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Published on: Jul 31, 2024
#Crypto 360
While Bitcoin is a famous and widespread use case of blockchain technology, it is only one of the myriad possibilities. Today, blockchain and cryptocurrencies are one of the main drivers of innovation in many industries, including finance, health, logistics, and more.
Key takeaways:
• Blockchain is a transformative technology with countless value-creating use cases.
• It is gradually transforming many fields, such as finance, logistics, and agriculture.
• Blockchain lets people who have no access to financial systems make transactions.
• India and many African countries use blockchain technology in managing land documents, supply chains, microfinance, and environmental protection.
Blockchain technology is one of the most revolutionary developments since the advent of the internet. It has been described as a computing mega-power that could reshape the world in the near future (WEF, 2015). The underlying technology supports the metaverse and has made outstanding strides across various sectors such as finance, logistics, and even agriculture.
Like how the internet revolutionised networking in 1993, blockchain started with Bitcoin in 2009. Today, blockchain and cryptocurrencies are two of the main drivers of change in many industries, and there are many discussions about them.
Some people believe blockchain technology should change the entire financial system, while others believe it can help adjust the power relations between countries and businesses. Others are more concerned with blockchain's impacts on climate change.
Now, society may consider the features blockchain can bring to humanity: an opportunity to draw equality and give people a better financial system that positively impacts society.
Blockchain is a decentralised digital record-keeping technology for transactions shared across a network. It uses distributed ledger technology to make the records transparent and unchangeable, providing security and immutability, as it is nearly impossible to alter the information within.
Image: Distributed ledger technology (DLT) system as an enabler of blockchain technology
Blockchain is powered by Distributed Ledger Technology (DLT), a system for recording and storing transaction information. Instead of a single computer, all computers store the information in the ledger to avoid a single point of failure. Plus, all these copies are updated and verified simultaneously to increase security. In contrast to other databases, which contain data in table or file forms with rows and columns, blockchain uses blocks to store data digitally.
There is a major difference between blockchain and traditional databases, as the former is decentralised. This means that instead of the control computer, it is controlled by numerous computers that form part of a peer-to-peer network. All the nodes in this network are given an equal responsibility of ensuring the accuracy of the data, which makes the information gathered from the network accurate and credible.
Bitcoin, the first cryptocurrency launched in 2009, proved that blockchain technology can be effective. Since then, the technology has been mostly associated with Bitcoin and other cryptocurrencies, such as Dogecoin and Bitcoin Cash, that use the public ledger.
In a time when misinformation spreads rapidly, it is important to manage expectations and address clarification of common misconceptions about blockchain. According to Kevin Werbach, a professor of legal studies and business ethics at Wharton, ‘Analysts and laymen have given the public the impression that blockchain is going to somehow sweep away all types of costs from various ventures like international remittances.’
However, the major work and practicalities are mainly in the implementation, coordination, and, most of all, building up trust rather than the technical aspect.
For instance, there is one who says that blockchain is “a scam” or that it has come to an end and “it’s over.” As he mentioned in his recent lecture at Wharton:
“A surprisingly large audience still doesn’t understand what’s going on [with blockchain].” He added, “The challenge is not the technology; it’s the issues involved relating to implementation, organisation and trust.”
Other experts argue that while Bitcoin is a famous and widespread use case of blockchain technology, it is only one of the myriad possibilities. According to Jules Miller, a partner of the IBM Blockchain Accelerator project, cryptocurrency is only the first example of blockchain integration on a large scale.
“We are much more excited about the underlying blockchain technology and how it relates to transactions, especially, than we are about cryptocurrencies.”
Blockchain's diverse applications are still in the testing phase.
Transparency and inclusivity are the key layers and some of the most important elements that interest people in blockchain.
On a broader scale, more than a billion people have no formal connection to the financial system since there is no viable and sustainable model for a centralised banking system. These individuals can make electronic payments using cryptocurrencies and become active participants in the global economy, creating business opportunities and income from digital taxes.
For example, PoolTogether is an application that uses blockchain to conduct a lottery and has a savings model similar to premium bonds.
Cryptocurrencies also help facilitate cross-border transactions as they do not have the restrictions placed by banks and governments. This leads to possibilities in the form of humanitarian aid, relief, or sanctions.
Blockchain is no longer only a technology used for cryptocurrencies; it is becoming more flexible and adopted every time. In the blockchain framework, smart contracts allow countless parallel large transactions to be launched and completed when certain conditions are met. These can be used in various functions, including sending or receiving payments, casting a vote, handling a supply chain management, and more.
India is among developing countries that have quickly adopted the technology. ConsenSys Ventures is a blockchain software firm that has spearheaded several popular decentralised initiatives. These initiatives implement blockchain in various sectors, such as land records, supply chain, and health, and constantly strive to introduce the concept of blockchain to the government.
