Blockchain and practical applications in the business world

Blockchain and cryptocurrencies: What is the difference? Blockchain and crypto currencies- are they not the same?

Blockchain and cryptocurrencies: What is the difference?

Blockchain and crypto currencies- are they not the same? The mass media has led to an enormous confusion between the two as sometimes the two terms have been used interchangeably. Unfortunately, that has confusion has sipped down to the general public, who cannot distinguish between the two terms. Crypto currencies are the virtual assets and can be stored on any device (with some exceptions) and/or in a digital wallet; their value as well as transfer are being stored using the blockchain. In a sense the cryptocurrencies are the assets and the blockchain is the ledger system, where every single transaction’s value, use and transfer is stored and accessible to anyone.

What many people initially failed to realize is that blockchain offer a unique system, which could revolutionize how we record transactions and how that information is stored not just for cryptocurrencies but everything else.

Blockchain: limitations and strengths

In a normal blockchain everybody have access to the same network and can make changes; for obvious reasons that is not a very attractive platform for businesses, because if everyone can make changes to the records there is a lot of scope for criminal enterprises to take advantage of it. That is why a solution was found called – a permissioned blockchain.

In a permissioned blockchain all the users are well defined, have unique and secure details and only a handful of people have the rights to create blocks and execute these in this digital environment. This makes sharing information easier, safer, and transparent to a very high extent. All features that make it very attractive from a business perspective. This is where a lot of startup companies tried to establish themselves during the boom of crypto currencies from 2017 to 2018.

What these companies were trying to push for is something called a smart contract. It is a very special type of contact because the terms of agreement for it are written in lines of code between buyer and seller. The contact is then stored in a blockchain network. What makes this appealing is that the information is contained digitally within the asset itself, which makes the transfer of information and verifying transactions much simpler and quicker.

Blockchain’s practical applications

Shipping companies have to transport goods from across the world often involving multiple jurisdictions, port authorities, customs and other cumbersome regulation. However, blockchain has come to the rescue.

A famous example of this type of practical implementation is TradeLens- a platform built using a permissioned blockchain model created by IBM and MAERSK. The aim is to create a global trade platform that would improve the visibility of the supply chain and make traceability of cargo easier as well as eliminate the paper trail(which in most cases is significant given that involves travel between multiple jurisdictions), improve customs efficiency and circumvent often time-consuming and costly processes.

Better visibility means that processes can be better monitored and steps needed for a shipment to be made reduced significantly. For example some processes need 10 steps and 5 people to get the information and using TradeLens it becomes one step and one person. So far the initiative has been a huge success and close to 175 organizations have signed up such as shipping companies, ports and terminal authorities, customs in different countries. It is very appealing from a business and regulatory perspective as one could follow the whole path of the shipment as soon as they leave the warehouse to their delivery destination via the inbuilt Ecosystem. Also given that the data is encrypted to the highest standard, access to the platform is via invitation only along with the fact can be audited points to its robustness and security. Currently, TradeLens records 700mln. events per year covering 50% of all global shipping.

Another area where the blockchain could help immensely is within the financial industry. With the rise technology financial companies have been struggling to tackle the growing myriad of issues surrounding their infrastructure. These issues have been used quite successfully by fraudsters and cyber attackers that have been able wreak havoc and have cost banks billions as well as eroding the trust of their clients. In particular, Know Your client(KYC) costs banks millions per year as banks have to verify the identity of every individual and whether they comply with sanctions and other restrictions. This is a very costly and time-consuming process. Another part of the same problem, depending how you view it, is complying with Anti-Money Laundering(AML) regulations as failure to comply can lead to very significant fines.

That is why there are hundreds of new startups that are trying to solve these problems for the banks. Blockchain startups could potentially save banks billions in operating costs and fraud losses. In particular, the issue is that banks sometimes have to verify the same transaction several times if it passes multiple jurisdictions thereby duplicating efforts. Utilizing distributed ledger technology (DLT) these issues could be potentially overcome. DLT could assist in tracking the transactions, reducing the paperwork necessary to complete them, and increase the overall speed of verifying information. The most optimistic projections are that such technology could reduce costs by 90%. The major benefit that major banks could share the platform and clients’ information will be on it the data can flow easily from one country to another, or from bank to another.

Another area, where blockchain could definitely lead to significant improvement is payments. Blockchain could be used to store ledger information remotely to each user’s payment device such as a smartphone and in case the payment operators’ system crashes you could still buy goods and services as the information is still stored on your device. The idea is also very attractive from central banks and some countries such as Senegal and Tunisia have implemented their own digital currencies. Currently, other countries are exploring the concept such as Uruguay and Singapore. However, most countries have a cautious approach and want to ensure the viability of such payments as the larger the country, the more financial risks one could face if not every potential risk has been addressed. One of the major concerns is regarding the security and circulation of digital currencies, which could prove irresistible to hackers if they are compromised.

In Conclusion

Blockchain is an innovative technology that has been misunderstood or misrepresented. It has the potential to change many of the processes that currently take a lot of effort and time to reconcile but it also has the potential to make things more efficient and streamlined. Given the many applications of the technology I have given a taster of its’ practical applications at this time and how they could help businesses in the long-term. Many more new features and potential uses could be found but only time will tell.

Sources Used(not an exhaustive list)

https://www.tradelens.com/

https://newsroom.ibm.com/2018-08-09-Maersk-and-IBM-Introduce-TradeLens-Blockchain-Shipping-Solution

https://transchain.io/en/

https://www.investopedia.com/terms/b/blockchain.asp

https://blockgeeks.com/guides/blockchain-applications/

https://www.businessinsider.com/blockchain-technology-applications-use-cases?r=US&IR=T

https://www.cbinsights.com/research/industries-disrupted-blockchain/

https://www.springerprofessional.de/en/blockchain-applications-in-supply-chain/15846280

https://www.crunchbase.com/hub/blockchain-companies

https://www.computerworld.com/article/3547022/blockchain-startups-to-watch.html

https://hbr.org/2020/04/how-the-pandemic-is-pushing-blockchain-forward