Yes, indeed dear reader! I can hear this thought whizzing around in your head. Blockchain? What on earth is that? Why should it concern me? I don’t have time to bother my head with useless information…!
Well, how do you know it’s useless? And, in this day and age of faster than sound information dissemination, is any information completely useless to the man in the street? Like you and me? Especially if it concerns technology. I have heard people say that they can’t be bothered knowing about the latest developments in technology. Is that very wise, given that we live in a world that is guided, driven, made possible by technology?
Reason enough we think to give our readers a brief ‘tutorial’ on one the newest, most pathbreaking developments in the IT world: Blockchain.
Blockchain has been acknowledged as being one of the most important technological developments till date since the Internet was first established. With the introduction of blockchain, scores of industries are finding applications for blockchain, with the impact on financial services being particularly high, as is obvious with the rapid developments taking place across every facet of banking, capital markets, asset management and insurance. Blockchain has played an especially important role in establishing and popularizing Bitcoin.
According to insights from the CIO, Deutsche Bank Wealth Management, on December 2017, “Blockchains and connected cryptocurrencies are probably the inventions with the most disruptive character for the finance sector and the public since the invention of the internet. Blockchains have the potential to revolutionize industries from the bottom-up and also to create new business models…”
What is blockchain?
The term blockchain
- Describes a network platform, based on the principle of a distributed ledger
- It uses the most sophisticated cryptography to secure the ledger and the transactions on the ledger
- And relies on a consensus and mutual understanding between the various participants in the network to validate transactions before they are entered in the ledger
- The ledger is designed to be append only and cannot be amended or changed in any way by any individual participant
Which makes blockchain technology supremely relevant and appropriate for high security industries such as finance.
In short, blockchain is a powerful technology capable of doing much more than just supporting a virtual monetary system. To put it simply, blockchain is an automated ledger system that provides immutability of information, establishes transparency, and prevents control regimes.
We all deal with banks. We deal with financial services. We deal with insurance. So, if we want to understand the impact that blockchain will have on our lives, we need to understand what it does. And how it will impact us on a day to day basis. Blockchain applications are spreading across the many layers of financial services. Bitcoin cryptocurrency, a peer-to-peer network for electronic cash, was the first blockchain developed.
The range of blockchain applications (in financial services) is growing day by day – across banking, capital markets, insurance and asset management. Some blockchain solutions are:
- Trade finance
- Syndicated lending
- Credit Default Swaps
- Reinsurance – Some of the services which are already in operation and have proven to be particularly effective are:
- Reconciliation of data across multiple market participants
- Reducing duplication where businesses retain the same records
- Auditability of records for regulatory purposes or otherwise
- Authentication of the various parties and verification of transaction origination
Blockchain: More than just a financial tool
Invented back in the 80s, blockchain can change everything. Instead of building layers of external security around data, blockchain engraves cryptographic security right into the information itself, making it virtually immutable and impenetrable. This opens up many possibilities since information may be on sites that can’t be trusted totally or are loosely protected. Blockchain can offer its high security benefits to a range of industries and in many spheres of industrial and commercial activities.
Blockchain could play a vital role in medical practice and research. With regard to patient records, this technology is bound to save the medical industry millions in waste and abuse, as well as save incalculable amounts of time and data. In the pharmaceutical industry, it offers the surety of guaranteeing drug pedigrees, through the supply chain.
Once a piece of information is inserted into a blockchain, it’s almost impossible to change it.
Therefore, important records like birth, death, marriage, land records, and so on, can be
scrupulously recorded with far greater fidelity and security than ever before.
Managing supply chains requires a great deal of transactional data to be moved, shared across parties, and stored. Small errors in reproduction can create huge problems for large companies – especially on the financial side. Blockchain eliminates all of these problems and makes corporate waste and fraud a thing of the past. Blockchain is a great tool for supply chain transparency.
Protecting intellectual property is important to a whole host of companies and entrepreneurs – including small-time inventors, novelists and musicians. Blockchain will make these types of capital more secure, with a fail-safe proof of origin for a given piece of intellectual property.
The Internet of Things (IoT)
As a growing list of business tasks are automated, blockchain can report on anything that has been done in the physical world through automation. In today’s business climate, it is possible for smart products to survive while the manufacturer ceases to exist. Blockchain-based solutions offer the ideal approach here: IoT devices can suggest services that are automatically billed to their blockchain account, and they can use the currency stored in these same accounts to pay for the utility services they consume.
Blockchain can help secure educational materials and their distribution far more effectively. It can also maintain each student’s administrative data such as grades, certifications and test records.
Across the board, there needs to be transparency in government services and the functioning of their departments and agencies.
Beyond acting as the ultimate log book for everything digital, blockchain has the potential to transform the world we live in into a simpler, more equitable one. It’s a critical responsibility for a little piece of software that the man in the street has never heard of before. While the enthusiasm around the new tool is justified, it should be accepted that many of its features are still being researched…But if blockchain works out the way its creators and industry leaders think it will, we could all have in store for us a bright new age of accountability and responsibility, the likes of which few of us could have dreamt of.