Blockchain: Current Applications, and Future Potential
Throughout history, several innovations have revolutionized how people live, communicate, and do business. Examples include the mass-scale production of the automobile ala Henry Ford in the 1920s, the widespread use of the personal computer in the early 1990s, and the broad connectivity of these computers to the internet in the late 1990s and early 2000s. Recently, another innovation stands to dramatically transform several aspects of the economy: blockchain technology. This is because the application of blockchain technology is widespread, secure, and efficacious.
First introduced in the wake of the 2008-2009 global financial crisis, a blockchain is a medium that Bitcoin and other cryptocurrencies circulate through. When one actor wishes to transfer cryptocurrency, the amount of cryptocurrency and the encrypted identities of the sending and receiving parties are given a label, or hash, which consists of sporadically arranged numbers and letters. This information is then transmitted to a network of high-speed computers, also known as miners. Utilizing high-speed computing power, hordes of miners race to determine the algorithm which calculated the label. In a matter of minutes, the algorithm is found, resulting in the confirmation of the transaction. In the case of a cryptocurrency transaction, the blockchain rewards the computer which generated the algorithm with several coins, depending on the specific blockchain. The generation of the algorithm seals the transaction onto that blockchain, usually with a timestamp, similar to when an accountant records receiving funds onto a leger.
Many business leaders have started to apply blockchain technologies to their operations. Most notably, major players in the financial services industry began testing blockchain technologies for cross border payments, securities purchases, and identity verification from 2015 onward. Many financial companies plan to implement proprietary blockchain technology in the 2020s.
The utilization of blockchain technology is not limited to the financial services industry. Supply chain managers across many industries are starting to realize the value of blockchain, and therefore developing it for their use. When applied to supply chains, blockchain technology enables the involved parties to trace the origins of products which determines if the products are ethically sourced or not. For example, a blockchain can confirm the different parties that possessed a certain mineral, from its initial extraction to refining and placement in an electronic device, to prove that this mineral is ethically sourced.
Furthermore, travel industry startups are wising up to the benefits of blockchain. By building a blockchain-based reservation system, these companies link customers directly to hotels, airlines, or train companies, cutting out fees associated with intermediaries. Moreover, blockchain has the potential to optimize security and personal identification between travelers and passport control, which could conceivably shorten lines at airports while catching bad actors.
Already used by several industries, the potential for further adoption of blockchain technology looms large. Indeed, blockchain technology will optimize the use of the internet of things (IoT) devices within people’s homes. Since IoT devices send large amounts of data pertinent to the functionality of home appliances to remote networks, the encrypted nature of blockchain can ensure this data stays secure, and blocks hackers from compromising the devices in people’s homes. As more people implement smart IoT appliances into their homes, blockchain technology will act as an IoT immune system, cementing itself as one of humanity’s most important innovations.