In January of 2009, the first blockchain database was created to devise the highly attractive and widely controversial cryptocurrency bitcoin, thus introducing us to the future of money, a revolution of payment, and what many refer to as “digital gold“. But what, exactly, is it – and how does it work?
Most people have heard the word thrown around but have little understanding of what it is beyond a seemingly magical form of internet currency. And beyond that, even fewer people understand that it’s blockchain technology which enables bitcoin to exist in the first place.
At the core, the mechanics of blockchain technology for bitcoins are set up so that the database is decentralized and autonomous, allowing transactions with bitcoins to not require management from a central authority such as a bank. In all of our transactions, we rely on and trust centralized institutions to keep accurate records of our assets while simultaneously keeping them safe. We might think that if we have currencies and payment security networks in place, why innovate? Particularly with so much focus on other areas of digital transformation.
Consider the fact that only 11% of US dollars exists in physical bills. We trust the banks to keep accurate digital records of our accounts and further rely on the government to back up our currencies and fight inflation. One key blockchain innovation was to offer distributed ledger technology. Information and data becomes totally transparent as every computer in the network has access to the same database, allowing users to take back control of their money and transact in a new way. Add to this advanced cryptography, a limited exchange of personal information, and decentralization, and we are looking at creating a customer experience program that is a secure and expedient way to exchange money while cutting out the middleman. Understanding what bitcoin actually is for a consumer can seem overwhelming, but like with most new technologies, sometimes the best way to understand is to simply try it.
In the less than 10 years since its inception, blockchain technology has matured and gotten a lot of people thinking about its other potential applications as a secure, multi-party computation service to improve business processes. In a survey conducted by the Economist Intelligence Unit, 10% of respondents said that blockchain databases as a technology trend would have one of the biggest impacts on businesses in 2020. With many businesses focusing their efforts on different areas of digital transformation, this revelation is profound.
Virtually anyone can benefit from this innovation. Let’s explore the different ways in which blockchain technology can be applied to a vast landscape of businesses and industries.
Insurance companies establish their entire business model on trust and risk management. Blockchain technology can now be used to verify data in insurance contracts, such as the insured person’s identity, as well as a detailed and irrefutable account of their history.
Smart contracts powered by blockchain technology, “help you exchange money…or anything of value in a transparent, conflict-free way while avoiding the services of a middleman”. Imagine allowing customers and insurers to manage claims in a transparent and ironclad way – where processing can happen nearly instantaneously Now that’s a service best practice that streamlines the customer experience. Claims can be recorded on a blockchain and vetted by the network, virtually eradicating the potential for fraud and ensuring only valid claims are paid.
When we give to charity organizations, a common concern is knowing whether the money is actually going to the right place. But with a smart contract, donors can see precisely how the organization allocates funds. Imagine having total transparency and knowing without a doubt what percentage of your donation goes to the actual cause versus being utilized for other expenditures. Incredibly, this technology is already in place and giving an unparalleled customer experience. The BitGive Foundation, for example, has established a way for donors to trace their support on a public platform and in real-time, providing full visibility into the process of fundraising for their charitable causes.
Banking and Payments Industry
Much like how the internet disrupted media, blockchain technology has the potential to entirely disrupt banking. In a world where 2 billion people don’t have access to central banks, blockchain technology and digital currency could have a profound impact. Residents in developing world countries with limited access to banking institutions would have the ability to create an account, and exchange money for goods on an international scale. This is all while being able to trust that their funds are secure and easily accessed anywhere, anytime.
Bitcoin also allows people to send funds across borders almost instantly. By utilizing decentralized servers to manage exchanges, it cuts out mediators that charge exorbitant fees – especially to poorer countries (1.8 billion dollars per year in the African nations). This money could dramatically transform individual lives and local economies, and banks are eager to implement the necessary digital transformation. IBM predicts that 15% of banks will be leveraging blockchain technology by end of 2017.
Hospitals are often challenged with a lack of secure data storage platforms for hosting information such as medical records. As a whole, the healthcare industry is riddled with legacy systems and antiquated means of security, and it is ripe for disruption from blockchain technology to improve the customer experience.
Companies such as Gem are allowing healthcare companies to build on their “collective intelligence” and create a shared data infrastructure. “Blockchain technology addresses the trade-off between personalized care and operational costs by connecting the ecosystem to universal infrastructure. Shared infrastructure allows us to create global standards without compromising privacy and security,” a digital transformation that benefits both healthcare companies and patients.
Fit for your Enterprise
When it comes to adopting blockchain technology, many have applied a “wait and see” approach as business transformation solutions in general are a steepening trajectory. There are a number of common concerns amongst enterprises, and many are worried that the technology is not yet mature enough to meet requirements surrounding performance, confidentiality, governance, and processing power. Microsoft is looking to resolve that: “Our mission is to help companies thrive in this new era of secure multi-party computation by delivering open, scalable platforms and services that any company—from ledger startups to retailers to health providers to global banks—can use to improve shared business processes.”
Earlier this year, Microsoft made a big investment in the technology when they announced the launch of the Coco Framework. Coco, whose name stands for Confidential Consortium, will be ready and made open source by 2018.
Currently compatible with Ethereum (an open-source, blockchain-based distributed computing platform), it currently makes transactions up to 100 times faster. The first wave of adopters committed to integrating these enterprise ledgers includes J.P. Morgan Chase, Intel, and R3.
In conclusion, while the future of blockchain technology is rapidly evolving, it is still in an exploratory phase. To date, we remain uncertain of how it can be vastly utilized in the marketplace. But wider acceptance of the technology presents exciting opportunities, and many industry leaders are looking to implement blockchain technology if they haven’t already. The process of adoption may be slow and steady – but many agree that it must begin. Overcoming our hesitation and tracking breakthroughs by industry leaders will ultimately help determine the success or failure of blockchain technology in the global market.