Over the last few years, we’ve noticed a significant rise in the use of blockchain within the industry. Blockchain this. Blockchain that. It seems to be the talk of the cyber town. However, there seems to be an air of uncertainty that surrounds blockchain, and I’m sure there are many out there that share the same opinion. With $8.1 billion expected to be spent on blockchain services by 2021, this is the perfect time to get a better understanding.
So, what is blockchain?
Blockchain enables transactions in a peer-to-peer network to be validated without the need for a third-party influencer, thus ensuring traceability and transparency. Because of this, the technology can be leveraged for numerous application possibilities.
Originally made popular on the Dark Web, blockchain’s ability to decentralise the storage of transactions and make information almost impossible to destroy has naturally piqued the interest of many, none more so than those in the financial sector. According to Frederik Kerrest, COO and co-founder of identity specialist, Okta, blockchain would also appeal to critical services and identity security. He said “most countries still rely on multiple documents like passports, supported by digital methods such as passwords, for everything from healthcare to voting rights. With blockchain, governments could consolidate this under one unique encrypted code, with an unparalleled level of security. To hack a blockchain, you would need so much computing power that it’s virtually impossible.” Blockchain technology certainly sounds appealing and moving forward, we could see more industries adopting the benefits of blockchain.
But what exactly are these benefits?
Trust – Transparency brings trust, and with everyone connected to the blockchain network, everyone can see what activity is taking place giving the system total transparency which in itself brings trust.
Decentralization – With a centralized database, anybody with sufficient access to that system can destroy or corrupt the data, which is why there is a reliance on administrators and moderators. Blockchain removes this third-party element by entrusting the network of users to act as a consensus group to agree on the validity of the transactions made.
Added security – Any transaction made on a blockchain is cryptographically secured and encrypted. Also, any change or transaction made requires consensus by a supermajority of participants.
The above makes a strong case for blockchain. Nevertheless, there are some glaring problems with the technology that has generally gone under the radar as Shaan Mulchandani, director of security and blockchain lead at Aricent, highlights. Blockchain has issues with speed and scalability with “public financial transaction networks being “very slow”. For example, a blockchain process can take 6 transactions a second when a network is large. Compare that to a traditional, centralised problem-solving approach like Visa which settles hundreds of thousands of transactions/second. This renders it very difficult to utilise blockchain in cases such as immigration enforcement, IoT or device-to-device communication and onboarding into a network, and even in vehicle to vehicle communication.”
There are also problems with legality and transaction reversals with Shaan saying that “in certain cases – such as when blockchain network creators (or entities) issue cryptocurrencies for fiat currency ultimately resulting in shadow currencies with no governmental oversight globally.” Immutability also prevents “refunds” or reversals should certain entities be scammed or lose control of their individual accounts.
Shaan continues saying efficiency proves to be problematic because “blockchain networks utilise ‘proof of work’ algorithms to arrive at consensus which is very inefficient and costly for network participants as the network grows. A simple example is that of bitcoin – wherein the cost to ‘mine’ (generate new) coin is always a function of its current market value.”
With this in mind, is there really a future for blockchain?
The technology is already being used for the application of Bitcoin, but which other industries or sectors are interested in its services? Rene Bader, manager for critical business applications & big data at NTT Security, thinks that blockchain has a big future saying, “there are many areas that the same fundamental requirements in which blockchain could be used as a key technology”. Rene believes the following sectors will look to adopt the technology:
Banks: Blockchain is currently under careful consideration for adoption in the banking sector where it could be used for billing and transferring assets by documenting transactions without the need for validation from a central office, which will reduce costs and speed up processes.
Smart contracts: The more complex contracts could be processed using blockchain technology. For example, it’s possible to map the conditions of a contract in the form of an executable program code ensuring automated compliance with the contract determining which condition leads to which decision. Ownership transfers or leasing could be carried out faster. As soon as the buyer or tenant has paid the price for the contract to the seller or landlord, it is transferred to him or access is given to the digital key.
Insurance: It’s possible to dynamically adapt insurance conditions in the blockchain based on the habits of the policyholder and adjust the premium payment accordingly; For example, in motor insurance, this could be dependent on driving performance.
Music: In the music industry, many artists want direct responsibility for their music sales, music rights and the conditions of use. For this purpose, blockchain offers the ideal solution as it can directly link the use and payment of algorithms embedded in a blockchain.
Elections: For digital voting systems, blockchain can ensure the anonymity of the voter as well as protection against tampering.
Patents: Patents for the relevant administrative offices along with the documents for proof of intellectual property could be filed de-centrally, permanently and without the need for an intermediary in the blockchain. Certificates guaranteed by mathematical encryption would regulate the possession, existence, and integrity of these documents on a global scale.
There is no denying that there is huge potential for blockchain technology even after Bitcoin is dead and buried. Could blockchain revolutionise the way data is transferred? Its mission to improve transparency, security and reliability would certainly benefit the masses. Dan Taylor, director of systems and security at Fletchers Solicitors, states “the true future of blockchain can lie, by providing businesses with increased protection against cyber criminals and safeguarding their valuable data.”
At this stage, it is hard to tell but a breakthrough for blockchain technology could be right around the corner.