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What are experts saying the blockchain industry will look like over the next ten years?
Blockchain, to put it simply, is a shared ledger of digital transactions that is not controlled nor stored in a single computer around the world. This allows for the network to be safer, since not one single person (or group of people) has the means to manipulate it.
Despite having become famous as the technology behind cryptocurrency, blockchain is already being put to use to other purposes, such as helping out with the refugee crisis, funneling funds to impoverished regions of the world, streamlining government processes and licensing creative work.
According to experts, blockchain is bound to grow at a rate of 60% annually over the next several years, and companies will start adopting it as the backbone of their operations. The technology is expected to disrupt several industries (beyond cryptocurrencies), including security, supply chain management, forecasting, networking, the Internet of Things, insurance, transportation, cloud, charity, government and the public sector, healthcare and energy.
BLOCKCHAIN 101: A STARTER EXPLAINER
Putting it in extremely simple terms, a blockchain is a distributed database or a distributed ledger — or, as Jamie Skella explains it further in his article "A Blockchain Explanation Your Parents Could Understand," "a shared record book."
In few words, a blockchain is a record of digital transactions to which thousands of people around the world have access. However, there is not just one record in one place to which many people have access, and there is no one single use for the record book, as Skella explains: "There are thousands of copies of this record book, stored on computers all around the world, both home computers and business servers — hence the term "decentralised". This record book can be used to record many kinds of things," but he goes on to say that sending and receiving money is "the most common one right now."
Indeed, when most people think of blockchain these days, they think of money transactions — what is called cryptocurrency, particularly Bitcoin. Blockchain, though, can have many other uses besides cryptocurrency, including humanitarian and governmental.
The utility of blockchain is to keep track of digital transactions without a middleman, as well as the solution to the double-spending problem, a way to make sure that a digital transaction is legit and the currency used for the payment has not already been paid to somebody else. Since blockchain is not owned by anybody in particular and lives in thousands of computers all over the world (what is called "node"), nobody controls it and nobody can decide to duplicate or manually alter a transaction — any and all transactions update and sync up automatically in all computers where blockchain is installed.
In that sense, it works similarly to Wikipedia — since it is open source, and everybody has access to it, the bulk of users act as supervisors.
As Nik Custodio puts it simply it his article "How to Explain Bitcoin to Five-Year-Old," "it's a tough system to beat. Especially if it got really big."
Now, this doesn't mean it is infalible. As most systems, there is a chance it might fail: it is called the "51% Attack," and it would happen if a majority of users would choose to be dishonest and cheat the rest of the network. Blockchain is built on the assumption that the bulk of the people using it will be legit — if said honesty were to be violated, the system will collapse.
But, as Mohit Mamoria writes on the Next Web, "that’s the only vulnerable reason why Blockchains might collapse if they ever will. Know that it is unlikely to happen, but we must all know the vulnerable points of the system."
HOW IT IS USED TODAY: CRYPTOCURRENCY AND BEYOND
Despite blockchain being best-known for its uses with cryptocurrency (and Bitcoin, most notably), it is already being used for other purposes.
One of them is humanitarian causes, such as helping out with the refugee crisis. The UNWFP sent cryptocurrency-based vouchers to over 10,000 Syrian refugees in 2017, helped by Ethereum co-founder Gavin Wood, blockchain Big Data firm Datarella and Parity Technologies.
According to Forbes, blockchain can give an opportunity to go around bureaucracy and international uncertainty by providing refugees direct access to donations.
Similarly, blockchain is being used as a way to send donations and create financial avenues to impoverished areas of the world. Platform BitPesa, with collects crypto-payments between Africa and the rest of the world, is doing just that — allowing for donations and payments to be made without the extra cost that traditional wire transfers imply.
Another blockchain use that is already showing great promise is data sharing, authentication and confidentiality — which is highly valuable for healthcare and medical records. MedRec is doing just that, and MIT Media Lab has defined it as “a novel, decentralized record management system for EMRs that uses blockchain technology to manage authentication, confidentiality, accountability, and data sharing.”
A recent use for blockchain that is currently making headlines is creative work and licensing. Photography giant Kodak recently jumped on the blockchain bandwagon, intending to use digital ledgers to allow photographers to license their work and get credited and paid. The news sent Kodak’s shares roaring, after being down as much as 1.6% just before the announcement.
And of course, there’s blockchain’s most popular use: for digital money transactions between individuals (or payments) without a middleman. Jamie Skella explains best like this: “When John wants to send money to Sue, a new line item is created detailing that transaction. This line item then gets sent off to hundreds of other computers who have a copy of the record. Those computers confirm that this transaction is authorised, and ultimately they agree (or disagree) that everything about the transaction is legitimate before giving that line item a tick of approval. It has to match up perfectly on every copy of the record.” Skella continues, “It's as if John and Sue had a few hundred mates stand around them and watched John hand Sue the money in question, and they all agreed that he really did hand her the money, as well as other aspects of the transaction, such as it being the right amount.”
OUTLOOK FOR BLOCKCHAIN: WHAT INDUSTRIES IS IT EXPECTED TO DISRUPT IN 10 YEARS?
Blockchain has been experiencing some impressive growth in the last few years, and shows no indication of stopping — some experts think it will continue to increase at a 61.5% annual rate through 2021 (its growth beyond that is unknown). The technology has also received endorsement from industry giants, including recently JP Morgan's Jamie Dimon (who admittedly hates Bitcoin, but loves the technology behind it).
It is safe to say that blockchain is here to stay, and we may begin to see more of it in business and society from here on out. As the workforce moves towards the freelancing economy and peer-to-peer businesses continue to appear, companies are starting to use blockchain as the backbone of their operations.
