How will blockchain technology change the future of business, asks Ben Jordan.
Before money was invented, people used to barter. People always needed something that others had. Thus, an exchange of surplus things began to happen.
As remarked by Aristotle, “When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use.”
From the minting of the first coin to the dawn of digital money, the medium of payment for buying goods and services has evolved remarkably. The latest development is undoubtedly the advent of cryptocurrencies. It all started with Bitcoin, a peer-to-peer version of electronic cash that allows online payments to be sent directly from one party to another, without going through a financial institution. A trusted third party is no longer required to facilitate the transfer of money between two people. All bitcoin transactions are digitally signed by its sender, broadcasted through a peer-to-peer network, verified and then stored on a publicly distributed ledger.
Beneath Bitcoin lies the blockchain, a revolutionary technology that will change how industries do business. Bitcoin is one of the applications of blockchain, but the latter goes beyond financial transactions. Blockchain can enable different business entities to be in consensus without depending on anyone. A third party is no longer required to record and audit each business operation between entities. Blockchain can append these operations in a ledger, which is synced across the network with all participants agreeing on what is recorded. Blockchain ensures records are immutable, meaning the records are append-only. No one can change what is already committed on the ledger.
Due to its immutability, security and decentralised nature, blockchain has many applications in numerous industries: banking, financial services, social media and real estate are just some examples of sectors that have started to explore the technology.
However, it is important to note that blockchain technology came to the fore in the attempt to understand Bitcoin. But it was not until the launch of Ethereum that the true potential of the Blockchain was realized. These second-generation programmable blockchains enable developers to program more sophisticated smart contracts. Smart contracts were first described by Nick Szabo two decades ago as a set of promises, specified in digital form, which include protocols within which the parties perform on these promises. Blockchain technology has enabled smart contracts to be represented by a computer program stored in the distributed ledger, that is: immutable, verifiable and distributed.
The committed smart contract can then be executed to perform the agreed promises. Since last year, buzzwords such as “Initial Coin Offerings (ICOs)”, “Crowdsales”, and “Airdrops” were created through these smart contracts. The applications, built using smart contracts are referred to as “Decentralised Applications (DApps)” and are complex in nature. It is through DApps that developers can change the shape and operations of many industries.
In the last few decades, industries have evolved at astonishing levels due to the quantum shift in technological improvements. The apex of this change has been caused by the emergence of internet technology. Due to the ease of communication and smartphone accessibility, business models have changed dramatically. The startups of this era use an aggregator model, providing services to customers by connecting them to providers without owning a single asset themselves.
Uber, the world’s largest cab aggregator, owns no cars. Facebook, the world’s most popular social network, writes no content. Alibaba, the world’s greatest bazaar, maintains no inventory. And AirBnB, the world’s largest hotelier, owns no hotels. These companies take existing infrastructure, use it much more efficiently through technology, and provide an interface to connect customers to providers.
However, a radical change in business models is still to be witnessed, and this will be caused by blockchain technology. As it eliminates the middleman, aggregator models will become less feasible. Their decentralized counterparts will be able to provide the same service at same level of efficiency, but with lower cost. As blockchain technology overcomes its current limitations, these services will be much cheaper, forcing centralised aggregators to either change their business models or potentially cease trading.
Cost can be reduced by a significant amount by processing settlements between parties directly with no mediators involved
Aside from influencing future business models and removing middlemen as economically viable, blockchain tech’s intrinsic properties make it much more desirable to industries, enterprises and public domains by eliminating any trust-factor, along with increasing transparency and efficiency.
Let’s dive into some of the industries where blockchain tech can solidify the foundation of those industries and has the potential to play a significant role in shaping the verticals future operational landscape.
Companies in the payments industry have three key selling points, which are speed, cost and security. Blockchain technology perfectly fits into all three areas. Payments made on blockchain are immutable and impossible to tamper or forge due to so many parties involved verifying each transaction and keeping a copy of the ledger. Cost can be reduced by a significant amount by processing settlements between parties directly with no mediators involved. Banks, payment and fintech companies have already started incorporating blockchain technology in their infrastructure.
Supply chain and logistics foundations are traceability and transparency. Blockchain can solve the pains in the supply chain and logistics industry. With several entities involved and multiple geographical locations, the process might take hundreds of stages to complete. However, current technology has made the situation less complicated. Blockchain could put an end to the common pain points within the industry. By tracing every transaction, each asset position can be identified at any point. By integrating the Internet of Things with blockchain, asset conditions can also be monitored in real-time.
The proof of ownership has been a significantly ambiguous and complex problem since ancient times. Individuals have always been dependent on centralized authorities to prove the ownership of land or other kinds of asset. This could soon be looked at as archaic if current tech is well applied. A proof-of-ownership decentralised application built on blockchain can easily keep the registry of all assets as well as facilitate the transfer of assets to others; whenever authorized by the current owner.
This can lead to a decentralised peer-to-peer marketplace of land and other assets on the blockchain.
According to the World Bank Group’s 2018 ID4D Global Dataset, an estimated one billion people around the globe face challenges in proving who they are. Blockchain identity solutions can provide a self-sovereign identity to any individual and provide it for validation without any centralized authority involved. Once developed and adopted globally, it will solve numerous problems like lost identity documents in natural disasters, refugees etc. KYC and AML solutions can be scaled and provided in real-time. Individuals are in control of their identities and companies can implement products that are compliant with laws like GDPR fluidly with little operational impact.
Blockchain technology can be utilised within the iGaming industry to address a number of pain points, such as faster and cheaper payments, no chargebacks or returns and greater transparency. Despite the radical improvements in iGaming technologies, there is still the ability to innovate. Blockchain technology could well become best practice in the future for the industry.
Auditing an online casino is a costly and time-consuming process; but if each transaction is available on a public ledger, it can provide regulatory bodies as well as players with a higher degree of trust and confidence.
Let’s bring blockchain into perspective and try to find a better way to redesign the infrastructure so that it is much more secure than before and transparent as well. Using blockchain technology and leveraging smart contracts, a platform can be created, on which existing casinos can migrate their infrastructure.
By migrating to a blockchain platform, they will not only gain increased security due to the distributed nature of blockchain but they will also be able to lower their operating costs with fewer servers, reduced technical and cybersecurity staff and no commission to payment gateways. As all actions of a casino are recorded on the blockchain, auditors can now monitor casino activities in real-time instead of periodically. Using machine learning and artificial intelligence, these actions can be monitored for any kind of malicious or inappropriate activity. Casinos are also not bound to the idea of having to migrate their infrastructure. They can launch their own blockchain network and still allow auditors to monitor all activities through inter-blockchain communication.
Here, we have just scratched the surface of immense possibilities this technology can offer. It is important to note that blockchain technology is still in its early phases. As it is developed further there could be the potential to make the iGaming industry more effective and incorporate it into a unified platform of regulators, auditors, operators, developers and players.
Ben Jordan is the Director or Aristotle Integrity Europe, a leading global Identity services provider and CEO of Truedeck, a blockchain technology provider for the iGaming industry. Follow him on Twitter @BenJordanMalta