Building Blocks of the Future: How Blockchain is Transforming Industries

Blockchain technology is swiftly becoming a game changing ingredient in its passing, not only for the financial sector but also for several other industries.

The fourth industrial revolution (4IR) is upon us, and blockchain technology is swiftly becoming a game changing ingredient in its passing, not only for the financial sector but also for several other industries.

However, before delving into the specifics of how this innovative technology is revolutionizing today’s industries, it is essential to understand what blockchain technology is and why it has gained popularity over the past decade.

Understanding the Basics of Blockchain Technology  

A blockchain is essentially a distributed ledger that consists of a series of records called blocks, securely interconnected through cryptographic hashes. These blocks are linked together in a sequential manner, forming a chain-like structure. Each block contains vital data, including a cryptographic hash of the previous block, a timestamp, and transaction information, usually represented as a Merkle tree, with data nodes as leaves.

What makes blockchain a unique technology is its core set of features, which includes immutability (preventing alteration of already recorded transactions), decentralization (lacking a central governing authority), and transparency (allowing anyone to view or track transactions). All these features combined introduce a novel technology that fundamentally eliminates the need for central intermediaries and enables distributed verifiability by multiple actors (validators).

As for its origin, the first blockchain-like protocol was suggested by David Chaum in his 1982 dissertation paper dubbed “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups.” However, it was not until many years later until Satoshi Nakamoto developed and released Bitcoin that the idea behind the blockchain came into practical existence. 

Today, blockchain is one of the 4IR technologies that is significantly revolutionizing industries, alongside Artificial Intelligence (AI), Virtual Reality (VR), and The Internet of Things (IoT).

Blockchain’s Impact in Today’s Industries 

According to the latest report by Fortune Business Insights, the total blockchain technology market size reached $11.14 billion in 2022, with projections showing it could exceed $469.49 billion by 2030, growing at a CAGR of 59.9%. North America accounts for almost 50% of this capital, with a market size of $5.25 billion in 2022.

Image Source: Fortune Business Insights

Of course, several industries are benefiting from this capital injection, but in this article, we will highlight five main sectors that are looking particularly promising or have made notable advancements in blockchain adoption: financial services, supply chain, healthcare, energy, and real estate.

Financial Services 

Bitcoin was launched at a time when the global financial system was on the brink of collapse as a result of the US housing bubble. While most traditional banks are still opposed to the idea of decentralized crypto assets, a good number of the leading banks, including Standard Chartered, JP Morgan, and Goldman Sachs, have invested in research or the development of the underlying tech – blockchain.

How is blockchain transforming financial services?

Let’s start with the most basic function of the financial ecosystem: payments. Unlike the traditional payments system where it can take up to a week for settlements to clear, digital assets like Bitcoin and stablecoins such as USDT and USDC only take a few minutes or hours. Additionally, these transactions are much cheaper as there are no central intermediaries involved to charge exorbitant fees.

Even more intriguing is the emergence of Decentralized Finance (DeFi), a nascent crypto niche whose architecture resembles traditional finance. DeFi offers all the financial services you can get from a bank, investment manager, or brokerage, with the only difference being that there are no 3rd parties involved. Instead, settlements are automated through pre-coded smart contracts when the settlement conditions are met. 

And although DeFi is yet to go mainstream, there are currently over $43 billion locked in various DeFi protocols that offer services ranging from exchanges, lending, derivatives, and staking. It is also interesting to note that traditional banks are gradually joining the DeFi bandwagon, with JP Morgan having executed its first DeFi trade last year.

Meanwhile, on blockchain infrastructure adoption, Ripple’s enterprise blockchain solution has been gaining traction and is currently being used by Standard Chartered and Axis Bank to enhance the efficiency of on-demand corporate payments between the two banks.

Supply Chain Management 

The global supply chain management market was valued at $27.2 billion in 2022. Estimates by Allied Market Research show it is poised to hit $75.6 billion within the next decade, growing at a CAGR of 10.9%. Behind this growth are technological advancements, most notably AI, IoT, and blockchain technology, which are playing an integral role in streamlining supply chain systems.

