“I am usually busy trying to decentralize defences and after digging deeper into Blockchain and decentralized systems, I’m excited to join SIRIN LABS as an ambassador to make Blockchain more friendly with their upcoming operating system for smartphones!”
The recent words of none other than Lionel Messi. Whether the Argentinean and FC Barcelona footballing legend understands the deepest intricacies of blockchain remains to be seen. But his promotional post on behalf of a promising blockchain company shows just how far distributed ledger technology has come over the last few years, in terms of global awareness. And it suggests that blockchain is going to play a hugely influential role in the world during the years to come.
On the surface, one might be tempted to ask what all the fuss is about when it comes to blockchain. After all, when we boil all the hype down to the technology’s decidedly unglamorous core function – that of being an improved, distributed ledger – the revolution doesn’t soundparticularly exciting. But it’s the ability of this ledger to provide an unfalsifiable, singular version of the truth that is now enabling a multitude of processes to become faster, safer, more accurate and more efficient. And with blockchain crucially eliminating the need for central intermediaries, it will fundamentally change the traditional models and infrastructure upon which industries, governments and even individuals have functioned for decades, if not centuries.
To date, it’s been the cryptocurrencies that have stolen most of the headlines as far as blockchain use cases are concerned. And many would say “rightfully so!” – after all, it’s not every day that a new tradable asset generates four digits of annual percentage gains, as Bitcoin managed in 2017. But over the next few years, it’s the distributed ledger technology itself that will end up transforming much of the world’s economic, political and cultural landscape. It seems almost every day that another industry is gushing over what blockchain can unleash for its future. Here we take a look at a few specific examples of where the technology is expected to be particularly instrumental…
We have already discussed the potential for blockchain to transform the financial services industry, mainly within sub-sectors such as trade finance, payments, clearing and settlements, and compliance and regulation. It also looks set to cause major upheaval in the insurance world. Many of the industry’s biggest names are testing potential blockchain applications, including Allianz, AIA and Swiss Re. and are likely to emerge with blockchain-based solutions for both improvements in internal processes which should generate efficiency gains, cost reductions and top-line revenue growth; as well as more general industry use cases that could benefit sectors right across the industry’s value chain.
In this regard, there is much anticipation over the introduction of smart contracts– self-executing protocols on the blockchain that all parties involved in an insurance contract can trust. Claims data, in particular, will be drastically improved, especially given the multitude of inefficiencies currently pervading insurance organisations, agents and third parties (for example, repair shops) in this area, as well as the fact that manual data entry processing methods remain widespread, and are thus subject to human error. The use of blockchain, in contrast, could automate the claims payments process by filing and adjudicating claims based on secure information that is recorded using smart contracts. As recently observed by Deloitte, smart contracts “could provide customers and insurers with the means to manage claims in a transparent, responsive and irrefutable manner”. As such, the smart contract would lower costs, increase payment speeds and provide a new and innovative business model for the insurance industry.
Given that blockchain enables a decentralized and immutable record of transactions past and present, businesses can use this technology to track its goods, assets and/or services all the way through the supply chain – from production to receipt by the end user. And many would say this has been badly needed – supply chains today are notoriously labyrinthine in nature, such that it often takes days for a payment to be completed between, say, the manufacturer and the supplier, or between the merchant and the customer.
As asserted by Deloitte, implementing blockchain solutions “can help participants to record price, date, location, quality, certification, and other relevant information to effectively manage the supply chain. The availability of this information within blockchain can increase traceability of material supply chain, lower losses from counterfeit and grey market, improve visibility and compliance over outsourced contract manufacturing, and potentially enhance an organization’s position as a leader in responsible manufacturing”.
Time delays and human mistakes can be greatly reduced, as can waste and emissions which can significantly influence the environmental impact associated with industrial production. IBM, for instance, is collaborating with key food producers and distributors including Nestle and Walmart to reduce contamination in the global food supply chain. This is an important development, especially given that a World Health Organisation reportfound that every year around the world, one-in-10 people fall ill due to contaminated food, and around 420,000 die as a result. With nobody overseeing the entire supply, food safety can be currently threatened at many stages of the process.
But with blockchain providing immutable, time-stamped records along the entire ecosystem, identifying notorious points of contamination along the supply chain then becomes a much easier task. Forbes recently acknowledgedthe vast potential of the IBM blockchain to solve such issues, “All participants in the global food supply chain – from the growers to suppliers and processors and right through distributors to retailers, regulators and consumers – can through this latest IBM initiative gain “permissioned access” to known and trusted information regarding the origin and state of food for their transactions. In so doing it enables food providers and other members of the ecosystem to use a blockchain network to trace contaminated product to its source in a short amount of time and stem the spread of illnesses.”
Given the immutability and permanence of the blockchain ledger, there is much anticipation over the technology’s application in solving corruption. Take land registry as an example. A lack of security surrounding government registry systems has led to numerous cases of data corruption. Criminals are able to fake title ownership, often simply by using editing software to stipulate transfer of property ownership in their favour, and at negligible expense. Indeed, title insurance itself is a $20 billion industry, and some estimates suggest that it is costing around $1 billion to combat title fraud.
What’s more, this is a serious global problem. It is believed that 70% of those who have land have a somewhat tenuous title to their holdings. Honduras has been among the most badly affected, with USAid Land Tenure estimating that 80% of privately held Honduran land is untitled or improperly titled, while only 14% of citizens legally occupy properties, with less than a third of those citizens being officially registered. Such inadequacies have even caused violent conflict and widespread fraud, with cases of the registry system databases being hacked into and bureaucrats being able to secure the most luxurious properties.
