Every time a major innovation hits the market, the tech world goes into a state of euphoria – this maddening frenzy involves stock analysts citing numbers, tech evangelists debating pros and cons and corporate honchos charting future course centering the new innovation.
One particular innovation that has been in the news recently is Blockchain; it has garnered massive attention from all cross-sections of the world.
By all means, the attention is worthwhile. The benefits are for real and can be measured in tangible terms. But, there remain some pertinent questions.
Is Blockchain practical? Have we reached a point where its usability is proven in today’s scenario?
These are the questions we are trying to answer in this blog.
On the onset, Blockchain is a massive digital ledger that grows each time a transaction takes place on the Internet. Blockchain aims to eliminate expensive intermediaries in financial transactions through software empowerment. The tech innovation would positively reform the financial services industry where massive amounts of data and transactions take place every single minute.
Before we go any further, you need to know what Blockchain really is.
What is Blockchain?
Imagine you are conducting an online transaction, like opening a deposit account with a bank.
How can you be sure that the bank is really the entity that it poses to be?
How can you be sure that the facts as shown by the bank are true and verifiable?
You need a system, a collection of records or rather a universally compiled database where you can verify that all the records are pertaining to the bank is true. Such a database must also be secure and tamper-proof. That way, no single person or entity can edit the record and cheat people who are relying on it for conducting online transactions.
Blockchain is a software that helps create such a system of records. It is a collection of digital ledgers or records which are collectively called Blocks. The information stored in the blocks is secured using cryptography, a type of high-level encryption. All the transactions are visible to parties in the network who approve of the transaction. When the transaction is approved it gets added to the block. Thus, the block keeps growing each time a transaction is completed.
Blockchain is hosted on a peer-to-peer kind of distributed computing system. This means that no single person or entity is entitled to its ownership. Also, the distributed network ensures that cybersecurity attacks cannot take down the entire network. This heightens the level of trust with which Blockchain users can conduct business transactions.
Here are few practical use case scenarios that Blockchain can be deployed in:
1.Real Estate Chains
In the third-world countries, real estate transactions are largely unorganized and lack a secure central system of administration. Also, there is improper updating of land records with clear ownership titles. This has led to large-scale land grabbing scams that exploit the weakness in the system.
Blockchain can create blocks of land deeds and their respective ownership which cannot be tampered by unauthorized personnel. This will help real estate business owners, individual landowners and also governments manage land properties easily and reduce the risk of land-grabbing and illegitimate land titles. Ubitquity is one startup that has already ventured into this blockchain-secured way of recording land and property deeds.
2.Banking & Insurance
Blockchain can iron out the difficulties bank face in processing back-end operations. A possible use case is the gathering of valuation data of securities considered for loans. The single record of all securities will help in the proper evaluation of creditworthiness and appropriate issuance of loans.
In the long-run, this would also help prevent instances of financial slowdown and recession on a global scale since credit and cash transactions are conducted based on accurate security details. Japanese banks are already in the works to roll out J-Coin, a digital currency similar to bitcoin that will kill physical cash.
In the insurance industry, Blockchain can speed up claim processing by automating tasks and removing middlemen who transfer personal data of beneficiaries from one system to another. All the personal data of the beneficiaries can be brought under a single roof which will help quicken the pace at which claims are processed. The convergence of data will also help eliminate the need for middlemen and automate the tasks that were handled by them earlier.
Global insurers and reinsurers, Allianz, Aegon, Zurich, Swiss Re and Munich Re, have jointly launched a Blockchain Insurance Industry Initiative B3i to gain all the benefits cited above.
3.Supply Chain Management
Total visibility of a package or an entire consignment from the time it leaves the factory floor until it reaches the customer doorstep is a critical need for Supply Chain Management. Blockchain makes that possible by providing a track of the goods within the organization as well those that are dispatched for delivery.
Data from various stakeholders, including factory personnel, deliverers and customers can be used to streamline Supply Chain Management. Walmart, the global retail behemoth has already tasted success by building a Food Safety Solution using IBM Blockchain Platform.
The Way Ahead
Currently, Blockchain is being envisioned more as a problem-solver than a game-changer for industries, typically for the financial services sector. It will help remove the need for intermediaries in financial transactions that inflate costs and also slow down transactions.
In spite of its many possibilities, Blockchain adoption is still in its nascent stages. Adoption is primarily slow due to lack of technical talent and knowledge gaps. Also, legacy systems have massive volumes of data stored in them. It is not possible to move them on an experimental basis.
Once it does come into force, Blockchain will change the way we do business. Right now, Blockchain needs to earn the trust of users before it can become an epicenter for trust-based transactions.
To chat with us on Blockchain, write in at firstname.lastname@example.org.