Blockchain has managed to gain traction as a major topic within the technology industry for the past few years now. Perhaps it’s because we’ve watched it literally change the narrative around digital currencies, but its applications are not limited to cryptocurrencies alone.
A number of real-life issues that are inconvenient to us will now be able to be resolved by technology. Take your pick: banking, NFTs, Internet of Things (IoT), and even voting and governance.
It is a novel technology that needs more advocates, especially as industries around the world begin to adopt it.
One question keeps coming: can blockchain be the solution to any of these challenges?
To answer this question, let’s look at particular examples where blockchain has been a great success, evaluating its capacity to improve efficiency, security, and trust throughout the parties involved in the transaction.
Understanding the Real-Life Problems
But first, let’s clarify a common misconception. In order to systematically look for areas where blockchain can be useful in solving real-world issues, we need to appreciate the problem at hand. Real-world problems are typically rooted in inefficiencies, opacity, and lack of faith in the different industries.
Take, for example, supply chains, where there is the risk that goods may go missing, tampering, or wrongful presentation, and this can catalyze enormous losses and safety concerns, of course.
In medicine, patient data is typically kept in separate distributions making it hard to get or share pertinent information in an efficient manner. At the same time, financial systems have other barriers that may cut off millions from the possibility of having banking services.
All these problems are not just hypothetical. They influence economics, societies, and people every single day.
Emphasizing such problems makes it easier for us to understand why blockchain technology is so unique and why it is capable of providing revolutionary solutions due to its nature: that are decentralized, transparent, and secured under encryption.
Blockchain 101: Simplified
Now that we know the problems in the world and how they should be solved, let’s dive more in-depth into the fundamentals of what blockchain is and how does it even function.
There are several animated motion graphics or even explainer videos in which the spiral of blockchain is explained through various images such as a network, verification, or smart contracts, which make it easier to comprehend the theories of decentralization, ledgers, and consensus.
However, without comprehending the foundational principles, those visuals may still leave viewers with gaps in knowledge.
The simplified definition of blockchain would be: it is a digital ledger that contains information and an environment in which operations are performed based on specific principles.
A transaction is collected in a block, but the various blocks are combined based on a connection to form a chain. The omitted changes make sure that when data is put into a blockchain, it becomes safe and cannot be changed in any way.
Moreover, consensus processes are used to confirm and check transactions using this technology. Thus, there is no possibility for intermediaries, and therefore, there are fewer opportunities for fraudulent actions.
Given all these benefits, it’s easy to see why many believe this technology can do so much more than just strengthen data security. It does well in building trust and collaboration as we tackle the complex challenges facing our world.
Real-World Problems Solved by Blockchains
Back to the main question: can blockchain solve real-world problems?
TL;DR: yes, some of them.
We’ll explore specific real-world problems that blockchain is addressing and highlight success stories that showcase its transformative potential.
1) Supply Chain Transparency
Modern supply chains involve a number of networks and tend to be quite complicated. It is usually complicated for the other parties involved to trace back every product in the supply chain. This may result in issues such as counterfeiting, recall of products, and safety of the users among others.
But this is not the case in a world entity since every stage in the life of a particular entity is captured on an undisputed ledger and every person in the supply chain has access to it. For instance, Walmart collaborated with IBM to develop a supply chain that focuses on food products and their availability in the market.
Consequently, during a recall, businesses can efficiently locate tainted goods, thus minimizing health risks and response times.
2) Healthcare Data Management
Another issue that is not left out by blockchain is the corroboration of healthcare data. As far as the healthcare ecosystem is concerned, there are issues with the availability of centralized systems and records for patients.
This is the root cause of why healthcare practitioners are unable to get the correct and current details. These medical records falsifications can cause diagnosable medical errors, wastage of time in treatments and devices, and massive neglect in delivering the expected support to the patients.
How Blockchain Technology Could Change Healthcare
With blockchain, patients can have control over their own health data and grant access to healthcare providers as needed.
One of the most popular projects that would make a good example of this is MedRec. They use blockchain to create a unified patient record system that allows for secure sharing while maintaining patient privacy. The technology helps them streamline authentication, simplify data retrieval, track updates to existing records, facilitate data entry for both patients and providers and enable seamless data sharing.
