Future Benefits of Blockchain Technology
Updated: March 9, 2023
In the 1960s, when computer scientists at MIT were studying how computers might change the world, no one would have predicted what the benefits of blockchain technology would become. This was years before the introduction of the first personal computer. It was before Steve Jobs and Steve Wozniak built the Apple I. It was long before IBM and Microsoft became household names. J.C.R. Licklider, one of these MIT scientists, wrote about his idea for a “Galactic Network” of globally connected computers sharing information. While his colleague, Leonard Kleinrock, published the first paper on packet switching theory, a method for transmitting electronic data. Do these concepts sound familiar? They should. These two ideas became the building blocks for what we now call the Internet, a technology that continues to change and evolve that has revolutionized the way we live, work, and communicate. A comparison between the internet of the 1960s and blockchain technology today is an important one because of the huge potential that it offers.
Many experts predict blockchain will be the technology of the future. Its revolutionary effect will be on the global economy and the way we live. This is comparable only to the changes brought about with the World Wide Web. Blockchain is currently best known in reference to cryptocurrencies like Bitcoin. And for its impact on financial markets. However, blockchain offers many more applications for businesses and organizations across industries over both the short-term and far into the future.
Let’s explore the current ways blockchain can be beneficial beyond Bitcoin. We will look at how blockchain systems might shape and impact our future. And get a glimpse at what comes next for this transformative technology.
What is Blockchain Technology?
Before we dive into the details, a brief explanation of blockchain and how it works is in order. At its most basic, blockchain is a distributed ledger. Information is stored across a system of public or private computers in an ever-growing list of transactions known as “blocks”. These transactions are permanently recorded. Then mathematically encrypted, and put in chronological order adding to the chain of records. Various protocols are used to ensure a new block is authorized by other participants before it can be added to the chain. As a result, blockchain is an eternal, transmutable, transparent recording of data.
One of the most important features of blockchain is that no central authority or company controls it. Instead a network of computers stores data. Therefore, there is no middleman. The decentralized nature of blockchain also means that no one person can take down or corrupt the whole system, preventing problems like fraud and double spending. Blockchain’s most well-known application to date has been in cryptocurrencies like Bitcoin, but the potentials of this technology go far beyond financial transactions. In fact, blockchain technology can meet various goals and commercial objectives.
Current Applications of Blockchain
While many people have noted the disruptive potential of blockchain and the possibility of new operating models that it presents, the technology is still in its early days. However, blockchain does offer the potential to impact operational efficiencies now by lowering costs and removing administrative burdens. Several industries are already well-suited to implementing Blockchain solutions, as a recent McKinsey article pointed out. These sectors include:
Beyond cryptocurrencies, blockchain can help with cross-border financial transactions by reducing the number of intermediaries and eliminating location challenges. Permissioned blockchains is a type of blockchain where only authorized participants can join, and has been tested to reduce work and streamline processes. According to the article, 90 percent of major North American, European and Australian banks were already investing in blockchain as of June 2018.
Like banks, governments are often responsible for large amount of records and data collected from their citizens. This could include everything from birth certificate and voter registration information to tax records. Unfortunately, government agencies aren’t great at sharing and data can end up siloed among many record-keeping systems. Blockchain-based identity records is one solution. This would allow government agencies to simplify data processing while also increasing system security.
The current healthcare system is a maze. For instance, valuable data is spread across providers, patients, insurance companies and research systems. The industry also spends huge amounts of time tracking patients and the healthcare they receive. Now imagine if records were easily shared and accessed across a system. Researchers could gain crucial, non-identifiable and historical patient data to advance medical research and patients would have more control over their own information. A blockchain-based system for healthcare records could make this a reality, eventually even integrating with Internet of Things sensors to control the storage and distribution of crucial medical supplies.
Benefits of Blockchain Technology and Next Steps
In the future, systems built on blockchain technology could be used to enhance cybersecurity, address concerns with Internet of Thing (IoT) networks, enable faster more reliable communications, and create new ways of identifying people through secure data. There are applications for blockchain in every industry and organization from agriculture and arts to manufacturing and media. While many companies have already begun to experiment with blockchain, full feasibility is still years away for a few key reasons.
One of the key elements that eventually allowed the internet to succeed and become the transformative technology it is today was HTTP, a common communication protocol that allowed various networks to communicate in the same language. Other important developments in the growth of the internet included the creation of HTML as a standard markup language. Equally important were universal browsers such as Chrome and Safari. This displayed internet content in a consumer-friendly format.
All these important foundational pieces are currently missing in blockchain. There is no agreed upon universal communication for protocol between blockchains. This means that blockchains currently exist as islands with little to no communication between them. For blockchain to have an impact similar to that of the internet, interoperability must be achieved to create the “internet of blockchain” or “chains of chains”.
Lack of Common Standards
Along with a communication protocol, a lack of common standards and clear regulations limit blockchain’s scalable potential. Blockchain promises to bring system level changes. For that to happen, cooperation will be necessary among multiple parties. Everyone must agree on rules and standards. A dominant organization or government agency, like the internet’s ICANN, that could mandate the legal standing of blockchain systems will be an important component for future blockchain success.
Old Systems vs. New Chains
Blockchain technology is still new, therefore traditional database systems will likely still perform better for most industries atleast for now. The challenge will be in the switch between old and new systems. While switching costs are currently high due to blockchain’s immaturity, most of the technology’s benefits won’t be fully realized until old systems are decommissioned. For this to happen, companies need a trusted enterprise solution. Some major tech players are moving to address this gap with blockchain as a service (BaaS) offerings. However, for blockchain to be the system of the future, more will be need to be done.
A Generation Defining Technology
Blockchain is coming, but it may be years before we see the real effects of this new technology on a day-to-day basis. As Liana Douillet Guzman, McKinsey’s Senior Vice President for Growth of Blockchain, explained, when the Internet was created, there was no way to predict Facebook. The same is true of blockchain technology. At its core, blockchain has the potential to allow people to own and transact their own value. However, it will be anyone’s guess what exactly the future of blockchain technology will hold.
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