July 17, 2015
Blockchain has been one of the most awe-inspiring innovations since the Internet came into existence. Blockchain technology basically allows everyone to hold and make transactions as strangers but in a completely transparent manner. There is no mediator in between two people making the transaction, and the entire process becomes easier and cheaper. This concept can be applied to the entire digital world making any kind of exchange/transactions secure (and not just bitcoin). This article will take you through numerous such business models and companies that are beginning to sprout based on Blockchain tech.
The Blockchain network consists of nodes, i.e. distributed servers. All the nodes can accept and process the transaction. The nodes on the network share information about the candidate transaction. As much as the logic/tech part of it sounds confusing, the business models are so much more easier to understand and are really impressive.
Since the Blockchain network follows consensus and validation methodology, it is not only Bitcoin related applications where it can be used. Consensus is an iterative process, in which nodes communicate and update until majority of the peers agree on the transaction processed and therefore it is powerful. The transaction which does not pass one round of consensus will be sent for the second round consensus for approval. The nodes of the network recognize a ledger instance as validated when a supermajority of the peers have signed and broadcast an identical validation. If the network fails to achieve supermajority agreement on validations, this implies that transaction volume was too high or network latency too great for the consensus process to produce consistent proposals. Today we will try to demystify it. First have a look at the business models and applications using Blockchain concept in the infographic below.
The Blockchain Platform is being used for various use cases and business models such as:
- Crowd Funding - Blockchain Technology is being applied to the crowdsourcing platforms. When individuals are granted certain responsibilities or chunks of business, a blockchain-like system could determine which of those individuals are worthy of credit. Blockchain has the potential to make crowdsourcing smooth and secure. Examples of such companies are BitcoinCapital, Koinify and others.
- Identity - Authentication & Security Management- In the field of identity management, user first scans his/her identity document and then signs it. Then, the mobile app will generate a private and public key to seal that record. It is encrypted, hashed and sent to the network of communicating nodes running on the Blockchain network. Examples of such companies are ShoCard, BlockChain Factory and others.
- Smart Contracts - A cryptographic Blockchain is used to digitally sign sensitive information, and decentralize trust; and this is being used to develop smart contracts and escrow services, tokenization, authentication, and other services. (Smart Contracts) Examples of such companies are Symbiont, SAE and others.
- Remittance - Blockchain protocols are used by many companies already for P2P money Transfer across international borders. Its a segment worth $500 B. Examples of such companies are Ripplelabs, Bitspark and BitPesa
- Data Management & Analytics - Blockchain-based identity ledgers are used in database management and data analytics to support various application. Examples of such companies are Factom, numsight and others.
- Trading Platform - Using Blockchain technology, individuals and firms can produce and exchange financial contracts. This peer-to-peer contract creation and settlement means that all transactions are cleared on the Bitcoin Blockchain with no intermediary involved. Examples of such companies are Kraken, Nasdaq, Mirror and others.
What you have already seen is that Blockchain distributed ledger is an in-erasable record of bitcoin transaction. The network of computers around the world running bitcoin software will take care of the performance and maintenance of the Blockchain network. About six times per hour, a new group of accepted transactions (a block) is created, added to the block chain and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent.
It is this feature of Blockchain technology that has grown in its popularity amongst large banks, developers and entrepreneurs. Santander Bank, the world’s 10th largest bank, has also been investigating in Blockchain technology. They have announced that an internal team is working on applying blockchain technology and distributed ledgers on various use cases in the bank. Other international banks like Citi and JPMorgan have also been showing interest in Blockchain technology.
Many startups are building their businesses around blockchain technology. Consequently, VC firms like KPCB are showing interest in investing in these startups. While startups like Coinometrics gather data and research on qualitative and quantitative behaviors on blockchains, there are others like BTCJam who provide bitcoin-based loans. A number of other startups built around blockchain technology include BlockCypher, BitPay and BitPagos. Another interesting startup, Chain, helps companies build financial products around blockchain technology with its bitcoin data API. NASDAQ has chosen Chain to run a pilot around blockchain technology on the NASDAQ Private Market.
With growing applications of Blockchain technology and triggers by VC firms like KPCB Edge funds, the day is not too far when the Blockchain might disrupt the entire FinTech industry.