Tackling Blockchain: What is it and how is it shaping business?

In recent years, ‘Blockchain’ has become a buzzword in the world of internet technology and particularly e-commerce. Since the digital currency ‘Bitcoin’ first demonstrated the potential blockchain systems held as the revolutionary next step in data technology, the applications of blockchain have been pushed ever further and are reshaping the web. Total spending on Blockchain solutions by businesses is forecast to reach the $11.7 billion mark in 2022, so what is driving that push? Keeping up with the latest news and developments in this area can be a headache, but doing so is hugely beneficial to benefitting from this multibillion dollar advance in e-commerce and internet technology. Luckily, we have compiled some of the key trends and news here, so let’s consider the latest in Blockchain technology use, and the impacts of it.

Understanding Blockchain

Despite the way blockchain is redefining modern business technology, many people are still totally unaware of what it really is. Researching blockchain technology can lead down a rabbit hole of web development and e-commerce theory, but at its heart blockchain is a simple concept. Essentially, it is a system for recording information, a kind of public ledger. Any data entries added to the system are stored chronologically in ‘blocks’ of information like folders. As new data is added to the system, more blocks are added after the older ones and linked to them forming a chain of blocks – a blockchain!

The clever thing about blockchains is they aren’t stored in one location but are duplicated and shared across the network of users who have access to the data. The data blocks are linked via two hash codes, one that is a unique identity to that block and another that matches the preceding block in the chain. Being linked in this way means that any attempt to tamper with or edit one of these data entries would result in a new hash that wouldn’t match with the succeeding blocks in the chain. Seeing that this copy of the blockchain also would not correspond to those of the other users in the network, the system would identify the anomaly and correct it according to the other copies.

This is the major advantage of blockchain systems – they are almost impossible to tamper with! In order to edit the blockchain record, a person would need to be able to access the network, edit each succeeding block in the sequence to match the hash codes, and make at least 50% of the network’s blockchain duplicates match it.

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The principle of blockchain technology was first discussed in 1991, but since 2009 when Satoshi Nakamoto implemented it to create bitcoin interest in blockchain and its application has rocketed. Current research in Blockdata reports show that blockchain is mostly being utilised in areas such as verifying identity and reputation, supply chain, logistics and inter-bank transactions focussing on traceability. In fact, big brand names such as Amazon, PayPal, Shell, Samsung, and Microsoft all have operating blockchain solutions in place. But these applications are only scratching the surface of the potential of blockchain technology, and current trends are highlighting how far it can go.

Why is Blockchain so radical?

Presently, blockchain’s ability to track orders, payments, and accounts are leading to speculations about potential use in governmental administrative activities such as tax collection, but far more lies beneath the surface. While these applications of blockchain are innovative, broader potential in the use of blockchain lies in two main principles of the technology: transparency and shared access. Crucially, the emerging value of blockchain lies in the simple fact that it is open and accessible to users. This accessibility is what unlocks new potentials for the future of e-commerce and business, and is causing much discussion about a decentralised future. ‘Decentralisation’ is the distribution of control from traditional centres of power to a shared network. In a world of digital transactions and such conducted online, decentralisation also has application in modern business; by decentralising control and access to resources, a fairer and potentially greater service can be achieved by its users. So how is this taking shape currently? Let’s take a look.

Decentralisation: An Equitable Future

Web 3.0

The internet is one of the areas expected to see radical development thanks to blockchain advances. Currently, almost all user data online is concentrated in singular databases that face risks like hacking and government censorship. If these centralised databases are shut down, all data and connections to them are lost. Blockchain principles, however, are leading us into a more equal future with the next generation of internet – Web 3.0.

In its early days the internet functioned through device-to-device interaction, merely facilitating the communication between computer systems. In the 2000’s, we entered what is called Web 2.0 as the second generation of internet. The current web 2.0 sees users hosted in ‘walled gardens’ on platforms such as Facebook and Amazon. Now, ideas surrounding shared networks are prompting facilitation of the next step in internet evolution. Web 3.0 will work via the decentralised protocols which are the foundation of blockchain and cryptocurrency technology, and it is anticipated that a strong relationship between these three technologies will emerge.

Smart Contracts and DeFi

Another area seeing large impacts from blockchain technology is that of smart contracts. These serve almost like a pre-specified set of rules written within a blockchain that automate things such as digital transactions. In fact, this ability is giving rise to a trend called ‘decentralised finance’ (or DeFi) which aims to take accessibility to the next step. Essentially, DeFi systems are financial operations that run on a public blockchain, eradicating the need for third parties usually involved in transactions. Rather than relying on oversight and management by third parties such as banks, the smart contracts run automatically on inbuilt protocols that serve the users’ needs. By cutting out the middleman, DeFi makes finance more globally accessible to anyone with an internet connection. Those who might otherwise be turned away by the bankman or lenders are able to swap assets directly without struggling with bankers. This is also applicable in betting on things like Bitcoin value without the need for a bookie. Making third parties redundant, DeFi automatically handles online transactions without taking a huge cut of the profits.

