Illustration redesigned by Devin Thorpe
Everybody and their grandmother has heard of bitcoin, but it’s blockchain that makes it, and all other cryptocurrencies, go. Yet, that is just the most basic application of blockchain technology, which promises to usher in the biggest technological, social, and economic revolution since the widespread introduction of the Internet. While the potential is exciting for headlines, let us dive deeper and look at a few of the practical ways in which blockchain technology is being applied today in a number of industries. Some of these may come as a surprise to you but will end up being very handy.
Part of the excitement of bitcoin (besides pure price speculation) was in the use case of sending bitcoin anywhere in the world relatively quickly, with limited intermediaries, and with fees so tiny they’d make Western Union blush (if Western Union could). But there’s a catch: potentially wild variation in bitcoin’s price even within minutes, as well as the difficulty of converting bitcoin from/into funds in your bank account.
Yet, a number of companies are taking on international money transfers, making them quick and inexpensive via crypto today. Abra offers users free peer-to-peer money transfers (is there a Cadabra?). There is also a company named Wyre, clearly implying competition with wire transfers. And, of course, there’s Ripple — widely criticized by hardcore fans of decentralized cryptocurrencies for being extremely centralized under control of the bankers. Ripple is using this close banking relationship to become the go-to digital currency for international money transfers between banks (banks do love something they can control…or at least agree upon).
This is especially important for remittances (e.g. money sent by migrant workers home to their families). Migrant workers receive little pay, are often unbanked, and really need to stretch every penny of income in order to get the most money to their loved ones back home (where this money is needed for bills, groceries, education, and other necessities). Getting charged $40 on a $500 money transfer is thus a huge pain-point for them, as is for their family having to wait upwards of a week to receive the money. Meanwhile, moving a digital asset like bitcoin takes a couple of hours and costs pennies.
This is possible precisely because of how blockchain technology and the distributed ledger work. All the processed transactions of a specific cryptocurrency in a certain time period are recorded into the most current block attached to all previous blocks of that cryptocurrency in a chain (hence, blockchain). Everyone who has even the smallest fraction of this cryptocurrency has a record of the entire chain. This is why it’s called a distributed ledger — everyone owning a piece of the cryptocurrency has the full ledger of all transactions that ever happened on the blockchain for that cryptocurrency. Creating a fake transaction is practically impossible because everyone else would still have the correct copy of all transactions and would thus quickly sniff out the scammer. Knowing this, exchanges allow for quick movement of cryptocurrencies from one account to another, anywhere in the world. It is so cheap because no intermediaries are needed — the network of that cryptocurrency and the mathematical formulas by which the currency abides provide security against fraud.
Speaking of fakes, another practical application of blockchain technology, that is already deployed and having a major impact, is in supply chain management. How do you know if your Gucci bag is authentic or whether those strawberries really did come from a tiny farm in upstate New York? Companies can now use markers (like tamper-proof stickers and electronic tags) with a unique identifier recorded into the blockchain. Once millions of people have the same record of that Gucci bag or case of strawberries, it becomes much harder to insert a knock off into the system. Retailers can track products from farm to shelf. In fact, this is exactly what the biggest retailer in the world, Walmart, is doing. Walmart is using its leverage to convince its suppliers to make sure they all record their goods on the blockchain for the retail giant to track and authenticate. In doing this, they are collaborating with another big company, Big Blue itself — IBM. Needless to say, this is saving Walmart millions (if not billions) of dollars in food safety and supply chain management costs.
Is there really such a thing as honest gambling? The house always wins, and the player never knows just how much the odds are stacked against her. Blockchain technology is aiming to change that perception at least (and ostensibly, the reality as well) by replacing casinos’ shady “proprietary” algorithms with transparent smart contracts. Just look at what FunFair is doing. Smart contracts are computer programs designed to execute certain actions if specific conditions are met. This could be pretty much anything. In the casino use case, this means running games of chance, taking player bets, and paying out winnings accordingly. Since the smart contract gets its information from the blockchain (which, as mentioned above, is impractical to fake), it is able to operate with a high level of trust. Plus, when a transparent computer program runs the house it is more likely to be honest since anyone can check its code. Here too, the fees are minimal because there is no need to go through clearinghouses or other intermediaries: win a game, get paid instantly (like getting play gold in video games). Then there are CryptoKitties, the first blockchain-based collectibles craze that caused its own bubble with some virtual kitties fetching over a hundred thousand dollars.
Is that all?
Of course, there are many more current and potential applications of blockchain technology: medical records that are both secure and accessible by those who need to, more transparent voting, sharing of resources such as surplus electricity, and much more. The beauty of blockchain technology is in its transparency and decentralization. A dictator can shut down any single newspaper but not a million people all being able to access an article forever in a chain of digital data. The price of bitcoin may keep riding a roller coaster for years (nobody knows for certain). Yet, there are certainly real-world uses of blockchain technology. And we have only begun scratching the surface of the benefits this technology may bring us.
Featured Header Image Source: Zuckerman Law