Looking beyond decentralized finance for blockchain applications.
With the launch of Bitcoin following the Great Financial Crisis in 2008, Blockchain technologies have taken the world by storm. In fact, by February of 2022, over 10,000 cryptocurrency coins were in circulation1. Of course, many of those coins are useless, but the sheer quantity of coins should not be overlooked – there is a clear connection between coin creators and a desire to produce a niche revenue stream, even if the niche has already been exploited by thousands of other coins.
But blockchain is a technology that goes far beyond digital currency and decentralized finance. To find out just how far, it’s important to break down blockchain technology into its defining characteristics.
Blockchain consists of four critical characteristics that promise to revolutionize more than just the financial industry. According to IBM, the largest company in the world embracing blockchain, blockchain can be defined as: “a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.”2 Using this definition as a starting point, Blockchain Elements of a blockchain are:
- A Single Ledger. A ledger is simply a log or a book that contains information about time-ordered transactions. This information can be used to produce financial statements that are accurate. But in the digital world, the log can be anything – so long as it’s recorded and time-stamped.
- Immutable/Append only. Immutability means that the transactions cannot be changed. This log is not just written in permanent ink but is also on paper that cannot be torn out of the notebook. Once data has been written to the ledger, it is there to stay. The only change that can be made to a blockchain ledger is adding additional information after the previous entry. This makes blockchain extremely trustworthy.
- Shared. Critical to a blockchain is its distribution across a large peer-to-peer network. Blockchain technology is not stored centrally, it is a single log that is shared among users. This sharing of a single view enables resiliency of the system and transparency for all users – every transaction can be viewed and monitored, end-to-end.
- Trustworthy. Because blockchain is append-only, viewers of the data can audit, verify and trust the transactions they are viewing on the chain. Further, each additional transaction made on a blockchain adds to its security, as the exact time and sequence of transactions are recorded on the ledger. This prevents blocks from being altered or inserted by nefarious actors because they would have to go back and adjust the time and sequences of all past and future transactions; an impossible task to do against mature chains.
Ultimately, a blockchain allows people to achieve what I call secured consensus: a general agreement about the truth that can be trusted because the facts leading to the truth are secure. Do not underestimate the ability to come to a consensus – either in real life or in the digital world.
Tied to the blockchain are smart contracts. Smart contracts are important because they can be used to define certain rules or conditions that must be met to complete the contract. Critical to understanding smart contracts is understanding their impact. The smart contract gives people the ability to automate functions typically reserved for humans in the execution process. Because there is no third party involved smart contracts increase the speed and efficiency of transactions while also increasing the trust and transparency of those actions taking place – everyone can see the conditions of the contract and when those conditions are met, the transaction occurs immediately. Without a third party, smart contracts can also make transactions cheaper, by reducing fees typically reserved for specialized intermediaries.
As the title “Beyond Defi” suggests, this post isn’t interested in financial-only applications; we’re interested in everything else. This article will focus on three applications and future articles will deep-dive each application.
This is the most exciting application of blockchain to me and is the focus of my current research. The question when building a multi-agent system is this: How can agents coordinate their activities to maximize capability and minimize waste. Blockchain offers an attractive alternative to traditional consensus algorithms such as Paxos, Raft, and PBFT in two main areas: scalability and byzantine failures with many researchers claiming that blockchain-based consensus significantly reduces system failures in the presence of byzantine or Sybil attacks and can handle a higher percentage of byzantine failures than traditional algorithms.3,4
What does this mean? Any application where multiple autonomous agents need to coordinate their information or activities can leverage blockchain technologies. Further, a blockchain’s ability to resist byzantine faults, failures, or attacks enables an extremely capable architecture for multi-agent systems to interact. Lastly, systems within this architecture can more easily coordinate their actions based on the unique capabilities of individual agents, thus blockchain enables heterogeneous collaboration through the use of smart contracts.
Supply Chain Management
Recently, the global mining firm De Beers announced its own blockchain-enabled platform to manage its diamonds. And why wouldn’t they? Entering diamond information into an immutable log at the start of their journey across the world is an excellent way to guarantee their safety during the entire lifecycle of that diamond – from shipping to purchase at a retail store to actioning warranties post-purchase.
Da Beers isn’t alone. The Home Depot, agricultural firms, and medical & pharmaceutical companies are all turning to blockchain and smart contracts to manage their supply chains. Why? Because it prevents fraud through its immutability and transparency. It reduces human overhead through the automation of actions using smart contracts. Finally, it offers protection to buyers that environmental and shipping conditions will be met, and, if those conditions are not met (such as temperature control or humidity for shipments of bananas), refunds can be given automatically. Using Blockchain in supply chain management protects company and investor interests, automates and accelerates traditionally human processes, and promises to revolutionize this industry.
I have moved around the country a lot for my job (typically every 2-3 years). Depending on the rental market and the duration of our stay, we decided whether to buy or rent. Then, if we bought a home, we usually sell it when we head off to our next location. This means I pay an escrow for escrow services quite a bit, typically at the rate of 1%-2% of the cost of the home. Escrow is mutually beneficial but it isn’t free.
