We have become quite familiar with the term “currency of the future” in the world of technology, finance and business. However, its meaning varies according to the context. Some people use the term “currency of the future” to talk about electronic transactions. Others refer to trust as the most valuable currency of the digital era. But one thing seems certain: Blockchain technology will be at its core (and operating behind the scenes).
The history of this technology comes together with the one of Bitcoin, since Blockchain emerges exactly as a technological platform for the functioning of this (and other) crypto-coins. However, its potential goes way further. Blockchain is considered a true paradigm shift, also impacting the offline world. Following the trend, 61% of global digital giants are already investing in this technology.
The impact and attractiveness of Blockchain lies precisely in the way it is developed: its technology code combines the best of the Internet (eliminating distance, digital connections and peer-to-peer relationships) with encryption security. And so the expectation is that Blockchain will revolutionise the way transactions are done around the world (money, assets or even confidential information), overcoming the crisis of confidence of the digital age.
In order to clearly understand what may change in your company – and in your private life – with this new technological paradigm, it is crucial to go to the heart of the question: How does Blockchain work? And why is it revolutionising electronic transactions and trust?
What is Blockchain and how does it work?
Also called “trust protocol”, Blockchain is a decentralised technology that is based on a simple premise: once registered in the network, any transaction can no longer be modified or manipulated (ensuring data integrity). It is therefore a breath of fresh air in an era of fake news, where digital information is always viewed with suspicion, because it can be easily tampered with.
At its core, Blockchain is a digital ledger, a sort of virtual transaction logging system (such as a book of cash receipts and withdrawals kept by an accountant). These transactions can be money movements (as in the case of crypto-coins), but also of goods (allowing to trace the origin of a product along a supply chain) or information (with potential, for example, to serve as a basis for a digital identity system that dispenses physical documents). Each network user has access to an individual and identical copy of the transactions.
Blockchain’s code has been developed in such a way that registered transactions can be made directly among network users in a peer-to-peer model (no need for intermediaries to verify transactions). This is because any attempt to change the information already accepted and stored in Blockchain is immediately noticeable by all users of a Blockchain.
In a simple way, Blockchain needs three essential elements to work:
- Information Blocks – where transaction data are collected, recorded and organised (once a transaction has been validated in the “virtual transaction book”, it can never be erased or tampered with);
- Blockchain members (peers, who may or may not be anonymous) – these are the users who add new data (transactions) to the network, through the consensus of all other peers (decentralised verification of information);
- Blockchains – as each block of information is entered into the network, it “occupies” its place in a sequential chain (marked with a unique timestamp). Any attempt to modify the information of a block already registered causes incompatibilities along the entire chain of blocks following – easily detectable.
Cryptography and security: overcoming the crisis of confidence of the digital age
We are witnessing a crisis of global trust. The digital age has brought unprecedented mistrust regarding online information and the security of our data, but spills out of the network, with negative consequences for the business world as well.
The transparency and security with which Blockchain transactions are handled help to remove fears of information vulnerability in the digital world – by boosting confidence and by reconfiguring the way transactions are viewed by the various parties. Cross-block security in the Blockchain chain is based on cryptography and algorithms: each block of information receives a unique combination of random characters. In chaining, encryption of a new block is always part of the combination of the previous block, ensuring a secure connection of the chain.
Any transaction in Blockchain, whether between private parties (eg a ticket sale), between organisations (selling products between an industrial producer and a supermarket chain, for example) or within government (sensitive taxpayer information access to digital public services, for example) is built on a basis of transparency, security, peer-to-peer verification, traceability, immutability and confidentiality of information.
A disruptive change in business
Blockchain presents concrete advantages over other more conventional technologies:
- Enables faster transactions;
- Less cost (eliminates the need for an intermediary);
- Less risk of fraud, cyber-attacks;
- Greater transparency;
- Increased confidence.
This is a clear business opportunity that goes way beyond Bitcoin: it allows companies to revolutionise the way they transact information, how they track goods, and how they manage digital identities. All this with greater confidence in business, public administration and the people around us. The potential exists and is demonstrated in many applications, it remains to know how technology will develop and meet expectations.
To prepare for the realisation of this potential, there is now a race to invest in this area. Fintech’s industry has concentrated many of these investments, but it is not the only one. According to the Deloitte Global Blockchain Survey 2018, 25% of Blockchain executives work effectively in financial services, while another 18% are in the technology / telecommunications / media sector, while 14% are linked to consumer goods and industry.
Overall, 64 percent of these leaders say their companies will invest more than $ 1 million in Blockchain (with 16 percent planning to invest more than $ 10 million). These are important numbers that illustrate the appeal of this technology. The Global Blockchain Survey also reflects Blockchain’s importance in digital trust. 84% of respondents believe that a Blockchain-based solution is safer than systems built by conventional technologies.
In what areas can Blockchain be applied?
The application of Blockchain extends to different sectors, covering all areas where transactions of goods or information are necessary. For instance:
- Industry (eg real-time tracking of goods and auctions for supply contracts);
- Retail (eg purchase of tickets and digital rewards);
- Insurance (eg, complaints management and fraud detection);
- Banking and financial markets (eg global payments and trade finance);
- Government (eg digital ID, land registry or social benefits tracking);
- Health (eg personalised medicine, drug tracking).
InnoWave and Blockchain
In line with our mission, InnoWave is constantly focused on new products and technologies that bring value to businesses and leverage their digital transformation. We see Blockchain as a technology capable of changing the business paradigm by reconfiguring trust in digital media. For this vision to become more and more a reality, we work closely with partners like Microsoft to develop business opportunities in the Blockchain area.
Products like the Azure Blockchain Workplace (which simplify the adoption of this technology in companies from networks and infrastructures already created) can be key contributions for the technological value of Blockchain to be embraced by more entities.
For now, the technology is still taking its first steps, and it will be necessary to develop greater transaction capacity for Blockchain to become truly attractive. At the same time, it will also be necessary to make progress in its legal regulation. All this will be done in time, with the dizzying pace that the digital age has already accustomed us.
We believe that, in a few years and in retrospect, these years of development of Blockchain technology will be looked at with another recognition. The same recognition with which we look, for example, at the time when Steve Jobs and Steve Wozniak, in a garage in Silicon Valley, believed that the personal computer was going to change the world and laid the foundations of Apple.
Today, we are seeing, from the stateroom, the initial stages of a new era in technological trust and in transactions between individuals and organisations. Companies that first embrace Blockchain will benefit from a competitive and disruptive advantage in their business, with more transparent relationships with their customers. And above all, with confidence.