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The Impact of Blockchain

By: Shahin Arefzadeh, Ph.D.

It’s not an understatement to say that blockchain is probably the most disruptive technology in the modern digital economy. It may also be the most controversial. As the most transformative technology in recent history, blockchain will both enable new industry applications and modernize many antiquated ones. While centralized, highly available systems—from mainframe to modern public or private cloud—power the world’s institutions and have proven able to cope with millions of transactions, blockchain offers an alternate future. With it comes the promise of decentralization, which raises hopes of democratization and stokes the fears of many monopolized institutions.

Next-generation blockchain is potentially a viable platform for security, artificial intelligence, predictive analytics, e-government, and IoT, among many other applications. We can become particularly enamored of new technologies, seeing in them unlimited possibility when in fact there are very real limits. Take AI, for example. While it has gained substantial momentum in recent months, to some—especially some machine learning experts—the potential is overhyped. Consider machine learning vs. the human mind. In 1997, IBM Deep Blue could beat Garry Kasparov in chess, but only after a long period of training. And yet, its skills were not transferable, as are those of humans: Deep Blue could not play poker, but we can. By comparison, blockchain can disrupt many of the aforementioned sectors today by combining a powerful, secure distributed ledger with machine learning and AI systems for control and auditability. In addition, one of the most critical issues of our era is data governance, control, and sharing by the respective individuals; and this is one of the most promising applications of blockchain technology.

Blockchain’s ascent has been fueled by the meteoric rise of Bitcoin in the last two years. When Bitcoin hit a frenzied high of over $16,000 in November 2017, blockchain was the hottest of hot topics at conferences worldwide. In the time since, both Bitcoin and blockchain technology have gone through the typical technology adoption lifecycle. The mania has settled down somewhat, though these technologies are certainly here to stay. While many companies are certainly still watching intently the trends on blockchain, a handful of startups in different industries are moving towards tokenization of their respective domains. They are doing so for good reason: many early startup companies managed to secure funding in ICO (Initial Coin Offering) by means of being a “utility token” provider. This digital token of cryptocurrency is issued to fund development of the cryptocurrency and can be later used to purchase a good or service offered by the issuer of the cryptocurrency. In this way, tokens enable fundraising for the startup. The initial cost of entry was fairly low, requiring only a sophisticated whitepaper to secure an ICO.

If this sounds too good to be true, it is. As more and more startups failed to deliver on their promises, the tokenized economy experienced its first setbacks. While some governments stopped the ICO altogether, others took the initiative to support the cryptoeconomy. Gibraltar and Malta are still considered safe haven for the cryptoeconomy. Singapore allows payment with Luna and some coffeeshops in the country accept crypto-payment.

It shouldn't come as a surprise that cryptocurrencies in general are subject to increasing government scrutiny and control. They pose a threat to traditional systems in many industries. The most giant and vulnerable among these may be the worldwide banking system. Yet, even here, an element of ‘if you can't beat ’em, join ’em’ is creeping in. Some institutions are experimenting with different versions of cryptocurrencies. Understanding the volatility of some of the cryptocurrencies, some institutions started to use Ripple, which is currently in use with companies such as UniCreditUBS and Santander. It has been increasingly adopted by banks and payment networks as settlement infrastructure technology, with American Banker explaining that “from [the] banks’ perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like Bitcoin and Ethereum.” Many cryptocurrency experts see the volatility of crypto in institutions which will most likely lose the biggest power, mainly governments as well as big banks.

Banking and the cryptoeconomy show just one particular application of blockchain technology. It is also driving many PoCs and powerful applications in cybersecurity, supply chain management (including provenance, fluent, skuchain), forecasting (angur), insurance, private transport (arcade city, la´zooz), cloud storage (storj), charity (bitgive), public benefits (govcoin), healthcare (gem, tierion), energy management (transactivegrid), online music (mycelia), retail (OpenBazaar), and real estate (ubitquity), to name a few. 



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