The forth industrial revolution also referred to as the digital revolution, has witnessed the emergence of new technologies like Artificial Intelligence, Machine learning, Blockchain, Internet of Things, etc. These technologies are transforming the way we execute our daily tasks and are continuously defining the jobs of the future. It is pertinent to note that the future of work lies in the hands of those who can effectively utilise these technologies.
Of the numerous emerging technologies, one that is touted to revolutionise and disrupt businesses at a large scale is the Blockchain technology. This technology witnessed an increase in popularity with the birth of the Bitcoin, which is the first and most widely used cryptocurrency. The blockchain technology is an encrypted, distributed ledger of records commonly referred to as blocks. It is managed by a peer-to-peer network working together to validate new blocks while ensuring strict adherence to a protocol of inter-node communication.
The application of blockchain goes beyond traditional financial services and extends to other industries important for the SDGs, such as education, agriculture, and healthcare. As blockchain is projected to disrupt many different industries, it presents both risks and opportunities to businesses, consumers and governments, and consequently new challenges for policymakers and regulators.
Merits of the blockchain to businesses
While there abound numerous advantages of blockchain to businesses, highlighted below are three major reasons.
Experts in different industries agree that transparency is key to maintaining consumer trust and improving business relations. Because transactions in a blockchain are public, the validity of blocks can be confirmed by anyone on the network, hence, no chance of discrepancy.
“By providing details of transactions against the commercial construct, further trust can be enlisted within the process and so provide a more stable relationship based on transparency rather than negotiation. “
Transactions in a blockchain are verified using complex cryptography. All transactions conducted are verified, cleared and stored in a block that is linked to the preceding block, thereby creating a chain. Each block must refer to the preceding block to be valid. This structure permanently timestamps and stores exchanges of value, preventing anyone from altering the ledger. For businesses, blockchain ensures that transactions processed using the technology is authentic before it can be allowed into the chain.
The blockchain is completely decentralised with no central authority to monitor and direct the flow of transactions. These transactions are completed directly between relevant parties with no intermediary, thereby ensuring that transactions are quickly settled. By eliminating third-party intermediaries and related overhead costs, transaction rates are increased, and transaction costs are virtually non-existent. Blockchain projects generally have quick turnaround times, which can be further reduced to minutes, lowering transaction costs.
Speaking on the efficiency and transparency of Blockchain technology, Stefan Schmidt, the CTO of Unibright states:
“Integrating the Blockchain with existing ERP systems enables enterprises to source existing data and share it in an immutable, secure, and trusted manner. What this means for corporations and their consumers is higher quality products, sourced in exceptionally cost-effective ways, with a far greater level of accountability. The significance of Blockchain business integration cannot be understated”.
Demerits of the blockchain to businesses
It is important to note that blockchain has its practical limits.
Performance: Because of the nature of blockchains, it is said to be slower than centralised databases. As pointed out by Coin telegraph here, there is no Blockchain network in existence that could sustain the same amount of transactions as major card issuers like Visa or MasterCard do. Blockchain still has a very long way to go before it will be capable of replacing the giants of the financial world.
Crime: Satoshi Nakamoto, the inventor of the bitcoin cryptocurrency, highlighted a term called ‘51% attack’ when he launched the bitcoin. The 51% attack is a situation where more than half the nodes on the network accept a false transaction as true. This alters the integrity of the system and corrupts that chain of transactions.
To ensure that nodes connected to the network follow set ethics in approving transactions, the mining pools are closely monitored by the community ensuring no one (un)knowingly gains overwhelming influence over the network.
Energy consumption: Processing transactions on the blockchain requires a massive amount of computing power. According to a 2017 study, PowerCompare predicts that without a significant alteration in the way we process Bitcoin transactions, the cryptocurrency could guzzle enough energy to power the United States by the middle of 2019.
However, the need to ensure that more transactions are carried out within the shortest time possible has led cryptocurrency miners to seek more low-cost renewable energy. Michael Casey, a senior advisor on blockchain research at MIT, points out that the demand for processing power will, “Not only incentivise miners to seek low-cost renewable energy, but also drive energy firms to work hard at developing solutions for them, with spill over benefits for the rest of the world.”
The blockchain technology has great potential to facilitate a more sustainable world. However, change does not happen by itself. As changes are happening rapidly, both traditional industries and governments have so far been slow to adapt to the changing landscape. The blockchain technology, though in its early stages, will continue to evolve and be used in many more innovative ways.