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01.08.2019

Why do we need blockchain?

Blockchain technology provides a distributed ledger with immutable, i. e. unalterable, history of transactions. Blockchain allows to store data, issue digital money, distribute ownership and grant exclusive access to assets for its owners.

Blockchain = Cryptocurrency?

The potential of blockchain has been hugely overshadowed by the cryptocurrency hype whereas cryptocurrencies are a single use case of blockchain out of a humongously diverse array of usages. Since the blockchain technology is still largely a privileged domain of digital tech geeks and crypto enthusiasts, it remains a phenomenon far from being understood by many.

However, let us look at the practical applications of blockchain that go beyond cryptocurrencies.

Blockchain Use Cases

Firstly, it is an instrument for ownership. Blockchain grants access to property through Internet of things and technologies built on top of blockchain such as smart contract, private keys and tokenisation of assets. The owner gets exclusive rights for property backed up with privacy none of which can be claimed by any third party.

Different companies have already released their tokenisation service and there are numerous cases of how real estate has been tokenised. One of the best known is a block of luxury condos in Manhattan that was tokenised on the Ethereum platform in November 2018. The property was then appraised at $30 million.

Secondly, decentralisation, which underpins blockchains, though not always they remain truly decentralised, is an element that strengthens trust through trustlessness. Blockchains are operated by many node owners with equal authority for running validity checks on transactions and confirming them. Each node has a copy of all past history of the blockchain and the right to validate transactions.

Thirdly, being accessible from anywhere in the world the data stored on a blockchain allows everyone not to depend on local laws. The jurisdiction-free nature of cryptocurrencies is an example clearly showing how this can be used to end users’ benefit. With cryptocurrencies, this results in much faster international and even intercontinental transactions, which can take from 1 to 3 business days when wired through a bank.

Fourthly, blockchain provides protection from manipulation with information. What has been written into a blockchain becomes immutable and irreversible. Thus, transactions executed on a blockchain cannot be denied or cancelled. 

To see from a more practical angle how blockchain can be applied let us view several use cases. One of them is medical records of patients. Using blockchain hospitals can store health records of their patients and protect them from any hacks which is paramountly important with health-related documentation including doctor-patient privacy which gets broken in the case of unsanctioned access to them.

The use of smart contracts has found its application in logistic service. For instance, IBM has formed a whole subsection of its enterprise that is charged with the task of exploring business applications of blockchain and implementing it into a range of its branches. Thus, IBM has created a blockchain-based supply chain for the tracking of food items that has already been joined by Unilever, Walmart and Nestle.

And the Maersk-IBM joined shipping platform called TradeLens built with the help of blockchain added over 90 clients globally in 2018. In 2018, there were over 150 million shipment events registered on blockchain in TradeLens. And what is no less important the project has already designed a smart-contract service for customs that would minimise time and effort spent on cross-border procedures, reduce the number of middlemen and, as a result, save costs.

Another important financial solution that has been achieved through blockchain is stable coins. Stable coins are pegged to fiat currencies, which are normally USD and EUR. We already have quite many stable coins: True USD, USDT, A-EUR and others. The benefit of stable coins has been prominent for e-commerce. Prior to the emergence of stable coins, the small retailers that accepted cryptocurrency payments had a real headache due to the high volatility of the rates of cryptocurrencies that were not pegged to any underlying assets.

Stable coins, however, have proved a viable solution to this problem because they remain cryptofinancial assets with all the benefits that come along with that and have a stable rate, which relieves the retailers of the volatility problems with cryptocurrencies. It means they still can enjoy the benefits of cryptocurrencies selling their goods for them and not worry about their revenues falling sharply in value due to market swings.

The full potential of blockchain has not yet been uncovered and there are still very many opportunities for its mass adoption, however, the benefits it offers are undeniable and apparent. The blockchain has already proved to offer security of data, fast peer-to-peer money transfers, minimisation of middlemen in trade and logistics and new types of digital assets. We shall only see what it brings in the next few years.

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