopted by many regulated sectors, such as Financial Services, but blockchain itself is not currently regulated.
- ‘Easy to understand’: Blockchain technology is complex, and to a layman, even to a professional, can be rather difficult to understand. We are seeing this as one of the barriers to the speed of blockchain adoption. For those new to the topic, take a look at this ‘Blockchain for Dummies’ webinar.
3. Blockchain Security
One of the advantages of blockchain is that it is understood to be 100% secure, however, in 2016 we saw the DAO hacked for $60 million. What does this mean for the future of blockchain security and how will measures be put in place to prevent hacking and threats?
4. Blockchain Architecture
Blockchain is like a complex type of Lego, and it needs to be adapted to fit specific business requirements. Various use cases make it difficult to have one simple architecture so we will need to create different versions of blockchain applications and architecture that will suit the individual needs of the business/industry.
5. What comes first? Opportunity or Threat
There are many opportunities and threats in the blockchain space, some of which we have broken down in the diagram below:
Opportunities
- Easier cross-border business
- Speeding up the process of automation
- Changing the way businesses operate
Threats
- Organizations are still reluctant to change
- Banks especially are very risk-averse
- It’s not been done before, so there are no best practices to follow.
6. Blockchain Smart Contracts
First, it is important to understand what a smart contract is. Smart contracts are coded, self-executing digital contracts which help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman. Smart contracts can exist without the blockchain but most smart contracts naturally sit on the blockchain layer to enhance traceability and trust.
7. Blockchain Use-case: Insurance
We all agreed that there are many blockchain use cases in the insurance industry. Improved customer satisfaction is a big opportunity that lies on the blockchain due to the following enablers:
- Automated claims processing
- Removal of middlemen and third parties
- All personal data is bought together (no more policy silos)
8. Blockchain Use Case: Payments
International payment services have offered the most promising starting point for blockchain from a speed, cost, and security point of view. Global payments nowadays take days to settle for a number of reasons, including manual processes and cumbersome regulatory compliance. They also lack transparency and often fail on account of messaging errors. Santander is leading the way here in the UK.
9. Blockchain as a Service (BaaS)
No one owns the blockchain, instead, we envisage blockchain being used as the foundation for many different, customizable off-the-shelf solutions from a vast amount of vendors globally. Service providers such as Microsoft and Amazon AWS have already started to deploy Blockchain as a Service.
10. Blockchain Use Case: Cryptocurrencies
The most popular blockchain use case to date in the cryptocurrency, Bitcoin. There are now over 700 cryptocurrencies available but in theory, blockchains technology is not actually required to create one.
11. The Blockchain Revolution In Banking
Many of the top global banks are adopting blockchains and are heavily investing in research and development. Blockchains promises to optimize and automate all back-end operations.
Some major use cases for the banking sector are customer lending, corporate payments, p2p, and cash pooling. The mortgage industry also has a use case for blockchains whereby banks can store valuation data and make the issuance of loans much quicker.
But some are cynical – The Bank of England says there will be no banking revolution just yet, and many in our December Meet-up claimed there will be no revolution at all if banks continue to buy out their start-up competitors.
12. How might ‘Brexit’ Impact The UK’s Blockchain Influence
Brexit was a hot topic in 2016 and there is a mixed opinion on how it may impact blockchains. Some say that Brexit will not have a huge impact on blockchains as this will give the UK an advantage over the EU; and if the UK continues to lead as a FinTech hub then there will be more investment, workforce, and business fuelling the economy. On the other hand, the UK risks losing some great talent as EU employees may be reluctant to move to the UK post-Brexit, or UK-based businesses may leave for the EU.
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Despite the imminent trigger of Article 50, the UK’s Financial Conduct Authority (FCA) has set up a FinTech incubator set to help FinTech and blockchains startups thrive, so for now we predict little change on UK’s blockchains influence.
13. Blockchain Use Case: Energy
There are many ways blockchains can be applied within the energy sector. The major one is producing electricity from the comfort of your home, becoming a ‘prosumer’ (see Energy Prosumers & Blockchains Technology). E-mobility is another use case discussed, where you can use the blockchains to share your car ride with other commuters nearby.
From a business perspective, blockchains can be used to store smart meter stats, allowing consumers to know how much money they have spent. Businesses can also use this information to forecast sales and revenue based on the data these smart readers are storing on the blockchains.
