Blockchain’s Killer Application?
- Peer-to-peer payments
- Smart contracts
- Immutable records
- Decentralized file storage
In October of 2008, Satoshi Nakamoto issued a challenge to trust-providing organizations with the release of his infamous whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” The notion detailing how currency can be decentralized, summarized by Nakamoto in only eight pages, gave birth to a new technology now recognized as a Blockchain. At the time, Nakamoto’s work was only really appreciated in academic circles. Blockchain was an interesting concept, but Bitcoin was hardly a convincing demonstration of what the technology could represent at scale. Amazingly though, Nakamoto’s work has since disrupted established institutions such as banks and online payment processors. Most incredibly, “cryptocurrencies” such as Bitcoin and Ethereum have exploded into a cultural phenomenon.
Despite seeing such extraordinary success in the financial sector thus far, decentralized currency is not the killer application of a Blockchain. Rather, decentralization itself is what is so innovative about Blockchains such as Bitcoin and Ethereum. Nakamoto’s work didn’t just outline a decentralized future where users have control over their own banking systems — it offers a clever method of establishing data assurance among digital strangers. Blockchain at its core is a mechanism which ensures positive collaboration among unacquainted individuals through the use of cryptography, monetary incentives, and complete transparency. A leaderless system by which users can interact with one another through simply trusting the system itself, and not each other. Without the need of a centralized mediator, often indicated by archaic centralized servers, Blockchain is offering an alternative to the entire architecture of the internet itself, not just the banking industry.
It seems that this is often the largest point of confusion among cryptocurrency / Blockchain skeptics. Those who divulge themselves in communities more focused on the technology understand firsthand the broader implications of decentralized trust systems. Ethereum, the second-largest cryptocurrency by market cap, has gained massive attention surrounding their growing catalog of start-ups and businesses aiming to bring Blockchain to new sectors with this very notion. Because of this, Ethereum as a whole has seen massive growth when compared to Bitcoin’s slowing adoption over the past two years. Forward-thinking businesses and institutions are understanding the rewards of utilizing Ethereum for their digital infrastructure, and how it generates cheaper, more secure, and more trusted protocols for their day-to-day operations. Simply put, businesses who don’t adapt to utilize Blockchain will pay a hefty premium.
So how are businesses benefiting from Blockchains today?
Peer-to-peer payments ?
Many businesses require payments from different states or countries. Traditionally, these transactions have been slow and expensive to conduct due to antiquated techniques such as wire transfers, and expensive middleman services such as PayPal. One of the clearest promises of cryptocurrencies such as Bitcoin and Ethereum thus far is that they will conduct global transactions exactly like any given domestic transaction.
This, of course, would enable businesses to transfer money across the globe within seconds instead of days. Blockchain-based cryptocurrencies open up the potential for huge advancements in globalization efforts. The result would be a future where transactions bypass potentially oppressive governments and are instead conducted by equal peers without the need of any trusted intermediaries. Given this potential, the ability for common businesses to expand to global markets will no doubt be another key area of large-scale adoption for Blockchain technologies.
Smart contracts ?
Smart contracts assist the exchange of money, property, shares, or any form of data/value in a decentralized and transparent manner. With smart contracts, parties can expect a conflict-free way to make exchanges without the need of a middleman or third party.
Simply put, smart contracts are similar to a digital vending machine. With classical contracts, a participant needs to hire a lawyer or notary which will draft a legal document for their transaction. This service requires participants to pay hefty fees and consumes a significant amount of the consumer’s time. With smart contracts, you are presented with an autonomous system which can read, write, manage, and execute whatever terms and conditions you feed into it. There is an abundance of pre-existing smart contracts, all of which contain code that is both transparent (open source) and heavily audited, as well as simple services which help you draft your own contracts. Smart contracts exist and execute on top of the Ethereum Blockchain. This ensures that they are just as secure, transparent, and immutable as any regular transaction parsed on the network.
For example: Let’s say that Miningstore.com holds a tally each Friday to decide where the team will get lunch from. A smart contract could be drafted to manage the entire democratic process. More so, smart contracts not only define the rules and penalties around this agreement in the same way that a conventional contract would, but it can also automatically enforce those outcomes. Each week, the contract could accept deposits of $10 from approved users and records their vote for where they would like to get food from. Come Friday at noon, the contract could not only declare the winner but could also transfer the money to the winning restaurant and prompt users for their order.