According to Liana Douillet Guzmán, senior vice president at Blockchain, in the next decade blockchain will evolve in a similar way to the Internet and intranets, in that companies will have their own private blockchain to operate, living in the larger network of the public blockchain. "They are a useful part of the ecosystem. Right? They allow our businesses to interact with one another internally and then plug into a more public domain. Ultimately, what we’re going to see is these partnerships, this collaborative process, where we have companies use private blockchains that sit atop public blockchains," she told McKinsey.
Cryptocurrency is, of course, the talk of the town — Bitcoin has the potential to bring financial services to millions of people around the world who are under served by the traditional banking world. "When you actually dig into the financial system as we know it today, it’s fairly antiquated. It’s primarily built on technology that was created in the 1970s," said Douillet Guzmán.
"The thing that I find really exciting about this technology is [what it can do] not just for users like me but users across the world. Two and a half billion people across the globe are not served by the current financial system at all," she added.
However, as blockchain grows and evolves, society will start developing new applications for it, or discovering new ways in which it can be using — thus disrupting a larger number of industries, beyond cryptocurrencies and payments.
Futurethinkers identified as many as 18 industries (plus one more item which is left blank, as the possibilities are infinite), sectors and activities that are bound to feel the impact of blockchain in the future — which they noted to be in the coming five to 10 years:
1. Banking and payments
Beyond cryptocurrencies, blockchain will have a substantial impact in the way we handle money and do banking. According to Futurethinkers, blockchain may change banking the same way the internet changed the media: “It can be used to give access to financial services to billions of people around the world, including those in third world countries who don’t have access to traditional banking.”
Traditional banks are already working on incorporating blockchain technology into their operations, which can make them faster, safer and more efficient.
2. Cyber security
The blockchain is public, which may raise some concerns about safety — however the data is verified and encrypted, as well as not controlled or stored in one single facility, which makes it less vulnerable to hacks or unauthorized alterations. The future of data security could lay in blockchain.
3. Supply chain management
Transactions can be logged, monitored and documented in a permanent, decentralized ledger, and done so securely and transparently — resulting in fewer delays and human mistakes. Blockchain can bring a way to monitor costs, labor, waste and emissions at all points of the chain, helping reduce environmental impact, as well as control origin and fair trade status of products.
4. Consulting and forecasting
The research, analysis, consulting and forecasting industry could be transformed using blockchain, creating a global decentralized prediction market that can be applied to anything from sports bets to stocks movements to elections.
5. Networking and IoT
Blockchain would eliminate the need for a central storage to handle communication between connected devices. These devices could connect directly and help each other to detect bugs, update software and optimize performance.
Just as blockchain, insurance is based on trust — blockchain is a new way to manage data, using trust as baseline, and could be used to verify and authenticate information given on claims and policies.
Blockchain can be used to build decentralized versions of ridesharing apps (like Uber), which would eliminate the need of third-party providers. As for private transportation, it would allow car owners to automatically pay for tolls, parking fees, top-up electrical cars, etc.
8. Cloud
Blockchain eliminates the need of centralized data center — making storage more secure and less vulnerable to hacks, data loss, or human mistakes.
Just as the UN has started doing to help the refugee crisis, blockchain's humanitarian uses could be expanded to bypass bureacracy and avoid inefficiency and corruption - two common complaints in the international development industry. Blockchain would allow tracking of donations and eliminating middlemen - enabling the money to reach the right hands.
10. Voting
Futurethinkers names the possibility of eliminating voting fraud as one of the key areas where blockchain could have a serious impact. The technology can be used for voter registration and ID verification, and vote counting to ensure that no votes are changed and only legit votes are counted. A public ledger of votes would make the process more transparent, having a massive effect on a fair democracy.
11. Government
Blockchain can provide transparency (by making process fully publicly owned) to government systems, reducing bureaucracy and increasing security and efficiency. Dubai is one city that is aiming to pull all official documents on blockchain in two years.
12. Public benefits
Blockchain can reduce slowness and bureaucracy by helping assess and distribute welfare, unemployment and other benefits, streamlining the process and making it more secure.
As evidence by MIT project MedRec, healthcare is another industry that can benefit greatly from blockchain. Medical records can be securely stored and shared with concerned parties, ensuring data security and helping with accuracy of diagnosis.
14. Energy
Energy management is an outdated industry, where producers and users cannot buy from each other and have to rely on middlemen (either the public grid or a private intermediary) for the transaction. Blockchain would allow customers to sell and buy energy from each other.
15. Creative work
Futurethinkers lists music specifically, but it can be extrapolated to all creative work. Just as Kodak started doing with photography, blockchain can be used as a mean for creators to catalog their work, as well as a way to license and get paid for their art to be used by third parties.
16. Retail
Blockchain would allow users to buy from stores without relying on third parties to handle payments, thus avoiding fees.
17. Real Estate
Blockchain technology would reduce the need for paper-based record keeping, as well as helping verify ownership, tracking accuracy of documents, and even transferring property deeds.
Crowdfunding is a popular way to support startups and projects, and blockchain would eliminate the need of crowdfunding platforms - these have been useful for putting in touch project creators and supporters, but charge hefty fees. Blockchain would build trust between supporters and creators through online reputation systems and contracts, and creators would be able to build their own tokens (or cryptocurrency) that can be later exchange for stock, products or services. This area is susceptible to regulation, which is still in the early days.
CONCLUSION
To wrap up, blockchain is, simply put, a shared ledger of digital transactions that lives in multiple computers around the world is not controlled by one single person. The technology is known mostly due to its role in the development of cryptocurrencies, but it is used in, and bound to disrupt in the next ten years, many other industries, including the public sector, international development, and creative industries such as music or photography.