Bockchain technology is currently generating a lot of excitement among financial institutions, major enterprises, public bodies and even individuals. Blockchain is basically the root of the globally recognized cryptocurrency known as bitcoin. Up until the year 2014, world interest grew in bitcoin as an alternative currency until the crash in bitcoin price resulting in an increasing interest in blockchain. Global investment in both bitcoin and blockchain hit a remarkable record of 1 billion USD in 2015.
Trends show that blockchain is an interesting technology set to change financial transactions as the world knows it. Blockchain has been described as an opportunity to recreate the internet. Imagine for a second that you had an idea of the power and benefits of the internet just few weeks before its birth?
Major financial and non-financial institutions are discovering the power of blockchain to revolutionize the world and are investing millions of dollars in blockchain related start-ups. Given the capabilities of blockchain, it’s all about the early bird. Brands that take advantage of this fast spreading technology will become the giant brands of tomorrow. Has blockchain always been around?
A Brief History of Blockchain Technology
The first blockchain, originally block chain, was conceptualized by Satoshi Nakamoto in 2008 and later implemented the following year as the primary feature of the more popular digital currency bitcoin. Blockchain as a component of Bitcon, serves as the public ledger for all transactions using peer-to-peer network and a distributed time-stamping server. Blockchain for bitcoin became the first digital currency to solve the double spending problem. The blockchain format for bitcoin, as a solution to the problem of making a database both secure and not requiring a trusted administrator has inspired several other applications using the blockchain technology.
What Exactly is Blockchain Technology?
Blockchain is simply a distributed and permanent database that can be used to record any transaction. The term blockchain is derived from its technological feature of group in transactions in “blocks”. These blocked are further chained through complex and tamperproof mathematical procedures that can never be replicated.
How Blockchain Technology Works
Blockchain basically takes transaction as we know it today, from manual third party confirmations to automatic reconciliations between participants. Transactions carried out via the blockchain technology are recorded on a public ledger which is distributed across a network of computers. Blockchain runs every ledger of transaction within a network on a decentralized basis ensuring safe transmission of all kinds of assets without confirmation from a central institution.
Figure 1: An infographic showing how blockchain works in financial transactions
Benefits of Blockchain Technologies
Blockchain is a technology with so many capabilities that still largely undiscovered. Just like the internet, the benefits of blockchain technology will unfold with growth and adoption. However, there are basic benefits that make blockchain technology very promising even in its early stage.
Reduced Transaction Costs
Currently, most digital transactions rely on certain trusted authorities. For instance, many cannot carry out digital transaction without third party institutions like paypal, Alipay, Skrill and several other institutions. Virtually all these institution charge a fee for acting as security for every transaction. With blockchain technologies, transaction is both direct and automatic via a distributed consensus hence eliminating the need for third party institutions.
More brands are embracing blockchain and are forming a more organized version of the global village. This will eventually lead to harmonization of brands and various industries making global trade more efficient.
Blockchain enables parties in a transaction to make an exchange without the presence of a third party. This significantly reduces third-party risk. Moreover, due to its decentralized network feature, blockchain does not have any central point of failure and is therefore able to withstand malicious attacks.
Due to speed, decentralization and automated nature of blockchain, more transactions are carried out when compared to traditional transactional methods. The efficiency in transactions will lead to more transactions carried out per time and subsequently more gains that possible with traditional transactions.
Ease of Verification
With blockchain technologies, every transaction both past and present, can be verified at anytime for validity. Blockchain does not just offer one man verification rather verification can occur simultaneously within a network without fear of distortion.
Challenges of Blockchain Technologies
Much like the internet today, blockchain technologies are still riddled with undefined regulations. Given that blockchain is still in its early stage of adoption and growth, regulations might remain undefined for a while.
Security and Privacy
For many countries where the know-your-customer and confidentiality requirements are strictly observed, the regulatory status of blockchain technology remains largely unclear. Moreover, despite its decentralized structure, blockchain technologies are still susceptible to manipulation.
Blockchain applications offer solutions often require complete replacement of existing systems. This transition often presents a challenge. In fact, an individual executing a blockchain transaction for the first time might spend hours downloading existing blockchains. Transition for now isn’t easy and would usually call for a lot of strategizing, especially for companies.
Opportunities and Chances Presented by Blockchain Technologies
To stay ahead of the competition and remain relevant to customers, businesses need to keep a close eye on blockchain.
- Thomson Reuters
Investment in Blockchain Startups
Thomson Reuters is currently partnering with Fluent which has built a team of blockchain experts, and are applying this talent to areas where the core technology could be applied to use cases across all of Thomson Reuters. Like Reuters, other business can take a cue and explore partnership opportunities with blockchain startups. These partnerships will be very beneficial to any brand as a whole as blockchain technologies gradually become the future.
