Interest and attention towards blockchain and crypto have grown in the recent past. But what exactly are these technologies, and how can they be applied to businesses, and affect the everyday consumer? Our writer Fatima Tariq explores more in her interview with Nickey Khem, co-founder and Chief Technology Officer at BSD Education and the trainer for our first class in the SLDxDigital program
What is Blockchain?
Blockchain is a “chain of blocks of data’’ which facilitates storing and sharing information very securely and transparently with cryptographic hashes in a business network.
Consider an example of a bank where the most important financial details of the client are with the bank and they in turn maintain a ledger for their client for routine transactions. In the event of an out of routine transaction, the bank will ask the client to follow a process involving submitting an “out of routine” request, which is then subject to the approval from the management. This whole process could take around 2-3 days. Alternatively, blockchain technology becomes the digital ledger itself where each time a new piece of information, called a “block,” is added to the ledger, it is verified and encrypted to maintain a high level of security by the network of computers. Since all blocks are sequentially linked together and permanent, this takes out the need for any intermediary approval and saves delays.
What is Cryptocurrency (crypto) ?
Cryptocurrency is a digital or virtual currency that uses cryptography to secure transactions and control the creation of new units. Unlike a traditional physical asset like cash or gold, this is like a digital form of asset that can be held onto as an investment or can be used to buy things. Nickey Khem, our speaker for the upcoming Class 1 on the topic of Blockchain shared, “What makes cryptocurrencies different from traditional money is that they are decentralized, meaning they are not controlled by any single government or financial institution. Effectively, like many innovative technologies, you reduce the need for an intermediary, in this case centralized banks”.
How are Blockchain and Cryptocurrency related?
The connection between blockchain and crypto is that the underlying technology of cryptocurrencies is Blockchain. In order for the cryptocurrencies to operate, they ought to be related to their blockchain. Hence, the existence of cryptocurrencies depends on the existence of blockchain.
“When we use a certain cryptocurrency, each transaction conducted is recorded in blockchains to take advantage of the transparency and security,” explained Nickey.
Each cryptocurrency has its own blockchain that handles all the transactions of that specific cryptocurrency happening anywhere and anytime in the world.
What are the real time applications of Crypto and Blockchain?
According to Nickey, “Cryptocurrencies are operating in almost all the real time applications of blockchain, but to provide more concrete examples, here are how the financial uses cases can vary:
- Peer-to-Peer Transactions: Cryptocurrencies like Bitcoin and Ethereum can be used for peer-to-peer transactions, allowing users to send and receive payments directly without the need for intermediaries like banks or payment processors.
- Cross-Border Payments: Cryptocurrencies can be used to facilitate cross-border payments, allowing users to send and receive money internationally with lower fees and faster processing times than traditional methods.
- Micropayments: Cryptocurrencies can be used for micropayments, allowing users to make small transactions without incurring high fees.
- Store of Value: Some cryptocurrencies, like Bitcoin, are seen as a store of value and a hedge against inflation. They can be used to store wealth and protect against currency devaluation.
- Investment: Cryptocurrencies can be used as an investment, with many investors buying and holding cryptocurrencies as a long-term strategy.
- Online Purchases: Cryptocurrencies can be used to make online purchases, allowing users to pay for goods and services without the need for a credit card or bank account.
- Crowdfunding: Cryptocurrencies can be used for crowdfunding projects, allowing entrepreneurs and developers to raise funds for their projects from a global community of investors.
Blockchain has a wide variety of use cases outside of financial ones stated above:
- Decentralized Finance (DeFi): Blockchain technology can be used to create decentralized financial applications that allow users to access financial services without the need for intermediaries like banks.
- Supply Chain Management: Blockchain technology can be used to track the movement of goods along a supply chain, providing transparency and traceability. This can help to reduce fraud, ensure product safety, and improve efficiency.
- Identity Verification: Blockchain technology can be used to create secure and tamper-proof digital identities, which can be used for identity verification and authentication. This can help to prevent identity theft and fraud.
- Healthcare: Blockchain technology can be used to store and share patient data securely and privately. This can help to improve the quality of healthcare by making it easier for doctors and other healthcare providers to access and share patient information.
- Real Estate: Blockchain technology can be used to create a secure and transparent way to buy and sell real estate. Smart contracts can be used to automate the process, reducing the need for intermediaries like real estate agents.
- Voting: Blockchain technology can be used to create a secure and transparent voting system, making it easier to verify the results of an election and prevent fraud.
- Gaming: Blockchain technology can be used to create decentralized gaming platforms that allow players to trade in-game assets and currencies securely and transparently.
Conclusively, this is just the tip of the iceberg, as the technologies develop further, we will see the use cases expand and evolve.
Is Blockchain and Crypto really the future?
We consulted Nickey, our speaker about his views on it and he sees the potential and future :
“Having developed, invested and utilized blockchain as well as invested and having invested in several different cryptocurrencies, I think we are truly seeing the tip of the iceberg. I would state that the two are not on equal grounds and often are wrongly compared with each other.
Blockchain technology (distributed ledgers) can be used to record anything of value without an intermediary – not only financial transactions. This is a concept with applications far beyond cryptocurrency.
While I believe cryptocurrencies have a part to play in our future, the regulatory challenges will be the biggest hurdle for its adoption. Digital currencies are definitely here to stay. Will the world function if currencies were truly decentralized? I eagerly wait to see.
Blockchains (the wider technology, the one that even powers the majority of cryptocurrencies) are going to solve major problems across many industries, while they are not a one size fits all solution, they are going to play a big role in our future”.
How are Blockchain and Crypto going to affect our daily lives?
One of the major changes will be to decentralize and not be dependent on any intermediary entity for our day-to-day transactions. The other major change it is going to introduce will be the accessibility and transparency in our day-to-day dealings with complete control being in our own hands.
Are there any potential risks related to Blockchain, if so, what are those?
According to Nickey, “Like all technologies, blockchain also carries some risk. At its current state I see some risks that are currently being tackled such as security, regulatory and environmental:
- Security Risks: While blockchain technology is designed to be secure and tamper-proof, it is not completely immune to security risks. For example, if a single entity controls a majority of the network’s computing power, they could potentially manipulate the blockchain and compromise its integrity..
Ensuring that businesses can seamlessly work between the various blockchain technologies is going to be a challenge, one that I can already see many projects being created to help with this. It is interesting to see that this is similar to many of the Web2 challenges we encountered and worked towards.
Some non-technical barriers which will likely pose a risk are:
- Regulatory: As this technology starts disrupting industries, there is bound to be government and regulatory intervention that could see a limitation in adoption and growth.
- Environmental: Some of the PoW (proof-of-work consensus algorithms) based blockchains such as BitCoin, require a lot of computing power and energy. As a result, many blockchains are exploring different and more energy efficient mechanisms.
Learn more about Blockchain by registering to our free online class here
