Internet of Things How can Blockchain Technology Be Useful for The Industry?
Blockchain technology and Bitcoin is on everyone's lips but hardly anyone understands what it exactly is. Nevertheless, the expectations are high. So first of all let's become clear about digital cryptocurrencies such as Bitcoin so that we can understand this technology's potential for the industry.
When we talk about Blockchain technology, everyone thinks about cryptocurrencies. But what can Blockchain do and how can it be useful to the industry? To answer this question, we've got to go back ten years to when it first came about. It marks the moment of Bitcoin's birth. The 2008 recession led to a lot of people losing faith in the financial sector. Investment decisions of large banks and insurance companies proved to be wrong, which had disastrous consequences for a large number of state budgets.
An Alternative for Transactions Without Intermediaries
With Bitcoin, Satoshi Nakamoto (a pseudonym) created an alternative to the pre-existing financial sector in 2008. It is an alternative form of payment, which should do well without the supervision of governments, banks and large companies. Nakamoto’s whitepaper «Bitcoin: A Peer-to-Peer Electronic Cash System» also explains the technical and economic principles of cryptocurrencies. It is supposed to allow one party to make payments to another online, without a reliable broker being involved.
Although cryptography does exactly what institutes, such as banks, supervisory authorities and central banks also do, i.e., checking the legitimacy and guaranteeing the integrity of the financial assets they are based on, this all takes place without an intermediary.
How Bitcoin Transactions Work
Bitcoins do not have any physical form and do not exist as a digital file. What actually happens is that each transaction is made in a public register (ledger). The more people owning a copy of the ledger, the harder it is to commit fraud. If someone transfers a Bitcoin to a recipient address, the addressee's credited increases or decreases accordingly. The addresses are also referred to as a wallet. All transactions are transparent so that a secure transaction is able to work. Every Bitcoin user is able to see any transactions that have been carried out with the Bitcoin Blockchain. However, the identity of the person behind the transaction itself is encrypted. The legitimacy of the transactions is verified to be decentralised "miners". They clarify if the sender has any Bitcoin credit, what the value of it is and how they intend to carry out the transfer - just like an accountant. According to the Blockchain log, it takes about ten minutes to carry out the check. Each recipient is only able to decide for themselves as to how many miners he wants to put on their Bitcoin transaction. The higher the number of verifications, the longer the delivery takes and, more importantly, the more secure it is.
Enormous Power Consumption for The Control Mechanism
The mining process described above depicts Bitcoin's consensus mechanism, the so-called “proof of work”. This model creates a public register, which everyone can trust, but nobody has to control. The "miners” use a lot or processing power for checking the transaction. A fee is charged for the accountant's processing power during the mining process. During this, the miners consume an enormous amount of electricity. According to Digiconomist, it came to around 37 terawatt hours (TWh) at the end of 2017. As a comparison, Switzerland consumed 62 TWh in all of 2014. This is enough to deter anyone who might have bad intentions. Hacking Bitcoins would require an enormous amount of computing power, electricity and money. If hacking were actually successful then it would result in a drop in the value of cryptocurrencies. For that reason, an attack just doesn't make any sense from an economic perspective.
Blockchain Technology Beyond Cryptocurrencies
The question now arises as to where else this database architecture can be used. The answer is: Everywhere, where people do not want to have a middleman and where people are looking for decentralisation. A prime example is property ownership. In Brazil and Venezuela, where large property owners are easily able to oust simple farmers with impunity because of the fact that corruption on the level of the authorities is able to undermine the rule of law, it is possible for Blockchain technology to have a truly humanitarian impact. As soon as a piece of land has been noted in a public register, it will be possible for any ousted party to assert their right and be safe from any encroachments. The technology can also be used in the West.
Since the middle of 2017, some land registries in Sweden have started to enter plots and ownership by using a Blockchain. It is thought that this will bring about improved efficiency and financial savings to the tune of 100 million euros.
In the same way, it would be possible for Blockchain to be used for transferring property rights in physical goods such as cars, art, musical instruments etc., and also for intangible capital such as information, intellectual property, identification etc. The Swiss city of Zug has recently started to offer its residents the option of getting a digital identity. This is based on an app that secures personal information with the help of Blockchain technology and is associated to it with a crypto address.
The technology in Zug is based on Ethereum's technology. It is an advancement on Bitcoin. Where Bitcoin was created, first and foremost, for financial transactions, Ethereum should be understood as being a platform. Ethereum allows two parties to sign a contract - without the need for a third party. This should ensure that intelligent agreements – so-called "smart contracts”– ensure more trust between the contractual parties.
Usage Of Bitcoin Technology In An Industrial Business Cycle
Blockchain technology also offers a platform, in the industry, for securing production data, measurement values or properties in a register, in an unalterable fashion; contracts or agreements that have been agreed to, which can then be saved. The technology could also be used for automation for creating a bridge between digital payments and the Internet of Things. Blockchain can also provide valuable services for product safety. An example of this is additive manufacturing: Prototypes or individual components can be rapidly and cheaply 3D printed. The additive manufacturing process is not without its risks, however. For example, components can be reprinted by unauthorized manufacturers with less valuable materials. Blockchain would not only allow payment and the product specifications to be clarified beforehand in a "smart contract", but also intellectual property in the product and tracing right back to the manufacturer. If it is not possible to clearly identify a product, then it is not secure.
Conclusion of The Blockchain Technology
Blockchain technology promises to completely reform money, intermediaries and trust. Traditional industries will be faced with large-scale restructuring. Fields such as e-commerce, legal transactions and ownership will face major changes as a result of cost-effective, Blockchain-based services.
Blockchain technology is not only an alternative to financial transactions, it also allows transactions between companies without intermediaries.
This article was first published by Process Worldwide.