A unique implementation of blockchain is being used to record and track land titles in the city of Chandigarh, the capital of India's Punjab and Haryana states. This project has been crucial in achieving the objectives set out for it in two ways.
Firstly, it is centralised; hence, all the financial services at the state level are offered from one site, and the records cannot be altered. Secondly, its ability to record property ownership enables checking on the title deeds from other records, such as records of the previous owners’ tax remittances on the properties.
Some recent advancements in the supply chain management include two Indian ports, Mumbai and Visakhapatnam, that have adopted blockchain to create unalterable records for shipments and payments to ensure that the right people receive the right amount. Some of the information in the agreement is protected by the government Know-Your-Customer (KYC) program, which helps to identify the parties of the transaction and is developed to prevent fraud and money laundering.
Another use case of blockchain technology that is also impacting is in the northeastern states of Assam and Sikkim. Blockchain technology is helping the tribal people to get the actual rights of the land that was taken into possession by the Indian government when India gained independence back in 1947.
The use of the blockchain is also slowly spreading to other sectors. IBM has also spearheaded an effort to improve agricultural yield in India by using output in ways that go beyond conventional pest and disease prediction and control.
The Indian Research Lab of IBM, one of the largest in the region, has conducted three projects with Indian agriculture producers, focusing on potatoes and sugarcane. Also, IBM's banking application for IBM is under development with the Reserve Bank of India. On the part of the Mahindra group's part, the supply chain process using blockchain is ongoing.
“Anything around the food supply chain – farm-to-grocery store – would be interesting for emerging economies,” said Jules Miller. “Insurance for farmers is another application because they face hurdles like inclement weather. With IoT sensors on their fields, they could make sure they are buying the right crop insurance.”
In Kenya’s capital, Nairobi, a practical partnership between Armonk, New York-based IBM and Twiga Foods, a B2B logistics firm for kiosks and food stalls across Africa, demonstrates the potential of change. This partnership focuses on micro-finance so that vendors can increase their stock. Given the issue of assessing the credit risk of such food vendors, IBM has designed a blockchain lending system.
To make this happen, IBM analysed the purchase histories that were made using mobile devices and applied a machine learning model to determine the credit risk. Based on the credit scores, IBM applied blockchain technology to manage the entire lending process, starting from the application and receipt of offers, agreement to the terms and conditions of the loan, and loan repayment. Details of this system are described in an IBM blog post. In the words of Miller of IBM, this application can also be useful in India.
“It is about the identity of the person who wants a loan, and if you can verify the person’s financial or personal history, or if they have a viable business that needs to be financed, you can cut out a lot of the process,” Miller said. “It is especially helpful for small businesses that don’t have a strong record of owning and operating a business, or the conventionally required credit scores.”
Lending is one of Africa's most successful application areas of blockchain technology in Africa. In Kenya’s capital, Nairobi, merchants who use the micro-finance services are provided can establish their creditworthiness as they repay their loans, hence getting a chance to access larger loans.
Another promising blockchain use case is in pharmaceuticals. The blockchain-powered sensors are useful in checking that the medications are stored properly at the appropriate temperature in special trucks. This guarantees that medicines can only be logged into the blockchain supply chain and paid for if they are delivered in time and stored properly, which will help avoid the distribution of counterfeit products.
In insurance, a company that handles workers’ compensation claims uses wearable devices to ensure that the employees are physically at the construction site. By integrating this data with the blockchain, the insurer can easily validate the information used in a claim and make proper decisions about it.
These examples show how blockchain can be applied across different industries to solve some of the modern problems and create new economic opportunities.
Blockchain is a transformative technology that can change many industries and positively impact society by accelerating services in fields such as finance, logistics, and agriculture.
The issue remains with implementing the technology. Blockchain has found application in the financial inclusion of millions of unbanked or underbanked worldwide, giving them the opportunity to make cross-border payments and digital transactions.
Many developing countries also use blockchain in land registration, supply chain management, micro-finance, and eco-programs. The emerging technology is now being applied to address the concerns and create opportunities, focusing on the developing world.
Blockchain is a distributed data storage system that maintains a record of digital transactions across its network.
Blockchain is the technology on which cryptocurrencies operate; cryptocurrencies are thus virtual currencies that run on a blockchain.
Many users tend to think that it is only good for cryptocurrencies when, in fact, it has many more use cases.
In India, blockchain applications are in land records, and supply chains, and enhancing financial inclusion is enhanced through NITI Aayog and state governments.
Yes, there are applications of blockchain in the environmental sphere, such as cleaning Nigerian rivers and monitoring the use of agriculture for sustainable development.
Blockchain enhances the supply chain by creating an immutable ledger for transactions and the movement of goods and services from the manufacturer to the consumer.
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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