Smart contracts are tools that can finally challenge the escrow company because they automate a service that traditionally goes through human institutions. Escrow accounts guarantee the seller or the mortgage company that a buyer has the funds and those funds are protected – but smart contracts can achieve this without the high overhead. As smart contracts become more prolific, the companies that use them and reduce the fees of traditional escrow will excel above their competitors.
But real estate doesn’t have to stop there. Peer-to-peer transactions of real estate can be made safer and more efficient by tokenizing properties and conducting exchanges using smart contracts, that specify the conditions that must be met before any transactions are performed.
Personal Information Management and Data Privacy
The current process of bringing an MRI to a specialist looks like this: Get the MRI, wait for the MRI to be processed by a radiologist, request the MRI be transmitted to the specialist’s office, call the specialist’s office, learn the MRI never made it, call the radiology clinic and request a new transfer, learn again that the doctor’s office never received it, go to the radiology office, fill out a form to request a CD, wait a week to get the CD. I’ve done this A LOT. Some experiences are better than others, but generally, they’re all the same. Clinics are on different networks, using different software, and have stone-age policies for the release of that data to other providers. It is as if you don’t actually own the pictures of your own brain, spinal cord, or blood work. It’s as if you don’t own your body or pay your doctor well for a service that they should be eager to provide you.
Blockchain can change that. Personal Health Records belong in the hands of the patient and can be secured and protected using a blockchain to manage that data. Leveraging blockchain reduces medical infrastructure as large centralized servers and IT professionals can be reduced. This should serve to lower medical costs. Blockchain empowers the medical record holder by enabling them to authorize the transfer or even sell their data to third parties if they wish to be reimbursed for medical research.5
But data management doesn’t stop at medical records. Companies and governments who embrace blockchain technology for professional certifications, diplomas, training management, and even birth and marriage certificates will find that the data is more secure, more accessible, and more resistant to fraud and identity theft.
Now there are some people who will want to stop me because they don’t want the government giving them a digital identity. It likely feels like it could lead to a breach of privacy. And I can understand that. But the truth is someone is already holding your personal data online (fingerprints, driver’s license, social security number, credit cards, etc.) The real question should be: who do you want holding your data? Do you want the same company or government authority that’s currently paying for you to receive your 10th free credit monitoring service because of their failures to secure your data? Because that’s who’s doing it now. Or, are you willing to trust a decentralized, ownerless, immutable capability? It would be insane to “do the same thing and expect different results,” so maybe it’s time for real change.
NFTs are changing and it’s about time. What started off as a simple photograph that had no practical utility is rapidly evolving into something that looks much different. Now, NFTs are tickets to enter exclusive clubs and restaurants, entry passes to take advantage of private timeshares, yacht clubs, and resorts, and they are social stamps that give you entry to communities that match your interests.
I believe that NFTs will replace tickets at sporting events, season tickets, annual passes at theme parks, annual memberships at COSCO, and much more. The best part of this transformation? If you don’t like the membership you bought or find you aren’t using it as much as you thought you would, you can just sell it. You aren’t stuck with it. You don’t have to bite the bullet if that COSCO membership isn’t working out for you, you simply sell the NFT and the next buyer takes advantage of the perks that the NFT offers. Companies that adopt the flexibility and power that NFT-driven memberships offer consumers will force other companies to compete or lose business. This is a technology that will revolutionize retail, entertainment, hospitality, and many other industries.
The number of possible applications for blockchain far exceeds the scope of this article, but the purpose was to demonstrate utility beyond decentralized finance. As more applications of blockchain are discovered, companies must innovate in order to compete in this new market. If they don’t, they’re likely to be replaced by those that do.
My current field of research is Multi-Agent Systems – specifically how do we get multiple autonomous agents to collaborate on tasks. This is an exciting new field with even more exciting applications. If you want to learn more, consider subscribing to this blog, leave a comment, or send me a note. I’d love to add you to my list of collaborators because, like blockchain, I believe in the power of decentralized networks.
- Statista. “Number of Crypto Coins 2013-2022.” Accessed June 2, 2022. https://www.statista.com/statistics/863917/number-crypto-coins-tokens/.
- “What Is Blockchain Technology? – IBM Blockchain | IBM.” Accessed June 2, 2022. https://www.ibm.com/topics/what-is-blockchain.
- Castelló Ferrer, Eduardo. “The Blockchain: A New Framework for Robotic Swarm Systems.” In Proceedings of the Future Technologies Conference (FTC) 2018, edited by Kohei Arai, Rahul Bhatia, and Supriya Kapoor, 1037–58. Advances in Intelligent Systems and Computing. Cham: Springer International Publishing, 2019. https://doi.org/10.1007/978-3-030-02683-7_77;
- Strobel, Volker, Eduardo Castelló Ferrer, and Marco Dorigo. “Blockchain Technology Secures Robot Swarms: A Comparison of Consensus Protocols and Their Resilience to Byzantine Robots.” Frontiers in Robotics and AI 7 (2020): 54. https://doi.org/10.3389/frobt.2020.00054.
- Fang, Hao Sen Andrew, Teng Hwee Tan, Yan Fang Cheryl Tan, and Chun Jin Marcus Tan. “Blockchain Personal Health Records: Systematic Review.” Journal of Medical Internet Research 23, no. 4 (April 13, 2021): e25094. https://doi.org/10.2196/25094.