Why Does Blockchain Matter?

August 24, 2022 |
4 minute read
|

We believe there is a generational platform shift underway in technology and its magnitude of impact could be as transformational as was the birth of the internet — and it is transparent, instantaneous and immutable.

Blockchain technology, in the simplest of terms, eliminates the need for “trusted” third parties. It enables the “transfer of trust in a trustless world:” entities can transfer value, track supply chains, manage pharmaceutical information, sell music rights, or trace the origin of food — all with confidence and certainty, and completely unencumbered by third-party validation processes.

Of course, as we all know, today’s financial and internet systems are heavily reliant on third-party intermediaries to transfer, sell and secure records — and, in so being, also introduce a great deal of friction into the services they provide. From cumbersome administrative processes to fees and costly time delays, today’s critical internet and financial infrastructure providers are increasingly fraught with inefficiencies. These providers have become more concentrated, and more powerful, over time as they collect, store and verify our information, and facilitate the transfer of value. Blockchain, in contrast, decentralizes institutions with open-source software that is shared among all network participants – thus, recording, storing and validating data and records without the need for middlemen.

Indeed, when comparing the simple elegance of blockchain’s digital functionality to the incredibly complex financial and technology systems on which our globalized economy depends, it is clear that blockchain could fundamentally improve the ways in which we access and manage data, and store and transfer value. In addition, blockchain technologies have evolved beyond their financial origins, and initial applications, with use cases today being nearly limitless. Blockchain could very well power a paradigm shift in how businesses are built and run in the not-too-distant future, potentially unleashing new waves of creativity and unlocking still greater opportunities.

In short, blockchain technology is a potential game changer. It has the power to disrupt almost any industry, and ecosystem participants are only just starting to test, experiment and experience its broad spectrum of use cases.

To better appreciate the versatility of blockchain’s functionality, let’s consider the following examples:

Real Estate

Purchasing a new home can be an exhausting, expensive and lengthy process. There are multiple stakeholders and intermediaries – agents, attorneys, lenders, inspectors and insurers, among many others – involved that, simply through their involvement, contribute to delays in communication, and timing and smoothness of execution — all while charging fees along the way. Removing even one layer of intermediaries in the real estate process could greatly reduce the cost and administrative burden of buying a house.

Today, we see platforms utilizing blockchain to create an immutable ledger for title registries (a $22 billion market according to IBISWorld), so imagine a future in which blockchain technologies become a store of record in the process of buying and selling real estate. These title registries could reduce, or even eliminate, the work of title companies and insurers that verify the right to purchase, ultimately saving invaluable time and, of course, money while creating an immutable, safe digital ledger.

International Money Transfers

Cross-border money remittance continues to be a critical necessity of day-to-day life. According to the United Nations (“UN”), a staggering one billion (or 1 in 7) people transfer money internationally each year. Despite the regularity with which money is transferred abroad, the process remains cumbersome, arcane and expensive. Based on data from the UN, currency conversion and fees represent over 7 percent of total amounts sent, on average. Additionally, over 50 percent of monies sent are destined for rural areas where the world’s poorest live. Couple that with the fact that international bank transfers can take up to five business days to process, and one begins to wonder why the international money transfer industry hasn’t been disrupted sooner.

When applied to this market, blockchain technology could securely enable peer-to-peer transfers at lower cost and with greater efficiency, regardless of the participant socioeconomic (or banking) status.

Gaming Market

According to Technavio, the global gaming market is expected to grow by $125 billion by 2025 with Asian Pacific countries contributing over 55 percent of this growth. “Play-to-Earn” games — whereby Blockchain gaming allows users to earn compensation as they play — are gaining widespread popularity and have quickly emerged as an alternative career in developing economies. According to Crypto Briefing, Filipino gamers can earn triple the minimum wage by playing and participating in blockchain games. Income from participation thereby becomes powerful motivation for users and leads to alignment of interest between parties.

Additionally, microtransactions have emerged as the preferred business model in the gaming industry. Gaming studios will release free-to-play games, then monetize through additional in-game purchases (like avatars, themes, power-ups, artifacts, etc.). In the past, these purchases have never truly been owned by the players, but rather controlled by the game developers themselves. As a result, if a gamer gets tired of playing a game, they can’t recoup any value for money spent on these digital items, or time spent improving them. In contrast, blockchain enables digital scarcity and proof-of-ownership for gamers that was never before possible. In a blockchain-based game, players can provably own their in-game items and would be able to buy and sell them in an unrestricted manner or use them in other ways outside the games in which they were bought.

Again, the benefits of blockchain for a massive and growing market are clear: secure and transparent transactions, lower costs and economic alignment among participants.

In Summary

While we’re still in the early days of user adoption and exploration, we believe that Blockchain technology will continue to gain momentum as users experiment with its versatility. As was the case with the dawn of the internet in the “dot.com” era, rising adoption rates, increased experimentation and the continued evolution of technology will force the disruption of industries for which its original use cases were not previously imagined or intended at the time. In short, we believe that, in the not-too-distant future, blockchain technologies will become essential to everyday life — as much as money and the internet are today.

Interested in more blockchain?  Check out our blog "Is there a Method in the Madness of Today's Crypto Chaos?"

 

Aaron Miller

Author

Aaron Miller
Cameron Szary

Author

Cameron Szary

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