Indeed, one of the most promising early applications of blockchain was the collaboration between the Honduran government and start-up company Factom, which aimed to put Honduran land titles on the blockchain. Although this project seems to have stalled, other countries such as the Republic of Georgia – which became the first government to record land titles on the blockchain– as well as Sweden and India, are now in a testing phase to expand the use of blockchain within their national property records.
Many policymakers are also hoping that blockchain can solve some of the world’s most complex humanitarian issues that persist today. In early-September, a blockchain taskforce from within the European Parliament expressed interest in using blockchain to provide refugees with digital identities. According to recent EU budget publications relating to the EU pilot project, Horizontal Task Force on Distributed Ledger Technology, lawmakers are considering just such a proposal, “One specific use case that ought to be explored is the potential of [distributed ledger tech] based solutions for the management of the situation of refugees. Many refugees, and people in refugee-like situations, are unable to prove their identity or access essential services.” Ostensibly, such an initiative would help refugees to gain a formal ID, which in turn would be of benefit when opening a bank account, accessing healthcare and seeking legal representation.
The news follows reports earlier this year that the United Nations is using Ethereum to provide funds to refugees from the Syrian War. Since then, it is believed that 7 UN groups are exploring how blockchain could solve problems relating to identity and micropayments.
Indeed, the Finnish government has already gone one better. In conjunction with a company called MONI, Helsinki is providing prepaid Mastercard debit cards to refugees who do not have bank accounts. Each card contains a unique identifier stored on the blockchain, which means there is no need for a third party required for identity verification purposes. The card also functions as a bank account by having the ability to receive direct deposits from users’ employers; and the account’s private keys can only be accessed by the cardholder, which thus allows identification to be easily and securely carried out. With blockchain storing all transactions made by each cardholder, therefore, local immigration services can also easily monitor cardholders and expenditures.
Blockchain could trigger a revolution in the way voting is conducted, not only on a political party level, but also when it comes to company shareholder meetings. The current voting process for political elections in most countries remains decidedly outdated. Travelling to a polling station to mark your vote on a piece of paper in a polling booth yields a number of problems, including long waiting times, hacking vulnerability, tallying errors and corruption. Blockchain-based voting systems from the comfort of personal devices, however, can completely change this process into a wholly secure, tamper-proof experience. Using blockchain for voting has been among the longest-running goals of the technology’s proponents, with Canadian computer scientists aiming as far back as 2012to use it “as a form of “carbon dating” for digital information – something that would make electronic voting more secure”.
Today, companies such as Follow My Vote are creating DLT-based voting systems that uses a token to represent a voter’s choice, and which is then deposited into the candidate’s ‘wallet’ as a way to permanently record the vote on the blockchain. BitCongress is another company aiming to ensure that blockchain secures an unchangeable vote for each person. As its website states, “BitCongress allows anyone to write the laws of the world using a simple app. This means anyone can now write a law, post this law to the platform for anyone to see & vote on. Votes are logged into the Bitcoin Blockchain forever, so no vote hacking can ever occur”.
We have discussed five of blockchain’s most exciting use cases. We could easily discuss many more, including art,prediction markets, the diamond industry, RegTech and healthcare. While these remain very much in the early stages of the technology’s development, we are starting to get to a point where ‘potential’ is starting to morph in into demonstrable, visible success.
But there are limitations and challenges associated with advancing blockchain. One of the most pertinent is its sheer complexity. Not only is it still likely that the average person on the street has still not even heard of the term ‘blockchain’, but even out of those who have some familiarity, frighteningly few truly understand how it works. With a whole swathe of new nomenclature that is accompanying the ushering in of the technology, moreover, it may take some time for users to truly get to grips with blockchain. And then there’s the computational costs of running a protocol like Bitcoin, which we have previously discussed. Recent estimates suggest Bitcoin mining consumes more electricity per year than Ireland!
Nevertheless, with the sheer number of applications and use cases that blockchain is now evidently influencing, it seems that a new paradigm awaits the world.
Data Driven Investor
Data Driven Investor (DDI) brings you various news and op-ed pieces in the areas of technologies, finance, and society. We are dedicated to relentlessly covering tech topics, their anomalies and controversies, and reviewing all things fascinating and worth knowing. DDI has only one mission: see what is coming, and do what is important – “NOW”.
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About the DDI Team
Dr. Justin S P Chan has a passion for clarity and synergy - seeing through the complexity of the intersecting spheres of technology, finance, innovation and social dynamics, to enable game-changing collaborations between entrepreneurs and innovative opportunities. Combining the vision of a true inventor and entrepreneur with his data-driven, evidence-based approach to investment, Justin also co-founded OCIM and serves as Chief Investment Officer for its fund management platform. Within OCIM, He co-manages OC Horizon Fintech, a transformational hedge fund, where he blends real applications, expertise and future-awareness into truly exceptional investment performance. Justin gains inspiration for these projects from his global network of contacts in investment and fintech communities, where he stays on the pulse of fast-moving conversations and trends affecting global markets and emerging technologies.
John DeCleene is a fund manager for OCIM’s fintech fund, and currently progressing towards becoming a CFA charter holder. He loves to travel for business and pleasure, having visited 38 countries (including North Korea); he represents the new breed of global citizen for the 21st century. Whilst having spent a lot of his life in Asia, John DeCleene has lived and studied all over the world - including spells in Hong Kong, Mexico, The U.S. and China. He graduated with a BA in Political Science from Tulane University in 2016.
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