Mental Block against Blockchain? Not any more…
Blockchain is often referred to as “the next internet” — a technology that is potentially one of the biggest innovations of our generation. The World Economic Forum predicts that blockchain will become “the beating heart of the global financial system” while leading venture capitalist Marc Andreessen describes it as “the most important invention since the internet itself”.
As with the arrival of the Internet in the 20th century, blockchain has been met with a divided response. On the one hand, businesses and individuals have experienced “analysis paralysis” while struggling to understand how it works and the impact (if any) it could have on their business.
On the other hand, some of the biggest brands in the world have begun investing heavily in both researching and implementing blockchain solutions — including financial institutions, technology companies and governments.
So, the question is this — why is blockchain such a big deal?
Blockchain first gained attention as the technology underpinning Bitcoin — an “electronic cash system that’s fully peer-to-peer, with no trusted third party”. And while Bitcoin might not yet be as disruptive as previously predicted, interest in its underlying technology — blockchain — continues to grow.
In a nutshell, blockchain is a distributed database that stores a record (ledger) of digital events. Transactions (or “blocks”) are added to previous transactions by nodes or “miners” who earn fees for successfully confirming transactions to the “chain”. Every node in the blockchain network has a copy of all transactions (unlike banks that make use of a private centralised ledger) and all nodes have access to that copy. These records cannot be modified or altered retrospectively and are therefore secure, verifiable and permanent. In other words, blockchain acts a database of transactions that is public (not owned by a particular party), distributed (not stored at a single location) and secured (via cryptography).
The blockchain is one of the most important innovations in the history of finance. Removing the middleman will transform how we transact, finance projects and distribute capital.” Brian Kelly.
Another key benefit of blockchain is that it eliminates the need for intermediaries. These go-betweens have become so integral to our day-to-day lives that it’s hard to imagine life without them. Everything from marriage and publishing to property and insurance requires a trust-worthy intermediary to verify, control and keep a record of the process. The downside is that while providing a valuable service, these intermediaries also levy heavy fees for their services, create delays in processes and provide a single point of failure.
As Don and Alex Tapscott, popular advocates of Blockchain explain, “Blockchain works by establishing trust in a transaction, not through powerful institutions or other intermediaries getting involved, but through clever software code and mass collaboration.”
Financial institutions, in particular, are reassessing their role of “trusted intermediary third party” and are looking at innovative ways to embrace blockchain technology into their offering. According to Farzam Ehsani, leader of Rand Merchant Bank’s blockchain initiative, “For the first time in history, we can actually transfer value across borders and different institutions without having to wait a long time for that value to be transferred. Banks need to start thinking about this technology and what it means for them.”
Banks also have an opportunity to target the billions of people that have been previously excluded from opening bank accounts. With blockchain technology, customers need only have access to the Internet in order to move funds, and will no longer be limited by the need for a credit record.
“Nineteen percent of Nicaraguans have a formal bank account, but only 14 percent are able to borrow and only 8 percent have formal savings. Yet 93 percent have a mobile subscription, usually in the form of prepaid access.” (Don and Alex Tapscott)
The Tapscotts also believe that blockchain has the potential to help us manage our identities. Currently, each time we interact with a bank, ecommerce store or social media networks, we leave a trail of crumbs behind us about who we are. Our data is highly sought after, yet we have very little control over it. Blockchain has the capacity to put us back in control through distributed applications and social networks — for example, Fitbit could “reimburse” customers with loyalty points or in-store discounts in return for data.
“Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi driver work with the customer directly.” Vitalik Buterin
“Blockchain provides limitless opportunities for those that have the foresight to adopt its technology,” says Mustapha Zaouini, Founder of Fliptin — global provider of ready-made, scalable and easy-to-integrate backend solutions. “And it’s not just the banks and financial institutions that are exploring scenarios in which blockchain can be part of their operations. Developers worldwide are looking at blockchain as an alternative to the stock market, auditing, Facebook, Airbnb, and even Uber.
The key is not to adopt a “wait and see” approach but instead to recognise blockchain’s value and identify where it can help in your organisation. Collaborating with industry experts such as Fliptin will provide you with the expertise and technical know-how you need to get your project off the ground and first to market. There’s no doubt that blockchain will be a game changer over the next few years — don’t get left behind.” (Mustapha Zaouini)
Keen to tap into our knowledge, expertise and technology? We’ll put the best backend solutions at your fingertips, allowing you to accelerate innovation and leapfrog the competition. Chat to us now about how we can help launch your dream project in record time.
