Bitcoin and other similar projects have become an inherent part of our lives, to the extent that the bitcoin exchange rate is monitored almost as closely as that of the major currencies. Some states even declare their intention to introduce a cryptocurrency, such as the Venezuelan Petro based on that nation’s oil reserves. However, Blockchain, the key technology behind Bitcoin and other similar cryptocurrencies, gets noticeably less attention, which is an oversight: after all, it has countless practical applications that are just as important as cryptocurrencies.
Safety and Resilience
Prior to the Blockchain era, information was digitally stored either in some scattered files or in centralized databases (DB). The former is cheap and simple, but it is the latter approach that makes it easier to find the required information within a mass of data.
Traditionally, all sorts of sensitive data, first and foremost corporate and banking data, was accumulated and used as part of a database, since centralization makes it much easier to monitor and manage information. But there is a problem: it makes it easier to hack and compromise data.
On multiple occasions in recent years, we have learned about the leaks of a wide variety of information: medical (from the servers of hospitals and insurance companies), financial (from banks and stock exchanges), and simply private (from cloud storage and from the private pages of social networks). By intercepting control over the centralized databases, intruders can exploit our data for financial gain .
At the same time, any rank and file citizen who simply wants to open a bank account, in order to have legitimate access to part of the bank’s DB relating to their transactions, is obliged to undergo a number of peremptory checks and in addition make a deposit into this account. While the world economy remained essentially centralized, this did not bother anyone. However, today, in a post-industrial society with distributed patterns of employment and income, the attitude toward classical databases has completely changed.
And here, Blockchain could not have come at a better time. A distributed, cryptographically-secure transaction ledger is resistant to falsification attempts: it is impossible to replace any entries in it without gaining control over 50% +1 of miners, or the people with computers that validate transactions. The blockchain is widely accessible to general users; it has an extremely gentle learning curve: all one has to do is download and install its client. Finally, the Blockchain’s decentralized nature guarantees the accessibility of information stored in it in case of an emergency or deliberate shutdown of a significant part of the computers, on which this distributed ledger is deployed.
The principle of “security through obscurity” is customary for those operating in financial and banking spheres. The less outsiders know about the status of a given account or about the transactions it is engaged in, the more peace of mind its owner has. However, there is no such thing as absolute security through obscurity. With the Internet now all pervasive in every aspect of private, public and business life, the very idea that some data can even theoretically be hidden from an immodest eye has faded.
But if data leaks cannot be prevented, could it be easier, instead, to conduct business as openly as possible, verifying one’s transactions with the help of Blockchain? Here one’s privacy is protected by the distributed ledger customer anonymity, whereas all transactions between the customers are absolutely open and verified by a chain of transactions that are protected from tampering and falsification.
Openness is the Best Defense
It is this feature of the Blockchain that renders unnecessary a large layer of intermediaries who not only confirm and record money transfers from one account to another today but are de facto controllers of financial flows. A bank or a stock exchange can be forced, for instance, to execute some sanctions announced by one state to another. A distributed ledger, on the other hand, cannot be forced to do so, unless you completely block access to the Internet for the country under sanctions.
One hundred percent credibility of the voting process is one of democracy’s cornerstones. The count and verification of the voting results take a long time, while the reliability of this process often gives rise to criticism, especially when voting is conducted through digital tools rather than voting papers. While guaranteeing the preservation of each voter’s anonymity, the Blockchain simultaneously generates a transparent register of votes, extremely resistant to falsification attempts and easily verifiable. Many experts suggest this particular method for organizing the forthcoming midterm elections to the US Congress in November.
‘Smart’ contracts are one of the most significant areas of Blockchain applications. The distributed ledger has the capacity to store objective records on the history of interaction between suppliers of goods and services and their customers. Cryptographically-signed reviews of a particular company, which are immune to subsequent falsification, will force businesses to provide communications in a completely different way.
According to the World Bank statistics, 2 billion adult residents around the world are unbanked, which means they do not have access to traditional financial services. This is because the provision of such services is based on traditional technologies and requires a potential client to have at least an identity card and the opportunity to reach a bank branch. The blockchain is an excellent means of combating both banking inequality, and the inability to effectively help the less fortunate through regular money transfers. Funds sent by philanthropists to countries wracked by poverty, wars, or natural disasters often get stolen or spent without proper supervision. To counter this, a large UK bank, Barclays, has made a decision to use Bitcoin as an alternative payment solution for charity.
Real World Examples
In 2017 fintech startup Humaniq joined Rised, created by Barclays. The Humaniq platform intends to provide financial and educational services to these unbanked people around the world and Africa in particular: the continent suffering most from wars and natural disasters. Support for the economic activities of the residents of remote and poverty-stricken areas will be ensured by providing them access to a peer-to-peer financial platform implementing the Ethereum Blockchain for payments and smart contracts, as well as biometric technologies for paperless participant identification.
The unbanked around the world will be able to connect to this platform using the Humaniq. The Humaniq smartphone App application that is already available in 22 African countries and has more than 450 000 users. Based on the Hybrid Blockchain, this application allows one to not only exchange cryptocurrency payments and certify smart contracts directly from one’s mobile, but also to communicate in chats and verify the identities of project participants using features available on any Android phone.
In other developments, IBM, along with some major food producers and retail networks launched the development of a Blockchain solution that would make it possible to monitor farm produce all the way from production to the counter. By scanning the QR code on a package through a special application, consumers will be able to see the conditions in which a product was made, when and how it was processed, in what way and in what conditions it was delivered to the store. The latter is especially important for chilled fish, for example, a distributed ledger with check marks from suppliers and receivers will help make sure that at no stage of delivery it was frozen.
Rather yes than no. The future of the Blockchain as a basis of a new distributed economy is not expected to be entirely trouble-free, of course. For example, to reliably exclude the very possibility of an attack on the distributed ledger, its wide distribution is essential, and when the network is in its infancy, it is vulnerable to attacks aiming at the interception of control (those 50% +1 clients mentioned earlier).
However, while traditional financial instruments will clearly continue to coexist with cryptocurrencies for a long time, a reasonable alternative to Blockchain simply does not exist. Too many things around us are becoming ‘smart’ and communications are getting too decentralized to justify data storage in classic DB management systems any longer. Which means that those who will introduce first and master Blockchain-based solutions in the most diverse areas of the economy, finance and life, in general, will have a huge advantage.