5. Applications of Blockchain Technology
Now that we’ve covered how blockchain technology works and how different blockchain networks tackle the issue of maintaining the ledger, it’s time to examine how blockchain can impact the world around us.
The most obvious application of blockchain technology is as a means of transferring or storing value as cryptocurrency. The transparent and immutable nature of blockchain networks, however, has the potential to disrupt everything from supply chain management to legal systems, or create completely autonomous Internet of Things economies.
It’s possible that blockchain technology could deliver us into a future in which your smart fridge is able to autonomously order your groceries and governmental officials are elected through completely transparent blockchain-based voting platforms. For now, however, we’ll take a look at the ways in which blockchain technology is shaping the world around us right now.
The disruptive nature of blockchain technology is most apparent in the explosion in the value of cryptocurrency over the last few years. Bitcoin and other high market cap cryptocurrencies are the first currencies that are truly global. Unlike traditional fiat currencies, cryptocurrencies are free from the economic health of issuing countries.
The recent Venezuelan economic collapse that occurred in Q4 2017 illustrated the power of cryptocurrency as a method of transferring and storing value outside of failing fiat currency systems. With the Venezuelan Bolivar worth less than the fictional currency used in the popular online role playing game World of Warcraft, Venezuelan nationals turned to Bitcoin and other cryptos to protect their capital.
The quick transaction times offered by blockchain technology along with the relatively low fees cryptocurrency can offer has made Bitcoin, Ethereum, and other cryptocurrencies highly popular alternatives to traditional fiat currency.
It’s now possible to purchase everything from domain names to real estate and even high-end sports cars with cryptocurrency. The rate of cryptocurrency adoption is rapidly increasing, with KFC Canada recently making it possible to buy fried chicken with Bitcoin. Expedia now makes it possible to book your next holiday with Bitcoin— you can even book a trip to space with Virgin Galactic using Bitcoin.
While cryptocurrency is a powerful application of blockchain technology, the future of blockchain is likely to be decentralized services. By allowing peers to connect to and do business with one another without the need for a trusted third party, blockchain technology is set to heavily disrupt hundreds of different industries.
Airbnb, for example, disrupted the traditional booking industry by allowing property owners to create their own listings and manage their own bookings, revolutionizing the way travelers find short-term accommodation.
Blockchain technology, however, makes it possible to decentralize absolutely anything. The finance and lending industry is currently being challenged by blockchain-based peer-to-peer lending platforms, while platforms such as SiaCoin and Factom are decentralizing the storage industry. The Israel-based Golem platform makes it possible for individuals to lend their processing power to a decentralized supercomputer.
Decentralizing services and platforms via blockchain technology not only reduces overhead and middleman fees, it also enhances security and strength while at the same time increasing productivity.
One of the most controversial elements of the blockchain ecosystem is the practice of generating startup capital through cryptocurrency. The decentralized nature of blockchain technology makes it possible for any new business or platform to offer investors the opportunity to contribute capital towards their development, regardless of location.
The most common method of blockchain-based crowdfunding is through initial coin offerings, or ICOs. Initial coin offerings are typically used to launch blockchain-based platforms that will use a native cryptocurrency token. Investors are offered the option to purchase these tokens before the platform is launched at a discounted rate, thereby providing development capital to the creators of the project and potentially generating profit when the tokens increase in value.
As the cryptocurrency environment is largely unregulated, the ICO market is currently the subject of intense scrutiny from regulatory bodies around the world. Notably, the price of Bitcoin dropped significantly in 2017 when the Chinese government placed a temporary ban on all cryptocurrency trading in an attempt to curb rampant ICO speculation.
Initial coin offerings are a highly effective method of generating startup capital outside of the stagnant venture capital system, but they’re plagued by a number of issues due to their lack of regulation. As the blockchain environment matures and more agile iterations of the ICO model are devised — such as Vitalik Buterin’s ‘DAOICO‘ model — blockchain-based crowdfunding should prove to be extremely disruptive.
The Internet of Value
High profile venture capitalist William Mougayar refers to blockchain technology as “the second significant overlay on the internet, just as the web was the first layer back in 1990”. While cryptocurrencies and decentralization are certainly exciting applications of blockchain tech, one of the most interesting benefits it offers is the ability to transfer value as information.
Blockchain technology not only allows for the instantaneous transfer of currency, but also makes it possible to instantly exchange assets such as stocks, intellectual property, securities, or even digital certificates that represent physical items, such as gold or other precious metals. It’s even possible to tokenize scientific discoveries, music, or in-game items on blockchain.
By facilitating the creation of legally binding certificates of ownership over virtually anything, blockchain technology is dramatically improving liquidity in all asset classes. This effect is set to reduce the presence of middlemen and third parties in business, and could potentially eliminate lawyers altogether.
AI and Autonomous-Machine Economies
The Internet of Things is beginning to converge with blockchain technology, presenting extremely promising opportunities for automation. Also referred to as the IoT, the internet of things is comprised of everything from smart fridges to smart cars and allows the devices we use every day to represent themselves digitally or be interacted with via the internet.
Blockchain platforms are beginning to make it possible for IoT devices to both communicate and trade with one another. that imagines a world in which IoT devices will be able to use IOTA tokens to autonomously purchase or sell goods and services without the need for human intervention, creating a ‘machine economy‘.
Let’s imagine that self-driving electric cars become commonplace. Using IOTA, an autonomous smart car would be able to use a decentralized transport aggregator to earn IOTA. While not delivering passengers, this smart car could park in an automated parking garage, paying in IOTA. Similarly, the same vehicle would be able to identify the closest charging station that offers the best price, navigate to the station and connect automatically, and then pay in— you guessed it— IOTA.
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