Gone are the days where companies needed thousands of computers under one roof to manage information. With the rise of blockchain companies can now manage their information through a set of computers that are present in different geographical locations. This has increased the efficacy with which data is handled, stored, and manipulated.
There have been extensive claims that Blockchain will revolutionize the way business will be carried out the way 30 years ago TCP/IP (systems that allowed two computers to communicate) changed the very way we live by giving birth to the internet. Without this system, there would be no globalization, international trade, or communication being carried out. In the same way, Blockchain is hailed as the advancement that will revolutionize technology as we know it. The numbers largely support this claim as research indicates that Blockchain’s market capitalization as of 2020 is more than $100 billion.
Who is using blockchain?
Large multinational corporations like Walmart, Shell, and Unilever have been slowly but steadily integrating blockchain technology into their businesses. Even governments have started making use of it. For example, Dubai has been carrying out the “Dubai Blockchain Strategy” a project whose aim is to enable the city to be completely powered by Blockchain by 2021.
What differentiates blockchain from traditional information storage methods?
It is true that at its core, Blockchain is merely space where data is stored. However, unlike traditional electronic data storage options, it has a few key differences.
Difference no.1: Visibility
The first one is that it is an electronic ledger where data is stored across multiple electronic servers or “nodes”. What is special about Blockchain is that all the information stored is visible to every single participant in the network. This means that transactions no matter how small or large are visible. This has been hailed as the biggest advantage of the system because it has allowed an increase in transparency.
How has visibility changed the market?
This feature has been key in the Financial and fintech industry where fraud through ledger manipulation is common. It has also been used in the Supply Chain which has led to an increase in the quality of products delivered. For example, after Walmart had to deal with an E.coli outbreak because of spoiled romaine lettuce, the company implemented a blockchain so that leafy greens could be traced every step of the way, from the farm to the store and its conditions could be monitored along the way.
Difference no. 2 Impregnability
The second difference is its immutable nature. Once information is entered into a “block” (or particular) it is transformed into fixed output. Whatever piece of information is entered into the block it is encrypted to produce the same number of characters. A single change results in a change in the output which is visible in real-time.
This information is then verified by all the participants in the Blockchain and once the information’s authenticity has been confirmed, it cannot be modified. This coupled with the fact that the information in a blockchain is stored across multiple computers in different geographical locations makes it very difficult to hack blockchain systems.
How has impregnability changed the market?
First of all, the encryption of data is allowing businesses to secure their data and carry out business transactions online safely. Secondly, it has been instrumental in preventing fraud in financial data records since if the data is modified it is detected immediately. This has led to large players in the financial industry have started shifting towards fintech business models.
For example, HSBC decided to shift from a paper-based record of private placements to a blockchain-based record-keeping according to Forbes. As a result, the shift has allowed investors to keep track of records, and any changes made on their investments in real-time. Hence, increasing the transparency and efficiency of private placements.
Difference no. 3 Confidentiality
Not to be confused with anonymity, the third characteristic is the confidentiality provided to the participant thanks to Blockchain. True anonymity would mean that there are no means to identify who is participating in the Blockchain. This would lead to questionable players participating in it.
Hence, Blockchain provides confidentiality. Companies keep track of personal information. However, instead of disclosing personal information to the public, each user is provided with a unique “wallet ID” which is similar to a Bank Account number. Users also have a “wallet address”. In essence, it is a code so that a participant can carry out transactions in the blockchain. This “wallet address” is not linked to the user’s personal information. However, a user that uses the same “wallet address” can easily be traced. Hence, a new code can be generated each time.
How has confidentiality changed the market?
The emergence of Bitcoin in 2009 is largely attributed to this feature of Blockchain. Though, cryptocurrency allowed for transactions to be visible to the public, not every user was comfortable with revealing their personal information. Hence, wallet addresses were implemented so that transparency could be maintained while keeping investors out of the public eye and away from hackers.
Difference no. 4 Security
One of the greatest advantages of implementing Blockchain is that it is difficult to hack into. This is because of the decentralized nature of blockchain. Previously, data warehouses contained all the computers that stored data. With Blockchain, these computers and as a consequence the data stored in it is not present in a single geographical region.
Hence, traditional data storage systems possess only one network which can be hacked into easily. However, Blockchains contain multiple networks, attacking every network is a costly endeavor, Even taking over 51% of a network is estimated to cost $62,000. Even then, it is very easy to notice that someone is trying to hack into the Blockchain.
How has security changed the market?
After the slew of cybersecurity attacks in 2018, many companies started looking for ways to protect their information. NASA was among one of the first to integrate blockchain for security purposes. Their blockchain allows them to prevent attacks on air traffic services, keep confidential flight information such as plans and position.
Why is Blockchain creating such a buzz?
Beyond its unique features and its applicability in a wide range of industries, there is another reason why Blockchain has been disrupting the industry. Its unapparelled potential for increasing efficiency and reducing costs.
Most industries face time-consuming procedures to carry out the simplest transactions since they must be recorded several times. Furthermore, intermediaries are needed to keep track of their records and verify the validity of their transactions. Even then, issues with fraud and embezzlement have persisted over time. However, Blockchain has provided a solution for many of these issues.
Cost reduction is International Trade
One of the biggest examples where Blockchain has increased efficiency and decreased costs is the International Trade Industry. Container shipping companies such as Hyundai Merchant Marine have used Blockchain in international documentation and sign off procedures. By doing so, they have managed to cut down the time it takes to verify transactions from days to hours. At the same time, it has enabled companies to track the containers they send in real-time.
Cost Reduction in Fintech
Similarly, Blockchain has been implemented extensively in fintech since it enables transparent and tamper-proof transactions. Even skeptical investors and large corporations have begun investing in fintech. Morgan Chase, Paypal, Visa have started investing in cryptocurrency. Mastercard has even allowed “Wirex” to issue cards through their network.
Many of these companies have even started to develop their own blockchain networks. For example, as of 2017 Mastercard integrated its blockchain network to facilitate partners, both banks and businesses to make cross-border payments.
Potential for cost efficiency in the Banking industry
Despite its rapid implementation, there is one area where Blockchain can easily exploit: the Banking Industry. Just processing deposits made in a bank takes days. By integrating Blockchain banks can verify transactions in just about 10 minutes. This could lead to a massive amount of savings, the European Bank Santander estimates that banks could save 15 to 20 billion dollars per year.
In addition to speeding up processing time, it can also potentially eliminate the need for intermediaries to keep records and instead, integrate them into the network and verify transactions immediately.
The downside of Blockchain
Despite its potential implementation in business, there are some downsides and issues with this technology. One of the biggest problems with integrating Blockchain is that it is a slow process. This makes sense since transferring a company’s physical records to a digital storehouse is not going to occur right away. Often, companies have recorded data that spans over many decades. Hence, not every company is keen on adopting it even if it is a cost-effective solution in the future.
Furthermore, not every company is not keen on implementing it. After all, Blockchain technology is still relatively new and companies are investing in small and medium-sized projects, working on developing it and tailoring it so that it can be used in their industry. This is the biggest reason why many industries like banking have yet to adopt Blockchain in their everyday transactions. Yet, despite the slow adoption, a survey by Deloitte across various industries showed that companies have invested at least 5 million dollars on average just in the year 2019.
Although Blockchain technology is still under development, big and small companies alike are implementing it. If you are thinking of integrating Blockchain into your business contact Pacsquare, we have 10 years of expertise building programmable Blockchain, permissioned networks, and ensuring confidential transactions. Request a free quote today.