Not even 10 years after an unknown person or group of people under the name Satoshi Nakamoto invented Bitcoin, the first cryptocurrency in the world, the technology underpinning Nakamoto's creation is everywhere, promising to change the world as we know it.
That technology is called blockchain, and Bitcoin uses this innovative ledger to record transactions that happen on its peer-to-peer, decentralized network. But financial record-keeping is not blockchain’s only forte. What makes blockchain special is its ability to ensure immutability without any trusted authority.
This key property of blockchain technology makes it suitable for a number of different applications, the most promising of which we explore in this article. But before we get to how blockchain technology could lead to the global disruption of established institutions and entire industries, we find it appropriate to take a closer look at blockchain's present state.
Blockchain has come a long way
Mike Gault, the CEO of Estonia's technology vendor Guardtime, defines blockchain as "an append-only data structure that contains data records that are cryptographically linked together." According to Gault's definition, "Data records are added to the data structure when multiple distributed parties come to a consensus based on pre-agreed rules." Gault has provided this definition in response to the rapidly growing number projects that are developing blockchain-based solutions that widely differ from the blockchain Satoshi Nakamoto created for his disruptive cryptocurrency.
Bitcoin as well as Ethereum, the most popular blockchain-based computing platform in the world, allow for the creation of the so-called Decentralized Applications, or DApps for short. At the time of writing this article, there are almost 1,100 DApps listed on the State of the DApps website. Confusingly enough, Bitcoin, Ethereum, and other altcoins, which are alternative cryptocurrencies launched after the success of Bitcoin, are also DApps because their backend code runs on a decentralized peer-to-peer network.
For example, Augur, one of the most popular Ethereum-based DApps, is using a blockchain-based betting system and the knowledge of the masses to create a forecasting tool capable of accurately predicting the outcomes of real-world events.
What Augur and many other DApps illustrate is just how incredibly far blockchain technology has come in less than a decade since it first gained traction. Today, there are several large blockchain enterprise alliances, including Enterprise Ethereum Alliance and its 250+ members, Hyperledger, and R3, and annual revenue for the enterprise blockchain market is expected to increase from approximately 2.5bn USD worldwide in 2016 to 19.9bn USD by 2025, with a CAGR of 26.2%, according to the State of Blockchain report from Coinbase.
Non-Crypto applications of Blockchain technology
While cryptocurrencies, and their wild price fluctuations, are still the main reason why blockchain technology makes headlines, non-crypto applications of blockchain technology make futurologists excited the most.
Contract Negotiation
Blockchain technology allows for the execution of smart contracts, which are computer programs intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts were coined by computer scientist Nick Szabo before Satoshi Nakamoto created Bitcoin. Many experts expect smart contracts to replace traditional paper contracts, naming complete immutability and enhanced transparency as two biggest advantages of this nascent technology.
Because smart contracts are programmable and self-executing, they can be triggered automatically when a set of preconditions are met. For example, a smart contract between a customer and an e-commerce store could replace a third-party escrow service.
Supply Chain Management
Blockchain could be a game-changer for supply chain management as traceability and transparency are among the most important foundations of logistics. "Blockchain offers a shared ledger that is updated and validated in real time with each network participant. It enables equal visibility of activities and reveals where an asset is at any point in time, who owns it and what condition it's in", IBM explains some of the benefits of supply chain management with blockchain.
The pharmaceutical industry has been struggling to secure its supply chain and prevent fake drugs from entering the market for a long time, and it is now starting to see blockchain technology as a potential solution to its problems. Pistoia Alliance survey revealed that 83% of the leaders in life sciences think that blockchain will be adopted as a data housing solution in the next 5 years and 22% of life science companies are already using or experimenting with blockchain.
Record Keeping
Because blockchain is essentially a distributed database, it can be used for all kinds of record keeping. In 2017 Dubai's land registrar has revealed it is developing a system that would seek to record all local real estate contracts on a blockchain, according to Coindesk. Dubai's aim is to unite all real estate and department services on a single blockchain-based platform and achieve this goal by the year 2020.
