Blockchains beyond the hype: there are real-world problems that have (already) been solved by blockchain technology.
Despite the hype, blockchains do solve many real-world problems, either through complete disruption of the existing status quo ("radical innovation") or through incremental changes. This article discusses 5 real-world problems that have already been solved by blockchain technology.
Remittance activities involve the transfer of money by an individual working in one country to another country. For instance, a foreign worker in America wants to transfer money to the Philippines. Remittance is a colossal industry: the World Bank estimated that in 2018 $689 billion were transferred for this sole purpose.
Before the invention of blockchain, remittance was constrained to banks and other money transmission operators (e.g., Western Union), operating with large margins. For instance, according to the World Bank, banks were charging their customers an average fee of 11% for remittance activities in 2019.
Blockchain technology allows individuals to transfer assets, such as stablecoins and other virtual currencies, from one party to another, irrespective of their location or income level. On average, a single transfer between two individuals is estimated to cost less than $0.15 on the Ethereum public blockchain and is not a function of the total amount transferred. In addition to the apparent cost benefits, speed has also been a significant improvement factor. A transaction on Ethereum (and other similar networks) often takes less than a few minutes to be considered final.
However, constraints and risks remain, such as the ability to (1) spend the asset locally (2) sell the received asset to the domestic/preferred currency. Yet, ambitious projects like Libra could contribute to improvement regarding both of these aspects.
Thanks to its characteristic of immutability, blockchain technology allows individuals to store any piece of data forever in a distributed ledger. Furthermore, non-fungible token standards (e.g., "NFT") enables the enforcement of ownership of any digital assets.
Besides, the concept of immutability has substantial implications in regards to property rights and other applications. For instance, Ethereum Name Services ("ENS") are domain names used to register an address on the Ethereum blockchain through a human-readable equivalent (e.g., "diamonds.eth"). This kind of protocol allows users to record information on the blockchain, leveraging the impossibility to modify it at a later stage without the domain name owner's approval. In comparison, there have been cases where traditional internet domain names ("DNS") were re-assigned without the authorization of individuals in a process often controlled by a single entity.
However, immutability is not a synonym of truth: the quality of any data point stored in a distributed ledger only remains as good as its source's reputation. Simply stating, a wrong entry into a blockchain remains wrong. Hence, the quality of the party appending new information into the ledger remains a critical component in a similar vein to other databases.
Initial Coin Offerings ("ICO"), which have been mostly conducted on the Ethereum blockchain , have enabled companies and projects to raise funds worth billions of dollars through token sales.
ICOs have radically changed how companies can raise capital across borders and how fast it was possible to do so, further reducing the delay between an idea and the implementation of a business solution.
Similarly, charity organizations have started to incorporate blockchain payments to foster faster money flows and the distribution of revenue in the event of a crisis. For instance, UNICEF recently launched its Cryptocurrency Fund, accepting payment in ether and bitcoin.
However, despite a definite improvement in how money can be re-distributed, ICOs and other processes attempting to raise money have also built a lot of concerns regarding regulations (e.g., do some ICO consist of unregistered security offerings?). As a result, this led to the growth of sophisticated scams by malicious individuals. Since transactions on blockchains are immutable, some of these scams stripped away millions of dollars worth of cryptocurrencies.
Governance and transparent voting systems are other real-world problems that blockchains solve. While applications for voting remains a niche segment, there have been on-chain experiments of platforms that have incorporated a thorough voting system for distributed governance.
For instance, platforms like Compound and MakerDAO, two of the most significant DeFi projects, have pivoted to community-driven governance. Anyone can write a proposal submitted for an on-chain voting process. Both protocols have their dedicated tokens unlocking voting power, based on the respective share of the total supply they own.
While some of these applications pioneers in establishing transparent voting mechanisms, several challenges remain to solve regarding how to protect voters' identity and how to prevent the creation of vote-buying markets.
Blockchain technology can also be used for supply chain and other operational management processes. In supply chain management, some of the existing problems are the lack of transparency, lack of trust between parties, and different information recording standards.
Most of these find roots in use by each party in the supply chain of their distinct data management system; it results in each company de facto owning their own version of the actual supply chain.
These problems often lead to multiple errors that translate into high costs and lead to lasting reputational damages and safety risks from the perspective of customers. For instance, supply chain scandals in the food industry have negatively impacted several brand images from consumers.
Existing companies experimenting with blockchains include:
For them, blockchains can synchronize information among multiple parties along the supply chain. For example, parties can record each product's origin, the tracking status, and other relevant information, which are available for any party involved in the supply chain process.
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