The rise of blockchain technology is tightly coupled to the emerging of Bitcoin in 2009.
Now you can think what you want of the cryptocurrency Bitcoin, but Jack Ma is right when he says that the blockchain came to stay.
As with every emerging technology, people tend to overhype the pros and forget about the cons.
In addition, there is often a lack of understanding for new concepts.
This article will give a short overview about the concept, pros and cons and promising use cases.
A blockchain is a distributed database capable of logging transactions.
Just like peer-to-peer networks, which are best known from file sharing, the data is distributed across many clients.
The only difference is that each blockchain client contains all data. This means 70GB for the Bitcoin application today.
Maybe the most important feature of blockchains is security through cryptography.
As shown below, transactions are hashed and consensus is reached through the (validation) network.
This makes manipulation (nearly) impossible.
Pros And Cons Of Blockchain
Generally, the blockchain – as every other technology – comes with advantages and disadvantages.
First, let us have a look over the most important benefits.
- Data Protection through encryption
- No need for central control instances
- Out-of-the-box traceability and transparency
- The traceability also leads to higher efficiency and lower costs in terms of logging and documentation
- Low transaction costs due to the elimination of intermediaries
However in reality, the Bitcoin example shows, that this could change in the wrong direction.
Sounds great? Now let us get a more differentiated view and have a look at the disadvantages.
- Low scalability and performance
Today the Bitcoin blockchain is capable of 200 transactions/min. This seems outrageously slow compared to Visa with 100,000 transactions/min.
As a result, this makes Bitcoin currently unsuitable for a global currency.
- Industrie 4.0 and IoT integration at the edge (computing) rather difficult
For this field there exists a specially designed alternative named the Tangle which scales a lot better and is also suitable for temporary offline applications.
- High energy consumption
- Possible network compromise through 51% attack
As with every new technology, a completely new set of vocabulary comes up. To master a technology, people need understanding first.
Now that we understand the technology better, we will have a look at promising use cases.
As a digital ledger, blockchain perfectly fits for application where confidence is important.
Hence, the following three uses cases have all one in common: trust.
Another common ground is that all of these use cases exist already or will soon see the light of the world.
First, we have a look at a field that touches everyone. In our lifetime, most of us will come to the decision whether to buy a real estate or not.
The purchase of a property involves the transfer of land. This results in many different bureaucratic steps in which several parties are involved.
For example, more than 30 steps are required in Sweden today.
As a result, the swedish government issued a project to realize the land register over a blockchain.
Another application field where trust plays an important role is the global movement of goods.
Most noteworthy is a very heterogeneous process sequence when it comes to ship goods globally.
The tracking of the items varies strongly in terms of infrastructure, transport medium and legal regulations.
Today there is no universal digital process. In this context Maersk and IBM introduce TradeLens, a Blockchain Shipping Solution.
Finally yet importantly, there are multiple aspirations towards a digital identity.
The city administration of Bern, Switzerland offers inhabitants a self-managed digital identity.
Based on an Ethereum blockchain and the open identity system uPort, the system allows citizens to use public libraries and park system without further registration.
Summing it all up, the blockchain is a very promising technology with pros and cons.
Besides the hype, there are already real life examples that show the benefits of this new technology.