In this 2 part series, I have attempted to summarise several use cases of the blockchain. I start off with a quick description of blockchain basics to set the stage for your exploration of use cases that are changing various aspects of our lives.
0. The Technological Basis
The blockchain has recently energised innovation across several industries. Innovation centers and labs are seeing the rapid rise of numerous startups all over the world. These startups have the potential to unlock trapped economic opportunities by allowing more people to participate in the global economy. It is increasingly possible for a wide variety of digital goods and services to be transferred between people across vast geographical boundaries very quickly, simply and cheaply with blockchain based apps from their mobile devices. A vast sea of humanity not served by the traditional banking industry finally may get access to financial services not possible previously due to lack of proper infrastructure and poor economies of scale.
To get to this promising stage in global economic development, several supporting technologies were critical. They include Transport Communication Protocol/Internet Protocol (TCP/IP) that powers the Internet, distributed ledger technology, cryptography to support the consensus rules, P2P (peer-to-peer) network of nodes, miners and tokens at the blockchain protocol layer.
This technological basis has spurred the development of distributed applications (dApps) like the bitcoin. dApps foster increasingly complex automation tasks that reduce infrastructure costs, and allows people who wish to transact as strangers in an open and transparent way. Since there are either nil or fewer intermediaries or middlemen in the transaction process, costs are significantly reduced and transactions are completed more speedily.
Blockchain technology has the significant potential to improve the quality of human lives with smart value (money and rights) transactions, smart mobility with driverless and shared vehicles, smart energy grids powered by sustainable energy sources (solar, wind, wave, nuclear, etc), smart buildings sustained with networks of sensors in the Internet of Things (IoT) and ultimately better quality planning and governance.
Here’s a short video that summarises what was covered above: Blockchain and the Middleman
Let’s review some current and upcoming use cases based on the blockchain. I have included video references to simplify the consumption of information without the need to read copious amounts of text.
1. Crypto Currencies
The blockchain came into prominence as soon as Satoshi Nakamoto published the White paper, Bitcoin: A Peer-to-Peer Electronic Cash System. This publication emerged at a critical moment in human history. Large global financial institutions, through their unwise practices, had initiated their destruction on a massive scale. Trust in ‘too big to fail’ banks had crashed (pun intended) and some of them were saved from oblivion by taxpayers through their elected governments. Man people saw their savings wither, their financial plans wrecked and were ready to consider the alternatives.
Watch this video to understand more about the Bitcoin: How Cryptocurrencies Work
2. Law Enforcement
The blockchain is a public record of immutable transactions since the inception of a distributed ledger. Law enforcement agencies are able to discern with significant accuracy, potential criminal activity from blockchain analysis. Law enforcement agents can trace the money trail and discern the parties and amounts involved. These efforts are part of Anti-Money Laundering (AML) programs. Value transfer entities, traditional financial institutions and cryptocurrency issuers and exchanges are seeing additional compliance requirements to clearly identify their clients as part of Know Your Customer (KYC) processes.
Check out this excellent video, where a US federal prosecutor explains in detail how the US government used blockchain analysis to detect fraud and shut down the Silk Road trading platform on the Dark Web: How the US government is using blockchain to fight fraud
3. Insurance
The insurance industry has typically lagged behind the banking industry in terms of technology adoption. Insurance transactions of the future based on the blockchain will involve more direct transactions between insurers and consumers. The disintermediation of insurance agents, their exorbitant expenses and sometimes inferior services would mean that consumers will benefit more from lower costs, more expedient services and potentially more innovative customer-focused solutions.
For insurers, there are opportunities to address the need to reduce costs, offer innovative solutions to a wider customer base, detect and reduce fraud, and enable the development of new products based on the Internet of Things (IoT).
Customer engagement will be enhanced with the elimination of repeated data entry processes, customer controlled identity verification as part of KYC (Know Your Customer) requirements, better handling of personal medical/health data and the reduction of customers’ fears of losing control of their personal data held in large company silos.
Here’s a short video that summarises the points made above: Blockchain will empower the future of insurance
4. Banking
The blockchain is having a huge impact on banking earlier than on other industries. This is in part driven by the astounding development of the bitcoin as a medium of exchange. Initially, several well- known bankers of established banks attempted to downplay the impact of cryptocurrencies. These bankers have largely been silenced by the community at large. Global financial institutions like the World Bank, national central bankers and some large banks have taken note of the transformative nature of the blockchain. They have setup innovation labs to understand the blockchain in greater detail, trial some innovative solutions with the view of rolling out some applications to the public.
How the blockchain will impact banking is explained in this short video, The Value Revolution: How Blockchain Will Change Money & the World
5. Capitalism
Since the blockchain deals with the fundamental exchange of value through cryptocurrencies and smart contracts, it has a huge impact on capitalism. Capitalism has won over other forms of economic systems over the last few decades and has delivered a higher quality of life to a wider group of people all over the planet. However, several issues related to capitalism have started to emerge. These include the over concentration of wealth in a very small group of multibillionaires, uneven prosperity among different strata in society and a declining sense of general fairness.
In this video, the presenter explains quite effectively the impact that the blockchain could have on capitalism as an economic model: Rethinking Capitalism with the Blockchain
6. Digital Marketing and Advertising
An often quoted issue with the current state of the digital marketing and advertising industry is that large centralised companies like Google and Facebook, take full advantage of our data, content, usage history and attention spans to build massive companies with very little of that returning to their users.
Google and Facebook connect advertisers with content generators (website owners, social media posts, etc). There have been suspicions of fake clicks that drive costs for advertisers. Users of these platforms are inundated with ads that negatively impact their user experience.
With the blockchain, users can permit advertisers to promote their ads directly. Identity verification will be precise and ad targeted users can benefit from responding to specific ads. Users can monetize the attention paid to these ads. So-called click through rates will be more accurate and will lead to greatly reduced ad fraud.
The blockchain has lead to the rise of upstarts like Steemit, Refind and 21.co (now Earn.com) that aim to reward users for the content that they generate, share and actions taken to grow their business models (reward for attention span).
Here’s a short video by one company addressing this issue: MetaX — Unlocking the blockchain for digital advertising
What can we expect next?
As you probably realise by now, since its emergence as a concept in 2008, the blockchain has made a significant impact on innovative solutions in many industries. Several pundits claim that the blockchain’s impact will be greater than that arising from the development of the Internet.
I look forward to the blockchain improving the quality of our lives in the years ahead. In the meantime, let’s stay abreast of developments and embrace those developments that are a service to life on this planet.
Look out for Part 2 of this story where I will cover how the blockchain is impacting the following use cases: assets and rights ownership, credit cards, supply chain, voting and governance, health records, venture funding with initial coin offerings (ICOs) and more.
Image credit: William Bout from Unsplash
Originally posted by me in Medium.
Please check out my other Steemit posts covering the blockchain topic:
A Personal Roadmap to Understanding the Blockchain
Different Blockchains for Different Folks
Singapore's Cryptocurrency Trial is in Progress with Project Ubin