The blockchain is best known for the cryptocurrency Bitcoin – but the technology can do so much more: this “chain” is said to have revolutionary economic, but also social potential. How far along is this technology today? Even the traditional “late adopters”, such as government agencies, are now relying on it! Conversely, this also means that anyone who has not investigated it and checked how they can use the technology in their company to achieve their goals should do so quickly, preferably yesterday. My forecast: In two years at the latest, blockchain will be part of everyday life in many industries – and for consumers as well (even if they may not even notice it)!
What’s behind the technology?
The blockchain is nothing more than a decentralized database that is stored on all participating computers, at least piecemeal so that it cannot be falsified – it is always possible to trace who has attached a block and what the chain looks like. There is no “central archive.” If someone wanted to manipulate the database, they would have to hack all participating computers in the network simultaneously. But that is not (yet) possible with the current computing capacity. In addition, there are encryption technologies that further improve security.
The blockchain is characterized by traceability and transparency. The chain is constantly being expanded by new blocks or transactions – and every transaction is traceable for the participants. And since the database is hosted decentrally, backup strategies are no longer necessary because there are automatically various back-ups of the chain on the participants’ computers.
At the forefront – as always, the financial industry
The financial sector was one of the first industries to recognize the potential and try to harness it for itself. Of course, they have also developed their own cryptocurrencies, but the current focus of their efforts is also on traditional bank transfers. Especially during the EU regulations, the internal costs for banks for transfers have skyrocketed. Technologies such as blockchain can help to massively improve and accelerate the processes, with higher security and lower costs.
A particularly interesting topic area opened via the blockchain is automated contracting – neo-European: smart contracts. One example: a car insurance policy can be dynamically adapted to the use of the car. If the car is only used in the city, the probability of parking damage is higher, and the insurance is correspondingly more expensive. However, the entire process runs automatically, and the car and insurance policy clarify the costs and settle them automatically – transparently and comprehensibly – with virtually no further intervention by the owner and the insurance company.
The late adopters are getting into a position
If you want to digitize highly sensitive records and documents – data of the kind that accumulates in government agencies – you also must secure them sensibly. No one – not even a government – can afford to lose such data. That’s why blockchain technology is currently (!) the most secure option. Because no one owns the entire bundle of data. And if just a piece of the data set on a computer is scammed, it is hardly possible to do anything with it. In addition to the security advantages, administrations also benefit from the fact that they can retire their data storage. There is also no longer any need to operate failover data centers. There are huge cost savings to be made here.
As a result, blockchain has even become an issue in public authorities. Separate project departments have been set up to find out how and where blockchain can be used sensibly in this environment. The possibilities are almost eye-catching: for example, an online tax return could ideally be set up, implemented, and secured with the blockchain. A central registry of residents or the issuing of identification documents is also a plausible scenario. Initial thought experiments on a “digital tax auditor” have also already been conducted – there is great potential here, considering the time required for such an audit.
How does it work?
Let’s take the example of online tax returns. Anyone who wants to participate in the system registers for it and becomes part of the network. Part of the database is then stored in encrypted form on their computer. This is not the user’s own data, but rather randomly selected data records.
randomly selected data records. Of course, the data center has a key that can be used to put everything together to run an analysis. But the key cannot be hacked because it is generated anew for each query. The system is – as of today – secure. The citizen sends in his tax return and then receives a code. This allows him to track who is currently processing the tax return, who has accessed it, etc. All in all, the consumer will hardly notice the technology behind it – he does his online tax return just as he did before. The only difference is under the hood. The engine is then called the blockchain.
The potential of blockchain is gigantic. In the beginning, it was a product for the financial sector – fintech, banks and insurance companies. The technology has already outgrown this niche. If even public authorities are not averse to it, that is strong evidence of the technology’s maturity. And anyone who has ever used Bitcoins knows how well and simply the technology works. For businesses, this means that now is the time to take advantage of this groundbreaking technology! It offers opportunities and possibilities galore. Therefore: Try it out! Create use cases! Learn! Because if the blockchain is used in a meaningful way, then clear competitive advantages await.
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