The field of blockchain technology is in a constant state of expansion. The technical framework that gave the world Bitcoin and other cryptocurrencies has moved beyond tokenization. Businesses in many industries are now exploring what a blockchain has to offer. What are the applications and use cases of blockchains? Let’s take a look.
Blockchains as a System of Record
A blockchain is first and foremost a decentralized ledger. That ledger can be applied to records of almost any type. Blockchains have the potential to create a system of record that is more secure and more accurate.
Take for example digital identity. Blockchains give individuals access to their own cryptographic keys. This creates a whole new real of ownership rights. It also opens up the door for individual parties to form interesting digital relationships that are secure. What is very promising about this concept is that digital identity can be created without divulging sensitive personal information. The cryptographic keys are what substantiate the digital identity.
Tokenization is still popular as a blockchain application. It would be fair, however, to say that token developers today are thinking beyond Bitcoin in terms of how digital tokens may be used. Some of the more interesting applications of token development include:
- Supply chain management
- Intellectual property
- Fraud detection
- Protection against counterfeiting
Data management between organizations has always been a difficult project. Blockchains can improve the security and speed with which organizations share data. The way that a blockchain is managed as a system of record simplifies the way data is collected, gathered, and stored.
Governments have an interest in all of these blockchain applications and use cases. For starters, the concept of cryptographic keys and digital identities that can be kept separate from physical identities makes governments nervous. The fact that anyone can act as part of a blockchain network is also discomforting. Finally, the ability of blockchains to manage and record data without the need for third-party involvement is also problematic. These concerns are why some governments have begun to push for regulation of cryptocurrency blockchains.
Ironically, the calls for regulation may have only helped blockchain developers. Rather that express a generalized resistance, blockchain developers have begun to actively seek relationships with regulated financial institutions. These institutions are finding out that they can benefit from a blockchain platform.
Take audit trails, for example. Banks are responsible for securing the digital relationships they have with their clients. A hack has the potential to reveal sensitive data, possibly creating a liability for the bank or other financial business. Blockchains have demonstrated impressive improvements in security and the protection of personal data. As a system of record a blockchain is able to prevent unauthorized altering of data, and it can also provide for permissions that are required to access certain information.
Blockchains as a Platform
The concept of blockchains as a platform has also evolved beyond Bitcoin. In its original incarnation, the Bitcoin blockchain was designed to perform the basic function of underpinning the Bitcoin token. With the development of Ethereum and other blockchains the potential of the technology has soared.
The most relevant example of blockchain applications and use cases in a platform context is the smart contract. This allows digital relationships to be created and secured in a manner that automates processes without third-party involvement. Ethereum was the blockchain that truly introduced and refined the concept of smart contracts on its platform.
In recent months many of the world’s largest banking institutions have banded together to use explore blockchain technology and the use of smart contracts to build secure digital relationships among themselves. The smart contracts can be used by the consortium of banks to execute legal agreements.
It may also be possible for smaller banking institutions to participate by creating so-called side chains. These are individual blockchains that can essentially be plugged in to larger chains to facilitate data sharing and collection. These side chains are also exemplified by projects such as The Lightning Network which aims to resolve the scalability issues with Bitcoin. The Lightning Network creates a protocol that rests atop the Bitcoin blockchain to enable faster transaction processing between individual parties.
Automated governance is also made possible by the creation of DAOs, or Decentralized Autonomous Organizations. These types of projects have vast applications for governance because they allow for processes which do not have to be subjected to individual oversight.
There is a world of possibilities awaiting those who are involved in the development of blockchain applications and use cases. The continued development of such can also be a benefit to the cryptocurrency investor as digital tokens are given more credibility and value.