While this is obviously a pretty laughable application, smart contracts hold a wide array of genuinely significant potential usages which could help automate and revolutionize an abundance of popular industries. Not to mention, as more industries adopt Blockchain infrastructures, they’ll increasingly be able to communicate with one another in a trustless fashion. Think of the future of Blockchain as an ecosystem of interconnected services that can conduct transactions spanning across multiple businesses, websites, and applications without the need of centralized mediators. Smart contracts could make real estate escrow services, driver’s licenses, freelancing boards, and plenty of other fields obsolete while also interconnecting the digital world.
Immutable records ?
An essential function of private and government organizations is to maintain accurate and timely records of individuals, organizations, assets, and more. Collecting and analyzing any such data across local and national levels, or for corporations which might process global-scale data, tends to be an extraordinarily uphill battle. For instance, data such as birth/death certificates, payroll transactions, marital status, property transfers, taxes, criminal records, and more often lack a unified registry or schema format. This data has to be regularly processed and maintained by a human workforce shifting through fragmented databases with inconsistent results.
Managing and securing this vast amount of public and private information can be extremely complicated as well, and is extremely expensive. In fact, plenty of records still exist only in a paper form. These paper records require extensive efforts to append to while offering very insufficient security and immutability. Often times, if changes need to be made to them, citizens must physically appear in person to append even the slightest information. Needless to say, the systems we currently rely on across private and public industries must be substantially improved upon.
Blockchain technology could considerably simplify the management of trusted public and private information, making it easier for government agencies and private businesses to access and use critical records. Doing such, while also maintaining the security of this information to a considerably higher standard, could tremendously reduce waste. A Blockchain is at the most basic level an append-only digital ledger, one which is stored on multiple computers in a public or private network, and thus ensures more durability as well as accuracy. It contains data records or “blocks” which cannot be modified without ludicrous computational power. Once these blocks are collected in a chain, they simply cannot be changed or deleted by a single actor. Instead, they are verified and managed using automation and shared governance protocols. Such a system is perfect for append-only data record industries. The result of industries adopting Blockchains for record keeping could mean more accessible and accurate data for businesses to benefit from together.
Decentralized file storage ?
A growing number of small businesses are increasingly switching to cloud storage solutions for their day-to-day operations. While these solutions cut costs and improve the overall efficiency of common tasks, they also come at a steep cost regarding further centralization of the internet’s backend infrastructures. Solutions such as AWS, Google cloud engine, and Microsoft Azure open much of the web to single points of failure where hundreds of thousands of websites live. With these centralized solutions governments can monitor and censor content easily, servers are vulnerable to downtime from DDOS attacks, and data is insecurely kept on one server.
Contrary to large cloud storage solutions though, Blockchains promote distributed file storage and are making large gains over established centralized competitors. Decentralizing file storage across the web would close several single points of failure, reducing the potential for any significant data loss or downtime. Some businesses such as Storj, IPFS, and IPDB have been applying decentralized ledgers to file cryptographic hashes (or digital fingerprints of data) for consumer data. The technology utilizes the collaborative nature of Blockchains to promote shared file hosting among strangers in a trustless ecosystem.
Storj.io for example, instead of storing files on a single centralized server, saves fragmented pieces of your files on thousands of devices across the globe. Each chunk has several copies, and which particular chunk is stored on which particular device is recorded on the Blockchain. If you need to retrieve that file, the system will assemble it for you based on this information. At scale, this approach becomes cheaper and more secure than cloud storage. While the centralized cloud storage stores your file on several backups, the decentralized storage will keep your data on an even bigger number of devices, therefore, increasing dependability.
For centralized systems, however, the strength of the system depends on how secure one company’s servers are. Using decentralized networks as an alternative, there isn’t one single device that contains the complete file, making it practically impossible for hackers to obtain any private data.
The killer application is already here
Peer-to-peer global payments, smart contracts, immutable records, and decentralized file storage solutions are just a few areas that businesses are adopting Blockchains today. The “killer app” for Blockchain, on the other hand, is already here. Decentralization lead by Blockchain solutions will be a significant driving force of innovation and growth across the next web. As internet access continues to reach new audiences in emerging nations — and global reliance on digital services continue to grow, the internet will need these new tools fueled by Blockchain to meet rapid demand. Businesses which support and adopt such solutions will be the leaders of not just financial industries, but all industries.