3) Financial Inclusion
Traditional banking systems often exclude individuals without access to formal financial institutions, especially in developing countries. Setting up shop in the global economy is hard for many due to high costs, long durations that take months to complete, and lack of infrastructure, making it almost impossible.
Most low- and middle-earners have trouble affording a life without banks. The ideal solution is to decouple these individuals from institutional financial providers using blockchain technology, which goes beyond government control.
Currency such as Bitcoin allows transactions among individuals directly without the need to go through a third party, which guarantees security, speed, and extremely low costs.
Cross-border payments are needed because of globalization, and this is one of the key features of Stellar and Ripple networks. There are two key factors that help distribute such solutions: availability and cost efficiency of international money transfers, thanks to the use of blockchain. This allows people who are underbanked to receive financial support and services whenever they are needed.
4) Voting Security and Transparency
Voting systems in some states are porous to downright fraud or manipulation that can fatally damage the legitimacy of any elections and voting systems. Disputes and voters losing trust in the election process are common when it comes to manual counting of votes or using electronic systems that are obsolete and outdated.
Blockchain technology is an innovative and advanced solution that solves these problems.
Several countries, including Estonia, and systems like the blockchain-based platform Voatz have dabbled into using blockchain for voting. It allows citizens to vote securely and auditable from any distance. It reduces the chances of fraud while at the same time also encouraging more people to take part in elections as voting becomes easier and safer.
In a blockchain model where every vote can be tracked and traced, so it is easy to promise the integrity of voting data because of its immutability. After a vote is placed, it gets stored in the blockchain, which will not allow any change but lets you see through.
5) Protecting Intellectual Property
In industries including music, film, art, and software development, the question of how to protect intellectual property (IP) has long been vexatious. Creators often battle to establish ownership of their work, and unlawful copying/distribution can result in the loss of large sums of revenue.
Traditional means of protecting IPs, including copyright registration– which can be time-consuming and expensive to file while still subject to claim contests. With blockchain technology, intellectual property can be protected by creating a verifiable, immutable record of ownership and origin.
Authors can block the rights to IP on this very blockchain. They may also identify the date of creation and, if applicable, who was in control at that time. This will make sure that the record of ownership is immutable, according to the system.
NFTs are perhaps most familiar to you, especially through platforms like Ascribe and OpenSea. It uses the blockchain to help artists to register and track their digital artwork. These platforms safeguard credit and compensation for the work of artists or creators. There are also smart contracts that automate royalty payments.
6) Anti-Counterfeiting Solutions
Counterfeiting is a common problem, especially in industries such as luxury goods, pharmaceuticals and electronics, which can result in high financial losses or even imperil consumer safety. Statistics show that fake luxury items make up 60-70% of all counterfeit goods sold each year.
Labels or serial numbers may show that an item is genuine, but it turns out to be fake until you bring it to the official store. Therefore, verifying authenticity using labels or serial numbers is often insufficient as counterfeiters continue to develop more sophisticated techniques to mimic genuine products.
Every movement of a product can be registered immutably in blockchain technology. This is how authentication of goods can be fed back up all the way to consumers, retailers, and manufacturers with full transparency.
Luxury brands and diamond giants such as LVMH (Louis Vuitton Moët Hennessy), and De Beers are looking into record-keeping mechanisms from which they can track the origin of their products.
Not only for luxurious items, though. Blockchain technology also plays a critical role in pharmaceuticals, where counterfeit drugs can be life-threatening. The technology helps guarantee that only legitimate medications enter the supply chain by verifying their origin and tracking them through every stage of distribution.
Challenges and Limitations of Blockchain
Blockchain may offer the saving grace for so many of our real-world conundrums, but it does not come without struggles and limitations. So it is with systems change: as a new, emerging technology, there are barriers to entry. We will analyze some of them.
Scalability Issues
Although the decentralized nature of blockchain means that transactions are more secure and transparent, it also causes slower processing time compared to traditional centralized systems.
After all, we know that the larger the user base a blockchain network has, the longer and more computing resources will be required for improved integrity of transactions, which can result in bottlenecks.