At its core, blockchain technology reinforces the key features of supply chain management, which include tracking, visibility, inventory management and ethical practices. By tracking raw materials and final products using an immutable ledger, blockchain has made it possible for all participants in a specific supply chain to verify the origin of raw materials, ensure their originality throughout the chain, and seamlessly facilitate transaction finality. 

Given this value proposition, it comes as no surprise that the supply chain is one of the areas where we are seeing notable advancements in blockchain integration. A good example is De Beers’ proprietary blockchain-powered platform, Tracr, which was launched in 2022 to enhance the company’s diamond production and distribution supply chain. Worth noting is that De Beers is one of the largest diamond producers in the world.

UAE’s state-owned oil company, Abu Dhabi National Oil Company (ADNOC), is another entity that has integrated blockchain into its supply chain through a partnership with tech behemoth IBM. The initiative allows stakeholders to effectively track oil, starting from the wells all the way to the consumption stage, while logging on-chain and verifiable transactions at each stage of the process.

Healthcare 

Healthcare has also benefited from the advent of blockchain technology, particularly in the securing of patient data. According to a recent healthcare data breach report by the HIPAA Journal, 692 data breaches were reported between July 2021 and June 2022, compromising the personal information of over 42 million individuals. This is a worrying trend given the sensitivity of medical data.

But with blockchain in the picture, it is now possible for the healthcare industry to reduce the cases of data corruption through decentralized and tamper-proof data logs. Already, several startups have sprung up to offer blockchain-as-a-service to the medical industry, including the likes of Akiri, Medicalchain, Guardtime, and Patientory. All these firms offer data security solutions powered by blockchain technology.

“An interoperable blockchain can strengthen data integrity while better protecting patients’ digital identities. The blockchain’s inherent properties of cryptographic public/private key access, proof of work, and distributed data create a new level of integrity for health care information.” reads a report by Deloitte.  

Energy and Sustainability 

The issue of climate change is a hot and controversial topic that cannot be ignored, regardless of which side of the fence you sit on. For context, climate change activists envision a net-zero carbon world, which means that every CO2 emission must be offset by an equivalent amount of carbon credits. As it stands, one carbon credit is equivalent to one metric ton of carbon.

So, how do companies access the extra carbon credits? The most straightforward way is through an emission trading system (ETS). However, with the carbon credit demand projected to reach 1.5 to 2.0 gigatons by 2030, this market needs to be made more accessible. This is where blockchain technology comes into play, enabling the conversion of carbon credits into tokenized digital assets that can be sold in decentralized markets.

While still a nascent area of innovation, several carbon credit initiatives tied to blockchain and crypto have emerged in the recent past. One example is Universal Carbon, which claims to be the premier project introducing a tradeable carbon token that resides on a public blockchain. Ideally, users can purchase this token and choose to hold it as an investment or burn it to offset one-year tonne of carbon emissions.

Overall, blockchain technology through tokenization is opening up an opportunity for a larger population to participate in carbon credit markets, ultimately boosting liquidity and advancing the path towards achieving carbon-neutrality. 

Real Estate 

Last but not least is the real estate market. Here, blockchain proposes several use cases, ranging from recording titles in distributed ledgers, property management automation, and tokenization. The use of smart contract technology for property transactions and verifying the legitimacy of the seller not only reduces transaction costs and time but also enhances the due diligence process.

However, what I find more intriguing is the aspect of tokenization, which essentially bridges the gap between the traditional real estate market and on-chain economies. Imagine being able to buy a portion of a house or a piece of land without necessarily having to own the whole unit; that’s what tokenized real estate introduces – fractionalized investing. This makes the real estate market more liquid and globally accessible. 

For instance, suppose you wanted to sell a 200,000 square foot property via blockchain. In that case, one can simply leverage a platform like Tokeny to list the property by first securitizing it (selecting the jurisdiction of issuance and distribution). Once done, you can proceed to tokenize it and divide the property into smaller shares represented by digital tokens, enabling prospective investors to purchase the shares and own a portion of the property.

Obviously, real estate tokenization is still a grey area both in terms of development and the regulatory framework. However, given the underlying potential, we are likely to see more stakeholders in this market tapping into blockchain technology.

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