Dubai hopes that the move to blockchain will save the city money in the long run as an average person will move to a new location nearly 12 times in their lifetime, and each move is not legally possible without someone pulling information from the system and putting new information in. Blockchain would open Dubai's real estate market to investors around the world, giving them a way how to verify property data. It would also connect renters with landlords and property-related billers.
Another form of record-keeping to which blockchain technology can be applied is the management of digital identities, including passports, birth certificates, wedding certificates, personal IDs, and even online accounts.
Cloud Storage
Right now, virtually all cloud storage services are centralized, which means that the users must place their trust in a single cloud storage provider. Blockchain could disrupt the existing cloud storage model and usher in an era of decentralized cloud storage services with enhanced security and guaranteed ownership of personal data.
One such cloud storage service, Storj, is currently preparing for launch, promising 99.99999% availability, fully distributed infrastructure, end-to-end encryption, and extremely low prices per GB of stored data.
Digital Voting
"Many states use voting machines that are over 10 years old that are not only antiquated and failing, they are also becoming increasingly expensive to maintain as parts are no longer manufactured. Election fraud undermines the very fabric of democracy" stated Blockchain Technologies Corp, a company that wants to replace existing voting machines with blockchain-based voting systems.
Estonia has already implemented a unique e-voting platform that uses blockchain technology to guarantee flawless availability, transparency, and an unprecedented level of fraud protection. Many other countries around the world are currently considering implementing systems based on the one used by the government of Estonia.
Potential roadblocks to the wider adoption of Blockchain
Blockchain technology will be able to fully realize its potential only if it overcomes the most serious roadblocks to its wider adoption.
Regulations
The soon-to-be-implemented General Data Protection Regulation (GDPR) by which the European Parliament, the Council of the European Union, and the European Commission intend to harmonize data privacy laws across Europe, to protect and empower all EU citizens data privacy, and to reshape the way organizations across the region approach data privacy is one such roadblock.
The GDPR stands in the way of wider blockchain adoption for two main reasons: because of the fact that personal data is not to leave the EU, and because it demands that user's personal data is rectified or deleted under many circumstances.
According to Jan Philipp Albrecht, the member of the European Parliament who shepherded the regulation, the GDPR "is agnostic about which specific technology is used for the processing, but it introduces a mandatory obligation for data controllers to apply the principle of data protection by design. This means, for example, that the data subject’s rights can be easily exercised, including the right to deletion of data when it is no longer needed."
Considering that immutability is a key characteristic of blockchain technology, to say that it does not mix well with the GDPR would be an understatement. "Certain technologies will not be compatible with the GDPR" said Albrecht. "This does not mean that blockchain technology, in general, has to adapt to the GDPR, it just means that it probably cannot be used for the processing of personal data."
Scalability
In its present form, blockchain technology is severely limited by its insufficient scalability. Visa is known to handle around 2,000 transactions per second on average and up to 4,000 transactions per second during high shopping periods. The total capacity of the entire Visa network is expected to be over 50,000 transactions per second.
PayPal handles considerably fewer transactions every second, over 100, but that is still a lot compared to the maximum number of transactions per second of Ethereum: only 15. With the current consensus rules, Bitcoin can only process around 7 transactions every second.
"The Ethereum community, key developers and researchers and others have always recognized scalability as perhaps the single most important key technical challenge that needs to be solved in order for blockchain applications to reach mass adoption" writes Vitalik Buterin, the mastermind behind Ethereum. "Blockchain scalability is difficult primarily because a typical blockchain design requires every node in the network to process every transaction, which limits the transaction processing capacity of the entire system to the capacity of a single node."
Conclusion
Blockchain technology is evolving rapidly, and there have already been a number of practical applications, with considerably more currently being in various stages of development. If blockchain developers succeed in overcoming the most serious roadblocks to its wider adoption, blockchain could become one of the most transformative technologies of the 21st century - if not the most transformative.
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