Energy Consumption
Because mining is used to validate and secure transactions, it is a very computationally demanding process. This computation uses a great deal of electricity.
As you would expect, given this energy-consuming process, the technology has raised questions on the sustainability of blockchain, especially at a time when nations across the globe are pursuing measures to embrace sustainable and renewable energy practices to reduce carbon footprints.
For instance, Bitcoin mining alone is estimated to consume more electricity than some small countries, often relying on generator set services to ensure consistent power supply in regions with unreliable grids. This further raises questions about the sustainability of PoW-based blockchains.
Proof of stake (PoS) and other consensus algorithms may be more energy efficient, but switching between these systems may have drawbacks in terms of security and decentralization.
Regulatory Uncertainty
As blockchain crosses borders and threatens to upend currently established systems globally, governments and regulatory institutions are still torn on how to govern blockchains appropriately. Such uncertainty prevents various businesses and investors from adopting the technology for use– since they feel that the technology may fall out of favor in law in the future.
For instance, the use of cryptocurrencies often undergoes legal reforms in different countries, with some countries welcoming them while others have put in place some laws that strictly limit the usage of cryptocurrencies or even ban their use completely.
One of a business’s main concerns is the absence of clear and well-defined policies governing blockchain, as future legal issues may complicate its implementation.
Integration with Existing Systems
Several industries depend on old supply systems and other structures that cannot be sufficiently integrated with Blockchain technology.
Switching over can also entail a complete overhaul, meaning that the technology happens to be expensive, time-consuming, and not without technical complications.
Supply chain management systems would be a good example of this. This system, which has taken decades to develop, would require a massive overhaul to be able to include blockchain tracking and verification.
Some organizations may require their employees to undergo a change in orientation. They may have to purchase new equipment and rewrite programs that are compatible with the system. In particular, the concept is even more challenging for such industries as healthcare or finance since the rules are stricter and data security issues are more essential.
It is only natural that many organizations may not be ready to adopt blockchain solutions until these solutions themselves can simply plug into the existing systems, and the costs of adoption outweigh the benefits in the short term.
The Verdict: Is It Just a Hype or Really a Help?
So… is blockchain all hype, or does it truly offer solutions to real-world problems?
The answer, however, is somewhere in the middle.
The matter is that applying blockchain can bring about a worthy change in terms of increasing transparency and security and optimizing processes in many industries. But at the same time, it is crucial to understand that it is not a universally good solution for all the problems that we have in this world.
New applications of technology have emerged in the fields of supply chain, financial services, and healthcare, while challenges are being faced, including scalability, energy consumption, and problems with regulatory standards.
In other words, this paper has shown that electricity is not a ‘silver bullet,’ whereby a similar conclusion can be made regarding blockchain.
It is up to the specific context of a given problem. Another context that must be considered is compatibility with other solutions and the extent to which the limitations of the genetic algorithm can be overcome.
That is why, in some cases, we are already witnessing the possibility of blockchain. In others, we have not seen a significant utilization of the technology yet.
As with all disruptive forms of technology, its potential for change is only going to reveal itself as the product experiences further development.
Yet, at least in the short term, it is more than just hype, and deservedly so. As with any considerable raw power source for the human mind, how much it can help depends on how that power might be employed.
FAQs
Is blockchain technology accessible to everyone?
Despite the advances in blockchain accessibility, there are still barriers and limitations. This indicates that the understanding and adoption of blockchain solutions are dependent mainly on technology know-how and resources. Further attempts are being made to build new convenient platforms and raise public consciousness, all of which will enable expansion in the range of use.
How can businesses prepare for blockchain adoption?
Companies can become ready for blockchain by increasing their knowledge about the technology, analyzing the areas of their operations that can benefit from it, and evaluating potential partnerships with companies offering such solutions. Other important steps are understanding the existing strategy and or need for one and recognizing regulatory considerations inherent with the opportunity.
What industries stand to benefit the most from blockchain technology?
Several industries can benefit from blockchain, including finance, healthcare, supply chain management, energy, and real estate. Each of these sectors can leverage blockchain’s features mostly for better transparency, efficiency, and security.