As interest in Bitcoin and other cryptocurrencies has grown, attention has shifted to the blockchain, the underlying distributed ledger technology (DLT) that enables these digital currencies. Where blockchain technology is used?
At its core, blockchain technology is straightforward to grasp. Essentially, the technology exists as a shared database with entries that must be authenticated and encrypted using peer-to-peer networks.
Imagine it as a strongly encrypted and authenticated shared Google Document, where each item in the sheet is dependent on a logical relationship to all its predecessors and is agreed upon by everyone on the network.
Blockchain Use Cases in Banking & Finance
Blockchain technology allows for the safe and efficient creation of a tamper-proof ledger of sensitive activities. As a result, it is ideal for international payments and money transfers.
For example, Banco Santander introduced the world’s first blockchain-based money transfer service in April 2018. The service, known as “Santander One Pay FX,” employs Ripple’s xCurrent to allow clients to perform same-day or next-day international money transfers. Everyone in the network relies on it.
Santander has reduced the number of intermediaries typically required in these transactions by automating the entire process on the blockchain, making the process more efficient.
Santander, being a significant commercial bank, has many retail clients who would benefit from more efficient and less expensive payments, particularly in the area of international transfers. By eliminating the need for banks to manually settle transactions, blockchain technology may be utilized to reduce the cost of these payments.
Blockchain-based technologies may potentially help to enhance finance markets. According to a McKinsey analysis, blockchain systems provide financial markets with several advantages, including:
- Faster clearing and settlement
- Consolidated audit trail
- Operational improvements
Axoni has announced the development of a distributed ledger network to manage stock swap transactions, allowing both sides of an equity swap to be synced throughout their lifespan and communicate changes in real-time.
Traditional trade finance techniques have been a major source of frustration for firms since the lengthy processes frequently disrupt operations and make liquidity difficult to manage. When conveying information, such as place of origin and product characteristics, cross-border trade requires a vast number of variables, and transactions create large amounts of documentation.
Blockchain offers the potential to speed trade finance transactions and simplify cross-border processes. It makes it easier for businesses to transact with one another beyond regional or geographic borders.
Regulatory Compliance and Audit
Blockchain’s incredibly secure nature makes it beneficial for accounting and auditing since it reduces the potential of human error and maintains the integrity of the data. Furthermore, once the account records are locked in using blockchain technology, no one, not even the record owners, can change them. The trade-off here is that blockchain technology may eventually eliminate the need for auditors and so kill jobs.
Money Laundering Protection
Once again, blockchain’s inherent encryption makes it extremely useful in combatting money laundering. The underlying technology facilitates record keeping, which aids in “Know Your Customer (KYC),” the process by which a company identifies and confirms the identity of its customers.
Smart contracts are arguably the most important blockchain use for insurance. Customers and insurers may use these contracts to manage claims in a transparent and secure manner. All contracts and claims may be recorded on the blockchain and approved by the network, which eliminates illegitimate claims by rejecting multiple claims on the same accident.
For example, openIDL, a network developed in collaboration with the American Association of Insurance Services on the IBM Blockchain Platform, automates insurance regulatory reporting and streamlines compliance obligations.
P2P payment platforms like Venmo are useful, but they have limitations. Some services limit transactions depending on location. Others demand a fee to utilize them. And many are vulnerable to hackers, which is unappealing to clients who are disclosing sensitive financial information. Blockchain technology, with all of its aforementioned advantages, has the potential to remove these impediments.
Blockchain Applications in Business
Supply Chain Management
Blockchain’s immutable ledger makes it well suited to tasks such as real-time tracking of goods as they move and change hands throughout the supply chain. Using a blockchain opens up several options for companies transporting these goods. Entries on a blockchain can be used to queue up events with a supply chain — allocating goods newly arrived at a port to different shipping containers, for example. Blockchain provides a new and dynamic means of organizing tracking data and putting it to use.
Health data that’s suitable for blockchain includes general information like age, gender, and potentially basic medical history data like immunization history or vital signs. On its own, none of this information would be able to specifically identify any particular patient, which is what allows it to be stored on a shared blockchain that could be accessed by numerous individuals without undue privacy concerns.
