There is so much hype surrounding blockchain technology that you may legitimately think there’s no real weight behind this “buzzword of the year.” Especially if you are a non-techie looking at it from a business perspective and trying to find real-world applications of blockchain that prove its worth. Hang in there, we’ll get to those soon.
Widely known as the technology that powers the cryptocurrency Bitcoin, blockchain is quickly gaining traction not only in financial services, but across many other industries. Any business model that relies on some sort of a “central authority” or “middlemen” to facilitate and record transactions could potentially be transformed, decentralized, and made more flexible with blockchain technology.
Blockchain can record both financial and non-financial transactions between two parties in an efficient, verifiable, and permanent way. Imagine the impact if all digital transaction records were kept in transparent, shared, and unbreachable databases. Thanks to its distributed ledger technology, there’s no single point of failure and hence no way to tamper with records or digital assets.
Given that blockchain enables transactions to be carried out directly “from peer to peer,” businesses and individuals could transact with one another securely and efficiently without intermediary. This is the huge potential of blockchain - the promise of fundamentally changing the way we exchange value of any (digital) kind.
Companies from different industries took notice and are actively exploring ways to harness the opportunities that this technology offers. Some of them are already using platforms such as Ethereum to build and deploy the next-generation of distributed applications. Ethereum can be used to codify, decentralize, secure, and trade almost anything you can think of.
Now let’s explore some of the most promising blockchain applications.
Blockchain technology in banking
While blockchain technology is still in its nascent phase in many industries, there have been some serious signs that it’s moving into the financial services mainstream. For example, Two of Australia’s leading banks are replacing the paper-based bank guarantee process used for commercial property leasing with a distributed digital ledger that can be accessed by all parties in the transaction. And this is just one out of many use cases in banking.
One of the key challenges that banks are looking to solve with blockchain technology are fraud and cyber attacks. Traditional banking systems are built on a centralized database with all sensitive data kept locally in one place, making them vulnerable to data theft. Building new banking systems built on top of blockchain technology will dramatically reduce the chance for data theft and fraud since all transaction data is securely stored, encrypted, and verified.
Sooner or later, blockchain will disrupt the world of banking, lowering transaction costs, speeding up processes, and providing increased security and trust. Implications of this will be huge, and we’re going to see many more banks jumping on the blockchain bandwagon.
Digital security is a huge problem and one that blockchain technology can potentially solve. Major account breaches and hacked databases are still a part of reality in our digitalized world due to problematic password-based authentication systems.
Blockchain offers a solution by enabling unique authentication of identity in an immutable, secure, and efficient manner. Identity is verified with digital signatures based on private key cryptography, resulting in seamless sign-on and reduced fraud. This means no sharing of personal information and no room for hackers to exploit it. Blockchain digital identity can be used for passports, e-residency, IDs, etc.
Smart contracts are the true enabler of countless potential use cases of the blockchain technology. These programmable digital contracts entered on the blockchain are capable of self-executing and self-maintaining when the contractual terms are met, automating the traditional contract management process. This eliminates the need for an intermediary to ensure that all parties follow through on terms.
For example, if you want to send $200 to someone at a certain date and time in the future when a set of preconditions are met, all these transaction details would be programmed into a smart contract. Once the defined conditions are met, the funds would be transferred to the appropriate party as per terms.
Smart contracts can be used for a variety of use cases, such as complex business deals, electronic payments, insurance premiums, and more.
A majority of people would agree that the current electronic voting system lacks transparency, not to mention that it’s highly vulnerable to hacking and manipulation. Blockchain technology promises to change that. After all, votes are a type of transaction that has to be recorded.
Once the vote is entered onto a public ledger, it can never be altered or deleted - it becomes a verifiable and immutable way to store the vote. Unlike with the current voting systems, voters can verify that their votes were actually counted because the data on a blockchain is visible to everyone. This allows for improved transparency, security and trust, all crucial for voting or any other democratic process online. There are several projects that promote e-voting through blockchain-based systems. Follow My Vote offers a secure and transparent online voting platform that uses blockchain technology to make voting more convenient and accessible and to ensure elections are honest. Their voting platform provides transparency into election results by allowing voters to audit the ballot box and watch elections progress in real time. Another example is BitCongress that uses the Ethereum platform to build “votecoins” that people can use to cast their vote. Each voter can have one votecoin, meaning they can vote only once, and the vote will be recorded on the blockchain once it’s verified.
Blockchain in the Energy Sector
Energy management is another highly centralized sector that blockchain can transform. Traditionally, if you wanted to transact energy you would have to go through an electricity holding company or a reseller. Now we’re seeing a number of innovative startups that are leveraging the blockchain technology to enable the execution of energy supply transactions directly between peers. The main goal here is to create a decentralized energy system that delivers efficient, reliable, and renewable energy.
Blockchain-powered energy transaction platforms such as LO3 Energy’s Brooklyn Microgrid are enabling P2P trading of energy, allowing people to sell excess energy directly to their neighbors. LO3 is one of the vendors that is working towards making a decentralized energy market a reality. Another great project from this domain is SolarChange – a platform that uses blockchain-based technology to increase the use of solar energy. It rewards people and companies that produce solar energy with a new digital currency called Solar Coin.
The potential in this industry is huge which is evident from the growing number of interesting use cases and innovative solutions that we’re seeing on the market.
The use of blockchain in many sectors and business segments will only grow, as new startups and established companies alike continue to experiment with different blockchain use cases. The examples above are still work in progress and represent just a tip of the iceberg of how blockchain is going to benefit our society, impacting different aspects of our lives and changing the way we run our businesses.