Blockchain technology gained notoriety for its role in making peer-to-peer transactions cheaper, more private, and faster than traditional methods. With improvements and adaptations, however, it’s clear that its uses will extend far beyond the simple transactions that it is known for. Especially because of its main benefits - decentralization, immutability, and efficiency - blockchain technology will revolutionize business as we know it.
Cutting out the Middleman
Some of the most successful businesses thrive because they allow people to connect. Uber helps drivers find passengers. AirBnb helps homeowners find vacationers. Social media platforms like Facebook and Instagram exist solely to facilitate interaction between people. Beyond providing a marketplace or meeting ground, however, the corporations behind these services and platforms don’t provide any additional value.
Currently, the Internet is build on the following paradigm: users share personal information with enterprises like Google and Facebook and get “free services” in return. Of course, the price that users actually pay is in providing their personal information. Many people feel that these companies make too much profit on their behalf. One of the promises of blockchain is to empower the individuals.
Blockchain technology lets developers create platforms just like the ones that exist today - but without the corporations that run them.
The Importance of Trust and Transparency
As a society, we’re reaching a crucial juncture where people place high values on trust and transparency. The model of products and services being provided by giant, unaccountable corporations has proven problematic - especially when dealing with concerns regarding data privacy. Blockchains remove the need for trust and provide total accountability. As the technology improves and is adapted for more use cases, it’s entirely possible that people will demand blockchains in all aspects of business and life.
Blockchain’s Versatility
To date, over 1,800 cryptocurrencies are being actively developed and marketed to the public. Many of these cryptocurrencies strive to be the best for the same goals. For example, a large number of cryptos offer their customers the same benefits of fast, secure transactions. However, there are many cryptocurrencies popping up to provide entirely new use cases. One example is Golem.
Golem is a cryptocurrency that provides a marketplace for computation. The vast majority of computers and devices owned today use a mere fraction of their computational power. Meanwhile, individuals and businesses that require large amounts of computational power - for things like graphic rendering - need to purchase new devices to meet their needs. Using Golem, individuals with excess computational power can sell it to those in need. This mechanism increases efficiency, reduces waste, provides a new form of income that didn’t previously exist, and cuts cost for customers.
Removing the Cost of Inefficiency
In addition to increased trust and transparency, blockchains should also make many products and services cheaper. Blockchains can decrease costs in many areas by streamlining processes and removing unnecessary steps. One area that benefits dramatically from the blockchain is supply chain management. With a blockchain, products can be identified, categorized, and tracked from the beginning of the supply chain all the way to the end.
Another emerging technology that complements blockchains is the Internet of Things (IoT)? IoT refers to the process by which physical items can be identified and tracked online using embedded electronic devices. Once physical objects can be managed online, the opportunities for automation expand dramatically. As mentioned previously, blockchains can assist in supply chain management by providing an immutable ledger that keeps record of products’ movement. When IoT is combined with blockchain, the entire supply chain becomes automated.
Blockchain’s ability to verify value and transmit information automatically removes the need for third party verification. This means that various business processes that require intermediary steps for verification can be improved by switching from traditional methods to blockchain technology. Reduced costs as a result of this switch benefit both the business and the end customer.
Where are We Now?
Those that question the value of blockchain can look to its adoption by major businesses for confidence in the new technology. Wal-Mart, UPS, Fed-Ex, and British Airways are just four examples of corporations implementing blockchains into their processes today . Other financial institutions like JP Morgan are embracing cryptocurrencies by offering their customers trading services. While some claim that blockchain and cryptocurrency are just passing fads, interest in the technology from established corporations is a positive indicator for the their future.
The major hurdle that blockchain technologies still needs to overcome is scalability. Cryptocurrencies that utilize blockchains need consensus mechanisms for security and to continuously verify their data. One consensus mechanism is Proof of Work. Proof of Work requires participants to secure the blockchain by expending computational effort. Bitcoin is the most notable cryptocurrency using Proof of Work. The problem with Proof of Work is that it results in huge expenditures of electricity when large numbers of users and transactions need to be handled.
Other cryptocurrencies still being developed are experimenting with newer consensus mechanisms that may provide solutions to scalability. Proof of Stake is a consensus mechanism in which participants stake their coins or tokens rather than expend computational effort to verify transactions. Any blockchain technology that will be relied upon for significant volume will need a consensus mechanism that is reliable, secure, and fast regardless of the number of users and transactions it’s needed for.
Keeping Up with Technology
Blockchain’s ability to improve business processes and reduce costs may make it a necessity in many sectors. Businesses that fail to implement the technology will suffer from higher operational expenses and will be unable to offer prices comparable to their competitors. This type of scenario could be the driving force of the blockchain revolution. Businesses that embrace technology will succeed while those that fail to keep up will be unable to compete.