Even if you are not up-to-date on the latest trends and technologies that are changing the world, you probably came across words like “Bitcoin”, “Cryptocurrency” or “Blockchain”. There are many strong opinions floating around on whether these are just digital world Ponzi-Schemes or game-changing technologies.
What is “Cryptocurrency”?
In simple terms, Cryptocurrency is a digital currency that is created and managed through computer programming rather than being printed by a government or agency.
The first breakthrough came in late 2008, when Satoshi Nakamoto released a paper on “Peer-to-Peer Electronic Cash System” and announced “Bitcoin”, the first cryptocurrency. Bitcoin is the most popular cryptocurrency. Litecoin, Ripple, Stellar and Etherium are few other cryptocurrencies that have gained popularity over the last few years.
Where does “Blockchain” come in?
The technology behind bitcoin and other cryptocurrencies is “Blockchain”. Blockchain is a digital platform/medium for storing value and compared to just information.
As such, blockchain technology is complex, but the underlying concept is quite simple. It is a public ledger or a distributed database running on millions of devices spread across the globe. It is open to anyone with the key here being, not only can information be stored but anything of “value” can be stored on the database. Money, contracts, music, intellectual property rights or anything that has an intrinsic value can be stored and move around securely.
Unlike traditional solutions, where an intermediary like a bank, government or a company establishes trust and security, with blockchain the trust is established through collaboration with millions of users across the globe and code that cannot be hacked. This makes the entire system difficult to manipulate and ensures integrity.
Until now, blockchain has made significant strides in the financial industry alone. The technology aims to reduce cost and complexity of financial transactions through a decentralized system that is faster, more secure and completely transparent.
As the technology matures and gains traction, other industries have started adopting and developing applications specific to their industry. The stakes are even bigger for industries such as supply chain, music and manufacturing where certain use cases make half the eco-system unnecessary.
Impact on Businesses/Adoption
Some of the well-known brands and financial institutions have adopted the technology to various extents. Major brands like Microsoft, Dell, and Expedia have started accepting bitcoin for purchases over their e-commerce platforms.
Payment solution providers, such as Square and Stripe, are also offering solutions that accept bitcoins either directly or by partnering with third-party providers such as CryptoPay.
MoneyGram has recently announced the use of “Ripple” another emerging cryptocurrency for international transfers.
Blockchain is expected to disrupt the music industry in a way that is sending music labels and global distribution firms into a frenzy.
Imogen Heap, a Grammy-winning artist started “Mycelia”, that develops songs with smart contracts built in. Smart contracts enable the automatic distribution of payments to all involved in making the song including the artist, musicians, recording studios or anyone else as soon as a purchase is made by a user. There are no licensing terms, contracts, exchange of money from user to distributer to artist. Everything happens instantaneously and everyone gets paid without any delay.
The use of blockchain technology to create and distribute songs will not only ease payment and copyright issues but could eliminate piracy as well.
Transportation & Logistics
IBM’s “Blockchain for Supply Chain” has already shown the advantages of using blockchain technology. The platform provides companies with greater transparency, visibility and efficiency across the entire supply chain.
“One truth across the supply chain network
Traceability and transparency are some of the most important foundations of logistics. IBM Blockchain optimizes business transactions and trading relationships with robustly secure business networks on blockchain—both at scale and globally.
Blockchain offers a shared ledger that is updated and validated in real time with each network participant. It enables equal visibility of activities and reveals where an asset is at any point in time, who owns it and what condition it’s in.” – IBM
Walmart’s “Food Safety Solution” is a clear example of how this technology is here to stay and transform the business world.
Blockchain technology has penetrated areas that are quite niche as well and probably un-heard of. One such example is the “Brooklyn Microgrid”. The company aims to create a peer to peer energy trading be system built on block chain. The platform enables solar energy producers, be they home-based or industrial scale, to sell excess-electricity thereby minimizing the loss of energy and providing energy at low costs in the neighboring areas.
Blockchain technology still has a long way to go before it becomes mainstream. The adoption levels are quite low despite some big names in the ecosystem. As companies continue to develop and test new applications, confidence in the technology increases and further drives adoption.
Businesses will soon start to look beyond cryptocurrencies and focus on the underlying technology, the “Blockchain”. Irrespective of how we look at it today, the blockchain powered platforms will take over and the traditional systems will fade away. It’s only a matter of “How Soon”.
Food for thought: In the age of digital transformation where cloud presence, big data, and robotics are the buzz words and the focus of every business is on “Cloud Transformation”, blockchain might take over behind the scenes and re-write the digital landscape completely.
~ Karthik Pannala, Associate