If you bought a single bitcoin at the start of 2017, you would have paid roughly $1,000. Assuming you did not spend it, that single bitcoin would have grown six-fold to $7,000 today. With such an enormous rate of growth since it was conceptualized in 2007, bitcoin is riding on a huge wave of investors with a market capitalization reaching over $100 billion.
While financial experts and investors are still divided on bitcoin’s long-term viability as well on what exactly it is—whether it is an asset, currency, or commodity—what is not up for debate is the tremendous potential of the technology behind it: blockchain.
Aside from its use in cryptocurrencies, enterprises and organizations are recognizing the potential benefits of blockchain technology for different industries. For instance, an increasing number of financial institutions, banks, and AML regulatory bodies are adopting blockchain technologies in the financial system.
Defining Blockchain Technology
In a nutshell, blockchain technology is a decentralized public domain where every cryptocurrency (such as bitcoin) transaction is recorded and can be traced to the buyer and seller. This means that blockchain provides a digital ledger of all transactions of every participant for the public to see without the need for a central authority. It is a self-managing system that cannot be tampered with by any single party.
Unlike traditional currencies, cryptocurrencies are not tied to nation-states. This is made possible by blockchain technology, which is self-maintaining and is neither owned nor controlled by any government or organization.
Blockchain is a game-changer when it comes to recording and ensuring the integrity of transactions. Instead of utilizing a centralized ledger where only certain users have access to data, blockchain technology distributes both private or public copies of the ledger, enabling other parties to verify the data in the ledger. The ledgers consolidate every transaction and is time stamped for added reliability.
The ledgers are also interconnected among all users and can be verified mathematically by each member of the network. Because of this, every member can verify the integrity of data in the network, eliminating the need for a single oversight organization. Furthermore, every dataset or block of data is linked to a previous verified block, making the entire system secure and tamperproof.
How It Works: Blockchain in Cryptocurrencies
Blockchain was first used in ensuring the integrity of cryptocurrencies, specifically bitcoin. The concept of blockchain technology starts with providing each stakeholder with a copy of the data in a ledger. In this scenario, no single stakeholder has the sole master copy of the data in the ledger and, thus, no single stakeholder possesses sole responsibility and power over the data. Each and every stakeholder is considered part of a collective trying to ensure the integrity of the data. Should a stakeholder tamper or misrepresent his part of the ledger, all the other stakeholders can compare their data with the suspect stakeholder and challenge his integrity.
In cryptocurrencies, blockchain enables transactions to be recorded by buyers and sellers, or counterparties, faithfully and with integrity.
Applications of Blockchain in Other Industries
While it may take a few more years before the widespread adoption of blockchain, some industries are already beginning to realize the potential and benefits of this technology.
- As the use of digital media continues to rise, it is becoming more difficult to ensure the integrity of measuring the performance of digital advertisements. Furthermore, fake news has become rampant across digital media outlets because of a lack of oversight. Digital media stakeholders are looking into the decentralized nature of blockchain as a solution to these problems. By distributing copies of a ledger to different stakeholders, each concerned party can verify for itself the integrity and reliability of other parties’ representation—whether it is for the number of impressions for a CPM advertisement scheme or the reliability of a news article.
- An increasing number of game developers are finding the use of in-game currencies to be a profitable business model. For instance, the NBA 2K series has become a gold mine for developers with the addition of virtual currencies and more developers are following suit. While it is not required to purchase virtual currencies, video games become much easier to play when you do so. Utilizing blockchain technology makes peer-to-peer and in-game micro-transactions safer and more reliable for players and users as it enables a large number of users to verify the countless transactions happening inside video games.
- Cryptocurrencies are also creating a new source of income for artists in the entertainment industry. For instance, Bitshares is connecting artists and fans through peer-to-peer sharing and using virtual currencies that can be converted to real cash. Blockchain technology is once again necessary to ensure the integrity of peer-to-peer transactions. Furthermore, blockchain technology can prove valuable in exchanging digital agreements as users can easily verify the terms in a shared ledger.
- The healthcare industry uses peer-to-peer networks to share and transfer critical medical data among networks of hospitals for better and faster patient care. But these highly sensitive medical data need to be secured and their integrity must be carefully maintained.
Healthcare providers can use blockchain technology to timestamp and verify updates and transfers of medical data. This not only ensures the integrity of data, but also provides healthcare professionals with timely medical data. Coupled with encryption, the anonymity of records in blockchain technology ensures that the patients’ identities are kept secure and confidential.
With the widespread use of wearable devices that capture health information, blockchain technology provides a perfect solution for keeping track of the information transferred from applications to healthcare providers.
- In the banking sector, blockchain’s distributed ledger system enables the automation of compliance processes and reduces errors. Blockchain technology can eliminate duplication in Know-Your-Customer (KYC) and other compliance checks and securely distribute the details to networked banks in real-time. Furthermore, the historical data kept in ledgers can provide information on past transactions which banks can submit to regulators for compliance. They can also be used to identify patterns of irregularity and criminal activity.
- Blockchain technology can eliminate tampering in stock markets by cutting out the middlemen in stock transactions such as brokers and exchanges. In addition, it can also reduce the amount of time and money needed to purchase and trade stocks. It also gives greater transparency to the entire operation as blockchain utilizes a public ledger available to stakeholders and stock investors.
- E-commerce merchants need a solution to keep track of transactions and ensure the integrity of each transaction. Creating a ledger for these transactions through blockchain technology solves this need. It allows both buyers and sellers to protect themselves by verifying the transactions before they enter into it.
Furthermore, blockchain technology reduces or completely eliminates the need for a central authority to protect the integrity of transactions, promoting the active exchange of products and services.
- Finally, blockchain can be used to reduce the costs of making global payments and remittances. Third-parties such as banks, financial institutions, and even online payment solutions such as PayPal charge service fees for every payment or remittance. They act as intermediaries that ensure security and protect remitters and receivers from non-delivery.
Cryptocurrencies and the blockchain technologies that enable them can eliminate the need for these intermediaries. Cryptocurrencies can be transferred and exchanged globally at virtually no cost. Furthermore, blockchain technology ensures the integrity and delivery of the exchange.
Preparing for Tomorrow’s Technology Today
In order to realize the benefits of blockchain and other emerging technologies, businesses must be prepared to take advantage of them by ensuring that their enterprise systems are fully integrated. Integration consolidates an enterprise’s applications and systems and prepares them to support new technologies such as blockchain, Big Data, machine learning, and many others.
For over 15 years, Liaison Technologies (now OpenText) has been considered by Gartner as a global leader in its magic quadrant of data integration solutions. OpenText’s data integration architecture, the ALLOY™ Platform, is in a category all its own, called dPaaS (Data Platform as a Service). dPaaS helps enterprises integrate ever-growing numbers of cloud applications and data sources and prepares them for use with emerging technologies. Through its managed services approach, dPaaS also provides visibility into the flow of data without encumbering users with the technical side of data integration. dPaaS also focuses on compliance and unification of integration and data management capabilities, and is much better suited to solving today’s (and tomorrow’s) true integration challenges.
Contact us to learn more about Liaison’s ALLOY™ Platform.