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E-commerce and DAO’s

The accessibility that DeFi and smart contract systems provide in allowing people to conduct transactions with each other directly have opened up a new kind of organisation that allows member control without influence by a central government. Decentralised Autonomous Organisations, or DAOs, are becoming the ‘next big trend’ that Ethereum enthusiasts believe to be ‘the future of work, cultural communities and human organization.’ On a basic level, DAOs are internet communities with a shared bank account, members can pool funds to make joint transactions. The decentralised nature of these organisations means that there is no traditional hierarchy. Instead, the rules are encoded in smart contracts of the blockchain and can only be altered by joint member decisions, giving people more control over their investment. Such investments might include the purchase of non-fungible tokens (NFTs) as was the case when ‘PleasrDAO’ purchased the original ‘Doge’ meme NFT for $4 million in June 2021.

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NFT’s

NFT’s themselves are in fact an entirely new market made possible by blockchain technology and continue to attract huge investment figures. In the last three years alone around £123 million has been spent on NFTs worldwide. A non-fungible token means that it cannot be replaced in the same way as say a £1 coin can; you may swap a £1 coin for another and have the same thing. NFTs are more like owning the Mona Lisa and wishing to trade it for a Picasso, you cannot swap the Mona Lisa for another Mona Lisa. Blockchain technology acts as a kind of record of ownership for NFTs like art dealers keep provenance of artworks. Although the entity exists solely on the internet where anyone can view it and even copy it, only the person with ownership of the NFT can claim to own it. This more or less comes down to bragging rights over owning anything from memes to tweets, but is a way that many people are interacting with blockchain.

Ultimately, we are seeing blockchain technology alter the way we interact on the web, particularly in ecommerce and cryptocurrency. The concept of decentralisation that blockchain maintains is leading toward a more accessible future for internet users where control is diverted away from centralised authorities and given to the individual. Traditional barriers of access to bank accounts and funds can be dismantled on the basis of smart contracts in the forms of DeFi and DAOs. Creating member equality and giving users more control over transactions will build a more inclusive and equitable future. Matt Damon’s recent advertisement comparing Crypto investment with historic human innovations was severely mocked. But with the IDC expecting global blockchain spending to reach 11.7 billion USD this year and continue at a growth rate of 73.2% p.a. in an estimate that has been described as conservative, it is easy to appreciate we stand on the edge of technological advancement. With these points in mind, modern businesses should seriously consider accepting the invitation to adopt blockchain technologies and experiment with the potential benefits it will bring in the exciting near future.

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Links and Further Reading

Amazon Web Services, Inc. 2022. What is Decentralization?. [online] Available at: https://aws.amazon.com/blockchain/decentralization-in-blockchain/ [Accessed 18 January 2022].

Benson, J. Tran, K.C. & Hussey, M. 2021. What is Decentralised Finance (DeFi)? A 3-minute guide to decentralized finance - Decrypt. [online] Available at: https://decrypt.co/resources/defi-decentralized-finance-explained-guide-learn [Accessed 7 January 2022].

Builtin.com. n.d. What Is Blockchain Technology? How Does It Work? | Built In. [online] Available at: https://builtin.com/blockchain [Accessed 4 January 2022].

Corbyn, Z., 2018. Decentralisation: the next big step for the world wide web. [online] the Guardian. Available at: https://www.theguardian.com/technology/2018/sep/08/decentralisation-next-big-step-for-the-world-wide-web-dweb-data-internet-censorship-brewster-kahle [Accessed 6 January 2022].

Euromoney. 2021. Blockchain. [online] Available at: https://www.euromoney.com/learning/blockchain-explained/what-is-blockchain [Accessed 4 January 2022].

Lim, M., 2021. 81 of top 100 companies use blockchain technology, Blockdata research shows. [online] Forkast. Available at: https://forkast.news/81-of-top-100-companies-use-blockchain-technology-blockdata/ [Accessed 5 January 2022].

Lock, T., 2021. NEXT GEN INVESTING What are DAOs? Here’s what to know about the ‘next big trend’ in crypto. [online] CNBC.com. Available at: https://www.cnbc.com/2021/10/25/what-are-daos-what-to-know-about-the-next-big-trend-in-crypto.html [Accessed 7 January 2022].

Marr, B., 2021. The 5 Biggest Blockchain Trends In 2022. [online] Forbes. Available at: https://www.forbes.com/sites/bernardmarr/2021/11/19/the-5-biggest-blockchain-trends-in-2022/ [Accessed 4 January 2022].

NonFungible.com. 2022. Market History | NFT sales and trends | NonFungible.com. [online] Available at: https://nonfungible.com/market/history [Accessed 7 January 2022].

Petrov, C., 2022. 91+ Blockchain Statistics: Understand Blockchain in 2021. [online] Techjury. Available at: https://techjury.net/blog/blockchain-statistics/#gref [Accessed 19 January 2022].

Thurman, A., 2021. DAOs May Be the Future of Work, but Don’t Bet on Them Being the Next Big Asset Class. [online] CoinDesk. Available at: https://www.coindesk.com/business/2021/09/26/daos-may-be-the-future-of-work-but-dont-bet-on-them-being-the-next-big-asset-class/ [Accessed 7 January 2022].

Ibm.com. n.d. What is Blockchain Technology? - IBM Blockchain | IBM. [online] Available at: https://www.ibm.com/topics/what-is-blockchain  [Accessed 4 January 2022].