Uses of Blockchain technology in different sectors

INTRODUCTION:

Blockchain is one of the most exciting tech trends at the moment  as its uses far outweigh its concerns.

A blockchain is essentially a distributed database of records or public ledger of all transactions or digital events that have been executed and shared among participating parties. Each transaction in the public ledger is verified by consensus of a majority of the participants in the system. And, once entered, information can never be erased. The blockchain contains a certain and verifiable record of every single transaction ever made. To use a basic analogy, it is easy to steal a cookie from a cookie jar, kept in a secluded place than stealing the cookie from a cookie jar kept in a market place, being observed by thousands of people.

Bitcoin the most popular cryptocurrency is intrinsically to block chain technology.

WHY BLOCK CHAIN?

Block chain technology has a good track record and has worked flawlessly throughout the years  and will continue to work.

Johann Palychata from BNP Paribas wrote in the Quintessence magazine that bitcoin’s blockchain, the software that allows the digital currency to function should be considered as an invention like the steam or combustion engine that has the potential to transform the world of finance and beyond.

Our current digital economy is reliant on certain trusted authority. we live our life precariously in the digital world by relying on a third entity for the security and privacy of our digital assets. The fact remains that these third-party sources can be hacked, manipulated or compromised.

This is where blockchain Technology comes in handy by enabling a distributed ledger every online transaction of present and past can be verified anytime in the future and the anonymity of user is also provided.

The advantage of blockchain technology far out weights the regulatory issues and other technical challenges faced by it. The technology is finding applications in wide range of areas—both financial and non-financial.

Financial institutions and banks are no longer seeing blockchain as a threat to traditional business models, They are pouring in more investments in this field on research and innovation on blockchain applications.

Apart from this they are also innovation on non-financial application opportunities Such as proof of existence, notary, Insurance, Private securities, etc.

Let us understand from this both the financial and non-financial use of Blockchain.

1) FINANCIAL APPLICATION

A) Perform conventional tasks faster and cheaper:

Financial institutions traditionally work as intermediaries moving payments between different entities, which involves complex and time-consuming processes that add friction into transactions.

And with the help of blockchain technology these process of reconciliation, Clearing and settlement are done seamlessly without friction which will result in reduction of time and cost to the financial institution.

For example, in April 2020 European financial technology company SIA launched a blockchain infrastructure to enable the Spunta Banca DLT, a private permissioned distributed ledger technology-based project for interbank reconciliation for Italian bank. The reconciliation process for interbank transactions in Italy  has been notoriously complex, “As a result, resolving mismatches in transactions has been a labour-intensive and time-consuming process.

Similarly, the financial industry can use blockchain to eliminate the manual processes required to collect and share the documents often required for transactions, whether those documents are custom forms, insurance policies or other myriad types collected by banks and financial services firms.

B) Private securities:

It is very expensive to take a company public. A syndicate of banks must work to underwrite the deal and attract investors. The stock exchanges list company shares for secondary market to function securely with trades settling and clearing in a timely manner. It is now theoretically possible for companies to directly issue the shares via the blockchain. These shares can then be purchased and sold in a secondary market that sits on top of the blockchain.

Here are some examples:

(i) Coin setter: is a New York based bitcoin exchange. It is working on a Project Highline, a method of using the blockchain to settle and clear financial transactions in T+ 10 minutes rather than the customary T+3 or T+2 days

on top of the blockchain. Here are some examples:

(ii) NASDAQ Private Equity: NASDAQ launched its Private Equity Exchange in 2014 . This is meant to provide the key functionalities like Cap table and investor relationship management for the the pre-IPO or private companies. The current process of trading stocks in this exchange is inefficient and slow due to involvement of multiple 3rd parties.

NASDAQ has joined hands with a San Francisco based Start-up called chain.com to implement private equity exchange on top of Blockchain.

Chain.com is implementing Blockchain based smart contracts to implement exchange functionality. This product is expected to be fast, traceable and efficient.

C) Smart Contract:

Smart contracts are contracts which are automatically enforced by computer protocols. Using blockchain technology it has become much easier to register, verify and execute Smart Contracts.

Open source companies like Ethereum and Codius are enabling Smart Contracts using blockchain technology.

Many companies which operate on bitcoin and blockchain technologies are supporting Smart Contracts.

Many cases where assets are transferred only on meeting certain conditions which require Lawyers to create a contract and Banks to provide Escrow service can be replaced by Smart Contracts

2) NON – ­FINANCIAL APPLICATIONS

A) Notary Public:

Blockchain technology is known for its integrity and quick service. There are numerous benefits to using the blockchain for notary public services.

Verifying authenticity of the document can be done using blockchain and eliminates the need for centralized authority.

 The document certification service helps in Proof of Ownership (who authored it), Proof of Existence (at a certain time) and Proof of Integrity (not tampered) of the documents.

Since it is counterfeit-proof and can be verified by independent third parties these services are legally binding. Using blockchain for notarization secures the privacy of the document and those who seek certification.

By publishing proof of publication using cryptographic hashes of files into block chain takes the notary timestamping to new level. It also eliminates the need for expensive notarization fees and ineffective ways of transferring documents.

B) Applications of Blockchain in the Music Industry:

The music industry has gone a big change in last decade due to the growth of Internet and availability of a number of streaming services over the Internet.

 It is impacting everyone in the music industry-artists, labels, publishers, songwriters and streaming service providers.

The process by which music royalties are determined has always been Troublesome, The rise of the Internet has made it even more complex giving rise to the demand of transparency in the royalty payments by artists and songwriters.

This is where the blockchain can play a role by maintaining a comprehensive, accurate distributed database of music rights ownership information in a public ledger.

In addition to rights ownership information, the royalty split for each work, as determined by “smart contracts” could be added to the database. The “smart contracts” would define relationships between different stakeholders (addresses) and automate their interactions

C) Decentralized Storage:

Cloud file storage solutions such as Dropbox, Google Drive or One Drive are growing in popularity to store documents, photos, video and music files.

Despite their popularity, cloud file storage solutions typically face challenges in areas such as security, privacy and data control. The major issue is that one has to trust a third party with one’s confidential files. for example

Storj -provides a blockchain based peer-to-peer distributed cloud storage platform that allows users to transfer and share data without relying on a third-party data provider. This allows people to share unused internet bandwidth and spare disk space in their personal computing devices to those looking to store large files in return for bitcoin-based micropayments.

Absence of a central control eliminates most traditional data failures and outages, as well as significantly increasing security, privacy and data control. Storj platform depends upon a challenge algorithm to offer incentivization for users to properly participate in this network. In this way, Storj platform can periodically cryptographically check the integrity and availability of a file, and offer direct rewards to those maintaining the file.

CONCLUSION:

To conclude, Blockchain will become the technology backbone. The distributed ledger functionality coupled with security of Blockchain, makes it very attractive technology to solve the current Financial as well as non-financial business problems

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