Cost Effective Payment Solutions
The current financial process is still very slow compared to the capabilities of blockchain technologies. Many financial institutions are making a move to incorporate blockchain technologies in their financial processes. NASDAQ is currently partnering with a San Fransisco Start-up called chain.com to execute private equity exchange on top of Blockchain. Blockchain technologies provide opportunities for business that set up cost effective payment solutions that eliminate the current trend of third parties like Paypal and banks. Other companies like Ethereum and Codius are also taking advantage of this opportunity by offering smart contracts.
Blockchain technologies also offer vast opportunities for record management. With blockchain, hospital records, legal records, educational records and virtually all records can be store in a private, retrievable manner
Copyrights and Ownership
With the advent of the internet, copyright became not just a serious issue but an almost impossible issue to handle. There are still no clear laws governing copyrights in the digital sphere. This is especially due to the fact that or most documents, verification is almost impossible. There are often no clear lines as to who wrote what first. However, with blockchain, verifying authenticity is easy and eliminates the need for centralized authority. Blockchain also offers a counterfeit-proof way of verifying documents and eliminates the need for expensive notarization fees. Several companies like Stampery, Block Notary, Crypto Public Notary, and Proof of Existence are taking advantage of this opportunity offered by blockchain technologies. Ownership is a problem (opportunity) in various industries like the music industry, film industry, insurance and several other industries. This presents vast opportunities for investment.
Blockchain Based Software and Applications
Just like the internet gave birth to a growth of internet birth technologies, so also is blockchain filled with opportunities for developing blockchain based software. Several blockchain startups are working hard on developing blockchain based software that offers various solutions. IBM in partnership with Samsung has developed a platform ADEPT (Autonomous Decentralized Peer To Peer Telemetry) that uses elements of the bitcoin’s design to build a distributed network of devices-a decentralized IOT (Internet of Things).
Namecoin is also another company taking advantage of blockchain and has developed an alternative blockchain based technology that is used to implement decentralized version of Domain Name Server (DNS), resilient to censorship.
Digital Asset Management
Assets are going even more digital every day. Blockchain presents opportunities for efficient, organized and secure digital assets management. Alternative Blockchains is a system of using the blockchain technology algorithm to achieve a distributed consensus on a particular digital asset.
Blockchain also offers vast opportunities in the legal industry. Document validation is a core aspect of every legal procedure. Traditionally, document validation is carried out by central authorities and this process is often riddled with human error, corruption and security risks. With blockchain technologies any document can be stored and validated. Proof of Existence offers services that allow people to anonymously and securely store any document and certify these documents at any given time.
Decentralised Storage Solutions
Despite the growth in cloud file storage solutions like Google Drive, Dropbox , One Drive and the likes, these technologies are saddled with serious challenges like security, data control and most especially privacy. With these storage solutions, one has to rely on trusting a third party with confidential information. Blockchain presents opportunities for storage without central control or third parties. Storj is a brand that is exploring this opportunity by providing blockchain based storage platforms that eliminate the need for a third-party data provider.
One of the major world trade problems is counterfeiting. Blockchain technologies present a huge opportunity to drastically reduce counterfeiting issues in every industry. The blockchain technology offers a decentralized and secure alternative to existing counterfeiting solutions that rely on third parties. With blockchain, brands and merchants can come together to form a blockchain network that stores information that validates the authenticity of their products. BlockVerify is one company is that currently taking advantage of this opportunity by providing blockchain based anti-counterfeit solutions for supply chains.
Customer Relationship Services
Despite the efficiency and cost saving opportunities offered by blockchain technologies, the world is still hinged on tangible trusted third parties. It will definitely take some time for customers to get used to the decentralized mode of transaction that Blockchain offers. This slow adaptation to change presents opportunities for customer relationship kind of services.
The decentralized feature and security of Blockchain technology makes it a very efficient solution to various transactional problems. Corporate funding into Bitcoin and Blockchain technologies is growing and reached a record US$1 Billion in 2015. Several big players like American Express, Bain Capital, Deloitte, Goldman Sachs, MasterCard, the New York Life Insurance Company, and the New York Stock Exchange are massively investing in blockchain based business applications and start-ups. Any business that must stay ahead of the curve must look into the possibilities and opportunities of Blockchain technologies.
- Deloitte https://www2.deloitte.com/nl/nl/pages/innovatie/artikelen/blockchain-technology-9-benefits-and-7-challenges.html#
- Wikipedia https://en.wikipedia.org/wiki/Blockchain_(database)#Other_uses
- Carl-Ludwig Thiele: Blockchain Technology- Opportunities and Challenges http://www.bis.org/review/r161125b.pdf
- Thomson Reuters https://blogs.thomsonreuters.com/answerson/blockchain-technology/
- Forbes http://www.forbes.com/sites/georgehoward/2015/08/12/blockchain-technology-is-our-chance-to-rebuild-the-internet-in-a-way-that-benefits-creators/#426c6e4b610f