Where Blockchain Technology Leads Us - New Fields and Applications
The newly emerging decentralized technology, blockchain, has the undeniable potential of being the most disruptive technology in the 21st century, after the internet.
Blockchain is one of the hottest buzzwords in the tech scene—in fact, your share price will soar simply by adding “blockchain” to your company name.
Let’s take a look at the new use cases and applications enabled by blockchain technology, and see how it could change the current business models and enable new ones, turning the ways in which we live our lives upside down.
The Avent of Cryptoeconomics
Cryptoeconomics is an approach in which the combined use of cryptography and economic theory is used to govern participants in a decentralized network to contribute to the growth of the ecosystem and behave in rational ways, often through various methods of incentivization.
People are incentivized to get some work done on the platforms and those who only enjoy the benefits of the systems or do not act ethically get punished, such as by paying the fees.
A good example of how things work is when you want to send your bitcoins to another person, you have to pay transaction fees.
The miners within the bitcoin network who use their computing power to validate the transactions get bitcoins—the incentive—for doing so. That’s the economics part of crypto-economics.
This process is enabled by cryptographical functions of the bitcoin network, which primarily include digital signatures and cryptographic hashing (the computational work done by bitcoin miners, also known as Proof-of-Work).
This is the crypto part of the crypto-economics.
The Tokenization of Assets, or How Everything can become a Token
Tokenization is the process of converting rights to assets into tokens stored on blockchains.
This process helps by removing all the paperwork associated with storing physical assets, brings physical assets liquidity which has been a long-standing problem of traditional real assets.
With tokenization, assets can keep their own traditional characteristics while enjoying the benefits of crypto tokens.
Tokenization can divide the normally high-value assets into smaller values that make them much more liquid and accessible to the retail investors without huge capital resources.
Imagine there is a piece of commercial real estate which is worth 20M USD. This real estate can be tokenized. The real estate can now be divided into 200M tokens. Now you can buy a piece of the asset for 0.10 USD per token.
Similarly, we can take this approach and do it with other high-value assets, though not only limited to those.
As rule of thumb, any asset can be tokenized and put on a blockchain.
ICOs and ITOs: How Blockchain Startups Raise Funds
ICO or ITO (for simplification purpose, let‘s call them ICOs) is a new innovative way of raising funds for blockchain startups enabled by the blockchain technology.
Ethereum was the first ICO which raised 18M USD worth of bitcoins in Aug 2014.
Since then, as of Dec 2017, there was 64B USD raised via this method of fundraising, with hundreds of new ICOs being born per week. In 2017 alone, this method of fundraising disrupted the VC market with 5B USD raised.
ICO gives blockchain startups access to the capital market that they would not otherwise be able to in the traditional VC market. There are many benefits to raising funds through this means.
Apart from having faster and wider access to capital, the online nature of ICOs and the related marketing activities help startups raise awareness for their blockchain projects.
This is one of the critical success factors for blockchain public use cases whereby the support of the community is crucial to the success of the project.
Conducting an ICO is a great way to connect with the potential customers who are going to be users of the platform.
Though ICOs are controversial—given the lack of the regulations, which has led to numerous scams where startups have no intention of creating value, and instead only raise funds as a way of making quick money—the benefits of an ICO is undeniable.
As a result, there is a trend of existing startups moving into blockchain and raising funds through this means.
Cryptocurrencies, How it All Started
According to Satoshi, the inventor of Bitcoin, cryptocurrency (like Bitcoin) is a “Peer-to-Peer Electronic Cash System".
Bitcoin is the first and the most well-known application of blockchain technology, one of the first cryptocurrencies and the most popular one.
Bitcoin is one of the thousands of cryptocurrencies issued and in circulation. There are more than 1,500 cryptocurrencies in existence today, and there are many issued every week, in the form of ICOs or ITOs.
The total market capitalization of the cryptocurrency market at one point in time was 822B USD. New money flows into the cryptocurrency market every day.
With cryptocurrencies, value can be transferred cross-border affordably within seconds.
Key New applications in Banking that could fast-forward the industry
- Asset management and wealth management
Blockchain technology can be leveraged to streamline portfolio management, ease clearing and trade settlement, and enable efficient compliance with KYC and AML procedures, and manage client profiles and preferences in a more efficient way.
The traditional insurance industry involves many intermediaries and processes which can be eliminated using blockchain technology. Examples of use cases in this industry are:
- Claim Settlement:
Claim settlement in insurance industry involves many parties from insurers to reinsurers and brokers and extensive paperwork. Now these costly and time-consuming processes can be streamlined with blockchain.
- Flight insurance policy:
Etherisc, a blockchain insurance startup based in Munich, allows completely automated flight delay insurance without interacting with an insurance company.
By utilizing smart contracts, you can get compensated immediately in real-time whenever your flights are delayed.
- P2P insurance:
Insurepal is a self-regulating insurance platform based on peer-to-peer (“P2P”) social proofing and decentralization.
Payments Made Easy on Blockchain Platforms
Payment is one of the biggest and earliest applications of blockchain technology.
The transfer of value has always been a costly and time-consuming process which requires the collaboration of many parties across the payment chain, from transferring banks to receiving banks.
