By: Vedang R. Vatsa, IIT Kanpur
Blockchain technology has gathered a lot of attention in recent times but for its usage in cryptocurrencies like Bitcoin. The capabilities of this technology are not restricted to the innovation of usage in the form of digital token but goes far beyond that. It makes it able to implement some of the technologies that were not practical to be deployed. Blockchain can also be called as a distributed ledger technology. It is expected to bring a revolution in the field of economics by disrupting it on a global scale, due to its properties of being transparent, secure and scalable.
The technology of Blockchain, like the internet, offers a global infrastructure of secure network that may allow the users to make transaction in a way that the middleman may be evicted and thus making the cost of any transaction to come down. The whole structure of blockchain enables a digital ledger of information to be shared within a network, between the distributed nodes. These shared ledgers are not controlled, in any way, by a single authority and may be viewed by all the users within the distributed network. Whenever a user wishes to add a value to a transaction in a ledger, the data involved is encrypted and authenticated using cryptographic algorithms, by other nodes in the network. A new block of data may be added to the ledger only after a majority of nodes may validate the transaction. This makes a transaction to be secure and auditable and check any third-party intervention. Blockchains can either be made public or private.
Financial Applications of Blockchain:
Blockchain may open the avenues of a secure and transparent medium of transactions that can cut off the role of middleman as well. The financial services sector is taking the advantage of the secure and transparent environment offered by this technology and thus is leading the way with blockchain. Deloitte is one such organization that is working with respective clients to work on a solution like ‘Smart Identity’ that may help various banks and other such organizations to ease the process of KYC. The technology also finds its application in the field of insurance, for financial institutions, exchanges, etc. A number of organizations are taking the advantage of blockchain as a means of recording the time stamp. Nasdaq uses blockchain to record transactions while Axoni make use of blockchain for managing the post trade events for credit default swaps. The technology also offers a real-time solution to monitor market activity.
Commercial Applications of Blockchain:
Factom and Everledger are two of the startups that are making use of blockchain, in the commercial world. Factom focusses on securing of data and is working on a land registry project along with projects for 80 smart cities in the field of data infrastructure. Everledger is the company that focusses on the identity of nodes involved in any blockchain transaction. One of the properties of blockchain nodes is that the history associated with it cannot be modified, making it more trustable. The history of transactions is utilized by the company to verify records for insurance companies and law enforcement agencies.
Potential for developing countries:
With the advent of digital identity, powered by blockchain, the data of thousands of people may be recorded in a secure manner thus offering opportunities of faster transaction in a number of industrials and processes. A digital identity may be secured using a private key making it easier for banks and other financial institutions to gather the required data for knowing their customers better. A number of transactional costs may be saved by the successful implementation of a blockchain powered backend of the information. The potential to bring a revolution is certainly there, if only the implementation is done in the right manner.