As specialized connected medical devices become more common and increasingly linked to a person’s health record, blockchain can connect those devices with that record. Devices will be able to store the data generated on a healthcare blockchain and append it to personal medical records. A key issue currently facing connected medical devices is the siloing of the data they generate — but blockchain could be the link that bridges those silos.
The average homeowner sells his or her home every five to seven years, and the average person will move nearly 12 times during their lifetime. With such frequent movement, blockchain could certainly be of use in the real estate market. It would expedite home sales by quickly verifying finances, reduce fraud thanks to its encryption, and offer transparency throughout the entire selling and purchasing process.
Media companies have already started to adopt blockchain technology to eliminate fraud, reduce costs, and even protect Intellectual Property (IP) rights of content – like music records. According to MarketWatch, the global market for blockchain in media and entertainment is estimated to reach $1.54 billion by 2024.
One platform that has taken the spotlight in leveraging blockchain for media, is Eluvio, Inc. Formally launched in 2019, Eluvio Content Fabric uses blockchain technology to enable content producers to manage and distribute premium video to consumers and business partners without content delivery networks.
And recently, the platform has been tapped by media giant, MGM Studios for “global streaming to web, mobile, and TV everywhere audiences of ‘certain properties.’”
Blockchain technology could be used to execute energy supply transactions, but also to further provide the basis for metering, billing, and clearing processes, according to PWC. Other potential applications include documenting ownership, asset management, origin guarantees, emission allowances, and renewable energy certificates.
Blockchain Applications in Government
National, state, and local governments are responsible for maintaining individuals’ records such as birth and death dates, marital status, or property transfers. Yet managing this data can be difficult, and to this day some of these records only exist in paper form. And sometimes, citizens have to physically go to their local government offices to make changes, which is time-consuming, unnecessary, and frustrating. Blockchain technology could simplify this recordkeeping and make the data far more secure.
Proponents of blockchain tech for identity management claim that with enough information on the blockchain, people would only need to provide the bare minimum (date of birth, for example) to prove their identities.
Blockchain technology has the ability to make the voting process more easily accessible while improving security. Hackers would be no match to blockchain technology, because even if someone were to access the terminal, they wouldn’t be able to affect other nodes. Each vote would be attributed to one ID, and with the ability to create a fake ID being impossible, government officials could tally votes more efficiently and effectively.
Blockchain tech could make the cumbersome process of filing taxes, which is prone to human error, much more efficient with enough information stored on the blockchain.
Blockchain could solve the anti-trust problems charities are increasingly facing through greater transparency; the technology has the ability to show donors that NPOs are in fact using their money as intended. Furthermore, blockchain tech could help those NPOs tribute those funds more efficiently, manage their resources better, and enhance their tracking capabilities.
The majority of regulatory oversight stems from recordkeeping, but the consequences of not maintaining records is inarguably much worse. Thus, compliance is non-negotiable for companies. Blockchain can make record updates available to regulators and businesses in real time, in turn reducing time lags and allowing red flags and inconsistencies to be spotted sooner.
Blockchain Applications in Other Industries
Financial Management and Accounting
If the blockchain is truly as secure as it has shown itself to be in the last several years, then such impenetrable security would be tantalizing for customers concerned with financial fraud.
As stated earlier, the encryption that is central to blockchain makes it quite useful for record management because it prevents duplicates, fraudulent entries, and the like.
The biggest advantage for blockchain in cybersecurity is that it removes the risk of a single point of failure. Blockchain tech also provides end-to-end encryption and privacy.
The immutable nature of blockchain, and the fact that every computer on the network is continually verifying the information stored on it, makes blockchain an excellent tool for storing big data.
The same principles for big data apply to data storage, as well.
Blockchain is poised to transform practices in a number of IoT sectors, including:
- The supply chain: Tracking the location of goods as they are shipped, and ensuring that they stay within specified conditions.
- Asset tracking: Monitoring assets and machinery to record activity and output as an alternative to cloud solutions.
Despite these key areas where blockchain can be leveraged, the technology in the IoT is still dependent on startups. In fact – only 17% of respondents to Business Insider Intelligence’s survey of IoT providers think that blockchain will become a universal standard in the IoT.