There have been few defining technological shifts that we have seen in history compared to the one we are going through right now. The Blockchain movement is causing a disruption on a massive scale by not only completely realigning the current global ecosystems but changing the way we live our lives. Cryptocurrencies are just one facet of the many promising use cases of the blockchain, which are being implemented globally to embrace this transparent, efficient & secure system. Let’s quickly review some of the important features of a blockchain before exploring its use cases.
- Smart contracts: This is perhaps the most important feature of the Digital Ledger technology (DLT) pioneered originally by the Ethereum platform and has now gained wider acceptance & incorporation in the upcoming projects. These contracts let you exchange any two assets on a secure & transparent network without an intermediary.
- Tokenization: Implementing a blockchain means working with a digital token of the underlying platform e.g Ether (ETH) for Ethereum blockchain & Lumens (XLM) for Stellar network. However, you can also have a new digital token issued customized for your business needs on your public or private blockchain network.
- Decentralized: The democratized nature of blockchain technology gives it the transparency & security as far as the storage & processing of transactions is concerned. Since most the networks work with some kind of consensus mechanism, manipulation of any kind is rare.
- Immutability & Security: Any information once recorded on a blockchain can’t be changed which adds another layer of security to the data on the network thus making it immutable. Also, there are improved algorithms being developed as we speak which make it very difficult to hack into the systems or launch a DDoS (denial of service) attack.
- Different types: And finally there are wide variety of blockchain networks that you can choose from.
Federated – Most restrictive, Limited access, Much better scalability, transparency & privacy e.g. A Central bank or R3 consortium
Permissioned/Private – Access can be public or private but verification or audit permission for a few only, simplified compliance & data handling e.g. Bankchain
Permissionless/Public – Open source Public network, transparency with anonymity as no third-party involved, minimum costs with no need for maintenance. However, results in slow processing e.g. Bitcoin
Hybrid – A combination of Public/Private network with partially restricted participation, Offers flexibility with what data is kept private & what is stored on the public ledger. Better scalability with consensus not required from every node on the network e.g. Hyperledger
And if anybody has any doubts about the adoption of the DLT, just look at some of the headlines from today in the Blockchain arena:
“Telecoms giant AT&T has announced a suite of blockchain solutions for enterprise customers”
“Austria’s government will use an Ethereum-based blockchain notarization service to issue €1.15 billion ($1.35 billion) of government bonds in a Federal Bond Auction next week”
Now, let’s look at some of the key areas where blockchain can help streamline the processes & make them more transparent & efficient.
Smart City Governance
Most of the Municipal governments around the world work on the outdated filing system with long paper trails causing unnecessary administrative delays. Try getting a city permit for something & you will know I am talking about. The most common problem in this regard is of land ownership records & the disputes that arise from the current inefficient process. With the new Blockchain system, these records can be stored in tamper-proof digital files making disputes a thing of the past. Local businesses & Property owners can apply for all sorts of licenses & permits digitally, improving the efficiency of the local government while cutting the processing time for the users significantly. Smart contracts can also be used to implement secure voting platforms, which would prevent tampering & double voting while assuring accurate compilation of results. The City-state of Dubai is getting ready for such an implementation— digitizing of all its services including visa applications, bill payments & license renewals which account for more than 100 million documents each year. All these records will now be securely transacted using a blockchain.
With the current state of Public healthcare in many of the western countries if you are looking to switch your family doctor or looking for specialized care, the process takes forever – your medical records gets physically transferred to the new doctor or the specialist who then looks at them to diagnose & prescribe you the medicine or recommend any treatment. With the patient records stored on a secure blockchain, these lags will not be there anymore as any doctor can access the patient’s medical history instantly, thus providing the patient with an integrated & accurate diagnosis. Even second opinion from another doctor could be taken instantly with this secure digital access. Centralized patient data will also greatly help in the research, resulting in improved healthcare & better patient experience. Access to this “border less” medical knowledge on a public blockchain would also help in serving the underprivileged people, who either have no access to medical facilities or live too far away to receive any medical assistance, thus bringing inclusiveness for everyone.
Digital Identity Management
We have gotten so far as having a passport with chip incorporated within it for border officials to access our information securely, but the convenience for the user ends there since we still have to stand in long lines at the airports to be verified manually & let go. Also, where ever you need to fill your KYC documentation – the process is tedious & takes too long. However, with the new components being added to your our digital identities – fingerprints, iris scans, facial recognition etc. the storage & access of such data via a blockchain would not only make it much easier for you to manage your digital footprint, security lines at the airports would vanish and KYC documentation required for various purposes would not be applicable anymore. India undertook a massive project called the India Stack, which is the establishment of a new digital biometric ID system. This system includes the fingerprints & iris scans for each of its citizens along with a 12 digit number consisting of the digital ID — since 2010 over 1.2 billion people in India have been issued with such IDs. This process is the largest IT project roll out in the history of the world. This has also enabled for the immediate authentication of the individuals. Also rolled out was the e-KYC, which is basically a digital (paperless KYC) system, where individuals have a digital folder – they can place all their documents needed for KYC requirements for a range of financial institutions & other processes where such documentation is required.
Digitization of Financial Services
There is no other sector of the global economy that is undergoing a bigger disruption than the financial sector. From online-only banks, to Cryptocurrencies, to tokenization of assets, to decentralized exchanges (DEX) – everything seems to be moving towards the blockchain model of things. Even traditional brick & mortar banks are evolving with this new wave to stay in the game – two blockchain-based cross-border payment systems, RippleNet (xCurrent) & Blockchain World Wire (BWW), are currently in being trialed by banks across the Globe pointing to a shift from the older SWIFT system. The blockchain-based digital tokens are seen as a direct threat to the traditional Fiat currencies which are believed to be replaced by them at some point in future once the scalability, volatility & regulatory issues are sorted out – it’s only a matter of when not if. We are so used to owning physical assets with “tangible value” that buying a cryptocurrency or any other digital asset for that matter scares most of us. Trade-able digital assets have seen the most innovation in the financial markets. Bitcoin Futures, ETFs, ETO (Equity Token offering), ETN & ICCO (Initial Convertible Coin offering ) are all members of this new digital asset class.
Supply Chain Management
Shipping containers keep the trade flow going around the globe & supply chain is a very important part of the Global economy, but the process of verification from origin to destination is a lengthy one causing unnecessary delays to an already slow-moving system. TradeLens — a blockchain based shipping solution that IBM & the shipping giant Maersk had been working on for almost a year came out of beta recently. The collaborative effort between the two companies has already garnered the support of 94 participants & 20 ports and terminals around the globe with 154 million shipping transactions already recorded on its blockchain. The project involves three components: Blockchain for tracking goods from start to finish, APIs to build applications on top of the platform & data standards for all the entities involved. Supply chain management has just gotten a blockchain upgrade. Similar projects are being implemented at the micro level as well.
Regulation has been a very thorny issue for the whole blockchain movement & the complete absence and the sluggish response from the regulatory authorities has caused immense confusion around the legality of the new technology. To be able to present an effective regulatory framework to monitor the workings of Blockchain technology, the Regulators should embrace & incorporate it into their processes as part of the whole RegTech movement. Seems like they are being pushed in that direction but the process is slow.
And there are so many other use cases that we can talk about but I think you get the picture. Blockchain is making us more efficient, productive & tech savvy and it is here to stay.