Blockchain technology has the potential to change the world. It could be the foundation for building new levels of trust in elections, financial transactions, supply chain management, and the sharing of healthcare data. It could be used by political and government institutions to empower citizens.
A report from Santander InnoVentures predicts that blockchain technology could reduce the infrastructure costs of banks by up to $20 billion a year by 2022. Capgemini has stated that blockchain technologies will enable consumers to reduce banking and insurance fees by $16 billion a year. The market for blockchain in retail is expected to reach more than $2.3 billion in 2023, growing at a compound annual rate of 96.4%. In the first five months of 2018, the dollar volume invested in blockchain companies reached nearly $1.3 billion, already surpassing the totals for the entire prior year.
Clearly, the potential for blockchain is making it one of the most widely talked about technologies of our time. But it’s one thing to talk about the potential of blockchain; we are approaching a new stage in the development of this exciting technology. It is time to start adopting it into our lives—allowing it to shape today’s digital economy into tomorrow’s crypto economy and ensuring that blockchain can be used as a vital tool to build trust in applications and environments beyond the world of cryptocurrencies.
Understanding Blockchain Technology
Most people understand that blockchain is the technology behind Bitcoin. But, if asked to define what it actually is, they would be hard-pressed to give a clear answer. Here’s a simple explanation, courtesy of The New York Times:
The easiest and most basic way to think about the underlying technology is to think about a technology that keeps a master list of everyone who has ever interacted with it. It’s a bit of an oversimplification, but if you’ve ever used Google Docs and allowed others to share the document so they can make changes, the programs keep a list of all the changes that are made to the document and by whom. Blockchain does that, but in an even more secure way so that every person who ever touches the document is trusted and everyone gets a copy of all the changes made so there is never a question about what happened along the way. There aren’t multiple copies of a document and different versions—there is only one trusted document and you can keep track of everything that’s ever happened to it.
Blockchain as a distributed ledger technology, or DLT, when used properly, can have a profound impact on cybersecurity since it is, at its core, a secure database that is immutable and transparent. Bitcoin provides a perfect example of the potential: In the nine years of its formation, Bitcoin has successfully warded off all cybersecurity attacks—something no other online/digital entity can fully claim. Imagine how other industries can benefit from that level of trust and security in their transactions.
The Business Potential of Blockchain
Although the first historical use cases of blockchain have been the disintermediated exchange of virtual currencies, distributed ledger technologies can be applied to all industry and public sector activities. Multiple types of transactions can be recorded in a blockchain and various use cases can be implemented. For instance, it can be used:
- In finance for money transfer, peer-to-peer lending and transfer of securities.
- By insurance companies for automatic execution of contracts.
- By governments for citizens’ ID management, taxation reporting, development aid management, e-voting, and regulatory compliance.
- In healthcare to track transactions on patients’ health records and identification of access.
- For media and intellectual property companies to directly distribute loyalties to authors of music, videos, and other content.
- For pharmaceutical companies to verify the drug supply chain.
- For retail companies to verify proof of authenticity and origin, and to easily manage provenance supply chain.
It is no surprise that banking and finance are leading the way in early adoption of blockchain technology. In the areas of banking, distributed ledger is incredibly useful because it keeps firms, individuals, and transactions on track and responsible. Blockchain provides financial institutions with a sense of security that was previously unattainable.
Blockchain is often compared to the beginning of the internet, when the potential was not fully understood or was subject to confusion by the large majority. Business models were unclear, regulatory frameworks were challenged by front-runners, and technical constraints hindered the uptake. Those who pioneered the internet and built long-term ecosystems, have been the big winners. That could be the case with blockchain now.
The biggest issue with blockchain today is scaling and cost. In order to better enable blockchain, we need to continue improving the technology. Blockchain is not a piece of code, it’s an infrastructure and ecosystem of distributed applications as smart contracts. As long as it is built and audited properly and functions correctly, it will be successful. This includes the development of distributed information and communications technology (ICT) infrastructure and, most importantly, correct implementation to actually ensure that businesses remain compliant and aware of upcoming security issues.
Those provisos aside, there is a gold rush to blockchain because it has such vast potential to address today’s most pressing cybersecurity challenges, creating a model for trust-based transactions that provide unmatched security to counter cyberattacks.
I believe blockchain technology has much more to offer than just Bitcoin or cryptocurrencies. Apart from its main features of being efficient, transparent, secure and, more importantly, societal—its democratic aspects should be emphasized.
Blockchains bring to people the power to control data without the middlemen and cuts their service costs. Blockchain can also be a solution for secure and transparent e-voting, hence reducing the risk of ballot tampering or political persecution. This is the way that I believe the public’s trust in governments and electoral systems can be restored.
We are already beginning to see how organizations plan to deploy blockchain technology in innovative use cases across the globe:
- In Australia, the Australian Securities Exchange is looking to replace its settlement system with a distributed ledger to improve efficiency and security in transmitting messages and accessing information. The managing director and CEO of the exchange’s operator says moving to blockchain technology could save the exchange as much as $23 billion (AUS). The exchange is looking to roll out the system by the end of 2020.
- In the Netherlands, numerous live projects have been presented, such as registering nursery childcare services on a blockchain; distributing and monitoring the use of the “kidpakket;” and trialing e-voting on a blockchain while keeping paper voting intact, in parallel.
- In my home country of Lithuania, the LB Chain initiative has been created by the Bank of Lithuania in response to demand for information and adoption. It will act as a safe technological sandbox environment, where domestic and foreign companies will be able to develop and test blockchain-based solutions in a regulatory and technological platform/service. The Bank of Lithuania has taken this strategic direction to accelerate development of a FinTech-conducive regulatory and supervisory ecosystem, while still fostering innovation in the financial sector and positioning itself to be a world leader in FinTech.
These are just few of many examples many more examples could be found via EU blockchain observatory forum, which has published over 400 blockchain initiatives across the EU – https://www.eublockchainforum.eu/. A simple internet search will give you many more potential blockchain use cases to consider, as this innovative technology continues to roll out and make its impact around the world.
Blockchain technology has immense potential to solve real-world problems and create new types of organizational structures that can change the economic and power dynamics of traditional centralized bodies. The technology will give freedom to people’s data and, therefore, stimulate new forms of democratic collective actions, security, trust, and transparency in daily activities. How far that potential and implementation goes is up to us and our ability to operate what the technology provides.
Antanas Guoga is a member of the European Parliament, EPP group, and a widely respected entrepreneur who has founded a number of successful international companies. He is also a committed philanthropist and a legendary former professional poker player. This article was excerpted from the book, Navigating the Digital Age, Second Edition.
“Santander: Blockchain Tech Can Save Bands $20 Billion a Year,” Coindesk, June 16, 2015
“How Blockchain is Changing Finance,” Harvard Business Review, March 1, 2017
“Blockchain in Retail Market Worth 2339.5 Million USD by 2023,” MarketsandMarkets, June 2018
“With at least $1.3 billion invested globally in 2018, VC funding for blockchain blows past 2017 totals,” TechCrunch, May 20, 2018
“Dealbook: Demystifying the Blockchain,” The New York Times, June 27, 2018
“ASX Head Says New DLT System Could Save Billions,” Coindesk, August 16, 2018
“The Bank of Lithuania to launch blockchain sandbox platform-service”