A cross-border payment costs, on average, $25 US, which is prohibitively expensive for micro-transactions.
Blockchain technology enables fast and inexpensive cross-border money transfers by cutting out many of the middlemen.
The Boom of Blockchain Micro-loans: P2P Lending
With blockchain technology, P2P lending has never been easier.
The benefits of using blockchain in P2P lending are tremendous. Ethereum blockchain with smart contract features enables trustless P2P lending transactions.
Lendoit offers “micro loans from the people to the people”. “Lendoit aims to connect borrowers and lenders from all over the world in a trusted, fast and easy way using the advantages of smart contracts and blockchain technology.”
Similarly, Ethlend enables P2P secured lending on a decentralized blockchain application running on the Ethereum blockchain.
Identity Management, for Companies and Users
TheKey and SelfKey are two among the many blockchain startups working on identity management solutions.
SelfKey is a “Blockchain based digital identity system that allows individuals and companies to truly own, control and manage their digital identity” whereas TheKey brands itself as a “decentralized ecosystem of an identity verification tool using national big data and blockchain”.
UPot is a self-sovereign identity and user-centric data platform on Ethereum.
UPot aims to give users direct control of their identity, and developers direct control of how this identity system is integrated. Citizens in Zug, Switzerland can register their digital ID on uPot.
Helping the Protection of Critical Data with KSI
KSI is a blockchain technology designed in Estonia and used globally to make sure networks, systems, and data are free of compromise, all while retaining 100% data privacy.
Own Land and Become a Lord in Goergia with Blockchain
Real property data can be easily recorded and stored on a blockchain.
Each property is given a unique number and as such, all the historical transactions associated with the property can be easily traced back. Change of ownership could be easily made without much paperwork and verification involved.
The Republic of Georgia is the first government to record land titles on the bitcoin blockchain.
Sweden is another country which is implementing blockchain for land registry.
Energy and Commodity Trading
Energy and commodity transactions involve multiple processes within each company and across market participants. These processes can be eliminated using blockchain technology.
Transactive-grid is a project from Lo3enery—a New York-based company—Is using blockchain technology in the energy sector.
Transactive-grid is a combination of software and hardware that enables members to buy and sell energy from each other securely and automatically, using smart contracts and the blockchain.
Shipping and Logistics
The freight and logistics industies involve many brokers and significant amounts of information across complex supply chains whereby no single party can have access to all aspects of the chain.
The freight and logistics industries are heavily controlled by freight brokers, taking a big cut of the value chain, leading to higher costs for the end consumers.
IBM has worked with Maersk on a blockchain platform that is designed to digitalize the supply-chain process by tracking shipments around the world.
Shipchain unifies shipment tracking on the Ethereum blockchain, using a sidechain to track individual encrypted geographic waypoints across each smart contract.
Blockchain tech works even for content production
Now with blockchain technology, a user can be incentivized to create and curate content on the internet. Anyone can be a content creator and the rewards are easily enabled with smart contract features.
Steemit is dubbed “the Facebook of blockchain”.
Steemit is a blockchain-based rewards platform for publishers to monetize content and grow their community. Steemit uses an upvote feature to measure how much content creators get rewarded for their content.
The more upvotes content creators get, the more will they be rewarded. And it’s the community who decides that.
On traditional social media platforms such as Facebook, the content creators do not get rewarded, regardless how valuable their content is.
The same concept applies to Kin and other platforms such as Basic Token Attention.
Healthcare and Blockchain Technology, a match made in heaven
Blockchain technology can be used to store and keep track of patient health records.
All patient data can be stored on a blockchain, and ownership of health records can be given back to the patient.
With the benefits of managing big data, data interoperability, data security, and integrity, Blockchain helps to enable a data sharing system that is secure. This will give access to all the details about the patient and this will help to reduce the cost.
Health data breaches are one of the long-standing problems in the industry.
The use of blockchain to allow various levels of access to users might solve this problem. Medicalchain is a decentralized platform that enables exchange and usage of medical data.
Medicalchain uses dual structure, which is a combination of the Hyperledger Fabric and Ethereum to allow various levels of access of data to patients and medical professionals.
Drug information can be stored and easily traced on a blockchain.
You Can Trace All Your Shipments with Blockchain Technology
According to IBM, a key benefit of blockchain for supply chain networks is that “it establishes a shared, secure record of information flows; a ‘shared version of events’ across networks for supply chain transactions, processes and partners.”
One of the main objectives of the supply chain industry is to create consistent traceability of goods.
Now, with blockchain technology, you can track the goods from the time it is still in the warehouse to where it is delivered. All the details of the goods are stored on the blockchain with traceable and unchangeable information.
- EY has worked with an Italian winery to record wines on blockchain, guaranteeing authenticity.
- Wabi is utilizing blockchain technology to “secure anti-counterfeit labels on consumer products in China and internationally”.
- Eximchain uses blockchain technology to eliminate traditional supply chain barriers and integrates actors—big and small—Into an inclusive, transparent, and secure global network.
The application of the technology is wide, beyond the above-mentioned industries and sectors.
However, blockchain technology is still in its infancy and foreign to many people, thus it takes time until this technology reaches the mass adoption where it is widely used in various aspects of life.