14. Blockchain Standards
‘Blockchains is Internet 3.0’. As such there are no set standards as people don’t know what blockchain is fully capable of. Some believe there will be a maximum of two types of blockchains and the rest will be like smaller intranets.
Regardless, it’s becoming apparent that blockchains will be available open-source for anyone to adapt and customize to suit their own needs (with R3 recently releasing the source code to their new platform Corda).
15. Blockchain Use Case: KYC And AML
When it comes to ‘Knowing Your Customer (KYC) and Anti-Money Laundering (AML) use cases the blockchains will drastically reduce operational costs by auto-verifying an individual’s identification using a wide range of available data sources.
As a result, blockchains can streamline the account opening process and reduce fees, fraud, and time spent on verifying identification (hence why fully digital banks are already launching).
However, some noted that your data can be made public if your private keys are leaked, making your personal data and identification vulnerable.
16. Blockchain Legal Implications
Currently, there is no regulatory framework for blockchains and there are also no jurisdictions. Since code is not a law we ask whether code will stand up in court?
Given the nature of blockchains, the question really is who, how, and what will be regulated? What will the implications be if it remains unregulated both domestically and internationally?
17. Blockchain Use Case: Trade Finance
Existing supply chains are complex, slow, distributed, involve many parties across the world and they usually don’t even trust each other (hence the need for trusted third parties such as banks and clearinghouses to mediate). Automatically executing Smart Contracts on the blockchains to transfer titles to goods and money removes the need for banks to provide products such as Letters of Credit, drastically reduces costs by cutting out the middlemen (and their fees), and creates a trusted network of assured authenticity and origin of products being supplied.
18. Blockchain Use Case: Healthcare
Health data is extremely sensitive and must always be kept up-to-date and secure. Falsified or misplaced health records and prescriptions can cause major issues when accurate information is needed. Enter blockchain. Blockchains can create a strong centralized system for storing patient information where their data is secure and cannot be tampered with.
19. Blockchain Use Case: Music
Nearly everyone who listens to music now downloads it online, many pay per track or via subscription services but there is still an issue with illegal downloads. Storing music on the blockchains will prevent this widespread industry problem, meaning artists, producers, and record labels can get paid instantly for the music they own, without any conflict. The musician, Imogen Heap, is leading the way in this industry revolution.
20. Can blockchain help the world’s poorest?
We think developing countries have the opportunity to adopt blockchains at a much faster rate than developed countries; one reason being that there are fewer legacy issues holding them back. Mobile banking and payments are already dominating these regions and storing this information on the blockchains will inevitably follow.
21. Blockchain Use Case: Real Estate
In the real estate industry blockchains can be used to store and manage asset information and ownership. All transactions can happen on the blockchains promoting trust, efficiency, transparency, and reducing operational and HR costs by cutting out third parties and their fees. As each block on the blockchains is unique the end-to-end transactions can be stored and verified making it tamperproof.
22. Blockchain Use Case: Government
The government can use blockchains for many different purposes both with Government-to-Consumer and Government-to-Government processes. One very simple, but ground-breaking use case is in the UAE – by 2020 the UAE wants to store all of its documents on the blockchains.
The UK is also exploring the use of blockchain to manage the distribution of grants. Monitoring and controlling the use of grants is incredibly complex, and subject to potential fraud or abuse. A blockchain, accessible to all the parties involved, is a better way of solving that problem.
23. Speed of blockchain adoption
Blockchains are in the very early stages and people first need to understand clearly what the blockchains use cases are before mass adoption begins. At the moment the speed of development is very slow as a result of knowledge gaps and limited talent in the blockchains industry. Some within our discussion group believed that people were reluctant to embrace change and they often see it as a burden, rather than an advantage. But, in today’s digital age this is beginning to shift and those willing to innovate will jump leaps and bounds ahead of their competitors.
24. 2017 and Beyond
The blockchains discussion will continue to snowball this year as more understand and develop the technology and its capabilities and applications.
Investment into blockchains is continuously on the rise and we are seeing many new start-ups sprinting into this space attracting new investment. For example, China just recently announced a $1.5bn FinTech fund of which blockchain will be a focus.
What we are also seeing is the growing interest and involvement of regulators amid concerns over governance and cyber-crime and how to prepare as they try to figure out what is really new about blockchain in case it really takes off.
Our Blockchains Meetup bought together a diverse group from novices to experts all from different backgrounds and sectors with a joint interest in blockchains and what the future holds.
The article was originally published here.
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