Blockchain, typically understood as the technology that powers the virtual currency bitcoin, in fact, provides market applications far beyond cryptocurrencies. It’s expected that the fintech industry will be the first area in which we’re likely to see the majority of new blockchain applications emerging, but the technology is already present in a host of diverse areas and is expected to continue its advance rapidly in the near future.
More about Blockchain
A blockchain is a distributed database which means that the devices used for the database storage aren’t all connected to a single common processor. Essentially, an increasing list of ordered records, or blocks, is maintained, with each block timestamped and linked to a previous block. For security purposes, this means that users can only edit the parts of the blockchain they own, while the entire distributed blockchain is kept synchronized. The distributed timestamping server means that security is built into blockchain systems but allows for autonomous and decentralized database management.
The value of blockchain is that although it allows for information sharing, it also provides a high level of security that is relatively easily preserved at very little expense. Because it’s able to record transactions, ascertain identity, and verify contracts, users can do away with the third-party intermediary that would typically ensure transactions are securely and validly processed. It’s fairly obvious how beneficial this is in finance, but such secure digital contracts also provide important applications for the smart grid, medical information sharing, and regulation of intellectual property.
Though blockchain application advancements have been seen in past years, it’s an unchartered area for most. Businesses, however, eager to rid themselves of superfluous costs (i.e. middlemen) are quickly recognizing the value of this technology and finding new ways to manage transactions utilizing the technology. And individuals should be aware that many of the companies they employ are, in fact, third parties, adding their own fee to the overall transactional charge. Imagine if we were fully exploiting the benefits of blockchain technology, cutting Uber out of ride sharing, publishers out of our eBook sales, and music studios out of song purchasing? Such scenarios, of course, have their drawbacks, but it’s another important way that technology is empowering consumers.
Currently, blockchain regulation is sorely lacking, resulting in low utilization due to fears around its safety. Some countries, however, are already implementing regulation for bitcoin, and many are researching the use of blockchain; eventually, we will need a globally standardized regulatory framework to manage this technology should we truly wish to enjoy its full benefits.
Exciting Blockchain Applications
Aside from digital currencies, blockchain is already used in a few innovative systems, and being investigated for employment in many others. In Estonia, it’s now possible to get married digitally, with marriage certificates stored in a blockchain and notaries or registry offices done away with. Lufthansa is exploring blockchain technology for the documentation of aircraft components, helping dispense with counterfeit parts and prevent falsification of hours flown. And e-voting systems could, with the aid of blockchain technology, obliterate fraud and errors in voting, while simultaneously encouraging more people to participate in elections through the convenience of a digital system.
With regards to fintech, it’s unsurprising that the technology is so popular, with proponents insisting that cracking the security is impossible, information validation and control is absolute, and transaction timescales minuscule. Blockchain also provides transparency as transactions can’t be changed or deleted, and are publically viewable, and users are wholly in control of their information and transaction records.
The potential applications are considerable, exceeded only, perhaps, by the vast number of benefits this secure but highly transparent technology offers. As more and more of us get our head around what initially seems a confusing contrivance, we could find blockchain offering us far more ingenious and safe applications that benefit us day-to-day.
(Infographic source: Startupmanagement.org)
By Jennifer Klostermann