Blockchain is a distributed ledger technology that makes the existence of several cryptocurrencies possible. It acts as a decentralized system for recording and documenting transactions that involve cryptocurrencies. Each transaction is added to the blockchain ledger. Each ledger item is termed as a “block,” which is securely chained through cryptography. Cryptocurrencies are growing in popularity every day, and blockchain is often associated with cryptocurrencies. However, the uses of blockchain technology go well beyond cryptocurrencies. There are several industries that blockchain can revolutionize, including government, finance, and real estate. In this piece, we will be discussing these alternative applications of blockchain technologies.
Traditional methods of transferring money (like banking systems) across borders are both cost-inefficient and extremely slow. This is because more than more currency is involved during international transfers, which requires the cooperation of several banks in different locations before anyone can transfer their money. The typical cost of such an international transfer can be as high as 20% of the deposited amount. With blockchain technology, people can transfer their money with much fewer transfer fees at a greater speed. Since transactions are protected through a protected ledger, the transfer can be done securely. The use of blockchain technology for facilitating international transfer is also ideal for people without bank accounts (unbanked) since the technology does not rely on a centralized banking system. The low cost of transferring money will save these people from paying the high transaction fee. A recent study highlighted that the migrant workers in the US are still paying up to 6-9% transaction fees when transferring money abroad. With the use of blockchain technology, these unwarranted costs can be cut down.
However, the mainstream adoption of blockchain for international payments will require a regulatory framework in several countries. These efforts are being made slowly, though. In 2018, Banco Santander, a financial services company based in Spain, launched the world’s first blockchain international transfer service called Santander One Pay FX. Santander customers can transfer money across Spain, the United Kingdom, Brazil, Poland, Chile, and Portugal.
Smart contracts are self-executing contracts between buyer and seller written into lines of code. The code and agreements between the two parties exist across a secure blockchain network. These smart contracts make transactions irreversible, traceable, and transparent. There is no central authority or enforcement mechanism system for these contracts. These are highly powerful applications of blockchain technology. Provided all conditions for smart contracts are met, they are self-executing and self-enforcing. These contracts provide an alternative to traditional law contracts, which are time-taking and expensive.
Smart contracts can be used in any domain where the traditional contract law can be applied. Even Nick Szabo, an American scientist who proposed smart contracts, envisaged them as computerized transaction protocols that enforce the contract terms. One of the best examples of the application of smart contracts is insurance contracts between customers and insurance providers. Customers and insurers can manage claims in a transparent and secure manner through blockchain. Blockchain can record and validate those claims and at the same time eliminate all the duplicate or invalide claims. OpenIDL, an open blockchain network built on the IBM platform with the American Association of Insurance services, automates insurance regulatory reporting, provides new insights to insurers and improves regulators’ timeliness, accuracy, and value.
Supply Chain Management
One of the prominent uses of blockchain technology outside of cryptocurrency is supply chain management. An efficient, well-managed supply chain is the key to success for many businesses. The immutable blockchain ledger makes it apt for tasks like real-time tracking of goods throughout the supply chain. Several industries are already using blockchain technology for managing their supply chains. They can trace their products within a matter of seconds now.
With the use of blockchain, customers will also be able to verify the authenticity of their product – they will know where the product was made, which ingredients were used, and who really manufactured the product. Today’s modern customer is interested in knowing more about the products they use – for example, they should be eco-friendly, sourced from a local farm, or should not employ child labor, etc. Walmart is one of the first retailers to understand the potential of blockchain technology and is employing it to improve its food supply chains. Working with IBM, Walmart is using blockchain for a food safety solution. In September 2019, it mandated that all the suppliers of green leafy vegetables have to upload their data on the blockchain. This makes the process more transparent, traceable, and digital. Walmart accepted that the use of blockchain reduced the tracing time from 7 days to 2.2 seconds.
The theft of digital identity is one of the biggest problems individuals face today. Even though you are extra cautious on the internet, there is still a chance that nefarious actors can steal your sensitive private information. Blockchain has tremendous potential to revert this scenario and provide users with a safe way to manage their online identities. Being an immutable ledger that stores information that can be altered, blockchain offers a much greater level of security for online identities. Information stored on blockchain is secured through cryptography and, therefore, cannot be hacked. Individuals can save their personal information directly on the blockchain on the internet, eliminating third parties’ role that saves sensitive user information.
Blockstack, founded in 2013 by Ryan Shea and Muneeb Ali, uses blockchain technology to solve security problems on the internet. Eliminating the role of intermediaries and third parties, people can use the Blockstack browser to run decentralized applications with their information encrypted securely on their personal devices. Blockstack aims to provide people full ownership of their digital footprint.
Besides the above-highlighted areas, there are several other applications of blockchain technology, including healthcare, record management, education, media, and so on. Blockchain is a unique technology with characteristics that can change the way several businesses and industries function. New and exciting blockchain applications are discovered every day, and it will be interesting to see what comes next.
At Unbanked, we are patrons of blockchain technology and immensely believe in its potential. To learn more about the applications of blockchain technology, visit our blog.