Blockchain for most is a cryptic term never heard of before, or at best associated with tech types. But this lack of awareness of blockchain is in no way an indicator of the lack of importance of this technology.
One only need look at the history of the internet to see writing off something we can’t understand while in its nascence could be to miss out on huge potential. Indeed ‘the internet’ had a similar aura of mystique around it when first created, yet swiftly became the facilitator of many of the functions in our lives, we now can’t imagine being without- from emails and web browsing to online shopping; music streaming and social media.
Blockchain for businesses holds the same potential as the internet did in its infancy.
But what is it? Put simply, blockchain allows digital information to be shared between parties without the need for a middle man to hold that data. Think of it as an open, distributed ledger. Blockchain was originally created to power the cryptocurrency Bitcoin, facilitating Bitcoin payments. So in a sense, blockchain is to Bitcoin what the internet is to emails – a facilitating technology.
There are a number of benefits of blockchain technology that could be applied to businesses across sectors.
First, blockchain technology enables transactions to be done more securely, with less risk of data leakage. As there is no centralised version of information shared from person A to person B, it is more difficult for a hacker to access the information being shared.
Second, information can be shared in a more efficient manner. Smart contracts are already in use. For example, you could pay out a derivative at a required point by using automated blockchain technology.
Lastly, the sharing economy – which is already becoming increasingly embedded in our day-to-day lives – can be furthered by blockchain technology. Currently, the sharing economy is facilitated by companies like AirBnB. However, ultimately you could cut out this middle man and enable peer-to-peer payments, decentralising the process and opening the sharing economy up further.
Perhaps, though, the most notable benefit of blockchain to date is the creation of cryptocurrencies, powered by this underlying technology. Currently, there are over 1,000 cryptocurrencies which have been created, with Bitcoin, Ether, Litecoin, Ripple, and Dash being some of the most famous.
Focusing on Bitcoin, as the biggest by market capitalisation, this cryptocurrency benefits from direct transactions made without the need for a middle man. The currency can be exchanged between any individual in any country, removing foreign exchange risk and complications of exchange rates when making global transactions. The currency is also not linked to any central government with control to print more or less money as required. So Bitcoin is inherently protected from inflation. Look at countries like Venezuela where the economy is crashing and inflation is wreaking havoc. Their government is currently looking to Bitcoin to see how the digital cryptocurrency could help them.
For businesses then, which of course centre around payments, cryptocurrencies may be one of the most tangible, notable benefits deriving from blockchain technology. And we believe they’re here to stay.
So are businesses making the most of this technology?
It is fairly well-known and expected that the banking industry is looking closely at blockchain, both through cryptocurrencies and other uses. However, the benefits are not limited to the financial services sector. For example, shipping giant Maersk recently ran a trial with IBM using blockchain to track containers across the world.
But for blockchain to find its way into more organisations, we need external support. If we look at lifecycles of any technology, whether they be as large as The Internet itself, or more localised such as Databases, CRM software or VoIP, support from external consultants, or companies which can implement and support was critical. It is only when this level of support is available to companies that adoption rates really increase, for any technology.
It is undeniable that some businesses are already benefitting from blockchain technology. However, we are some way off from blockchain reaching its full potential. Blockchain has the potential to entirely reshape the way we approach day to day transactions, and most notably banking. Yet those very businesses who look set to most benefits from blockchain technology have incumbent systems that would need to be transformed to enable blockchain to be fully adapted.
This could take time.
About the Author
Yoni Assia is the Founder and CEO of eToro, the world’s largest social investment network. He has shown an interest in finance and computer science since his youth and so decided to merge his passions. It was this very passion along with the social revolution, which lead to the founding and development of eToro’s investment network, where users connect, share, trade and invest in the world’s financial markets. It’s this young CEO’s vision to disrupt the old banking industry and replace it with a new online transparent and a social financial system for the benefit for everyone.