Many were pleasantly surprised when, recently, El Salvador, a third world country in Central America, passed a law to make Bitcoin a legal tender there. El Salvador doesn’t have its own currency and uses the US dollar for all its work, so this would be an additional currency for El Salvador to transact with. When this is finally implemented there, Bitcoin could be used to make payments, unlimited in any transaction and could be used to pay your taxes. Furthermore, any exchanges made through Bitcoin would not subject to a capital gains tax. Contemporary economies like Panama, Mexico and Paraguay are expected to follow suit soon. But about all the major economies? Why hasn’t India adopted this? They have the largest remittance market, surely, this would ease the process, wouldn’t it? India, though, does have its own currency, though Bitcoin is being considered as an asset class, but it will definitely be taxed very high.
Even if SEBI, the finance ministry and the cryptocurrency industry in India work together to set some regulations, there’s still some worry as to Bitcoin’s volatility and fluctuations. Or else, how will Bitcoin have its credibility established when there’s a growing trend of naysayers and how would…? Oh, wait. Why is this being spoken about? Is that it? Why is it that this whole battle of Bitcoin’s trustworthiness and its applications dominate the tech news, so much so, that it completely shrouds the wonderful potential of what Blockchain can do for the world?
For the uninitiated, Blockchain, in its core essence, is a kind of database. Centralized networks rely on intermediaries like banks for transactions between two parties, because of the established authenticity and trust; vindicating the validity of the transactions. In order to fend off any fraud and double-spending, these transactions are recorded through a ledger, for which intermediaries take a fee. Decentralized systems, on the other hand, are recorded via a network of computers and when a transaction occurs, it is transmitted to other computers and complex cryptography authenticates the validity of that transaction, which are immutably encrypted and verified on a reliable network. Generally, 500 transactions form a block, the first and the last block transactions are securely linked to other blocks via a key, thereby becoming a Blockchain. This can be accessed by anyone who has a personal node; every individual node would have a copy of the chain every time there are new blocks.
The foundation of business is data and information. The quicker it is received and the more accurate that it is, the better it is for the organization. What’s happening in businesses is that records are duplicated and doubly counted. Such systems are assailable and would be vulnerable to cyberattacks. If there isn’t enough transparency, it would hinder and curb the verification of data. A business fallacy that’s often promulgated is that lots of money needs to be spent in order to make money. While true, to some degree, businesses need to be resilient and antifragile in trying times and one of the ways this is possible is by having success that is affordable, instead of success that bleed companies dry. The efficiency of companies is often compromised because they’re susceptible to human error, which may also happen due to middlepersons. Generally speaking, organizations need a better way to operate. Blockchain would be apt because it would be able to furnish transparent and swift data and information that is stored on a ledger, which can be accessed only by authorized network members.
Through Blockchain, assets, be they tangible or intangible, could be tracked in a business network to record literally everything that one would want to know. That would mean anything of value can be tracked and traded through Blockchain. Payments can be transacted, production, accounts and orders can be tracked; the sky is the limit. With the aforementioned nodes, a transaction can be tracked end-to-end. With this whole distributed ledger technology and with the growing digitization around us, why isn’t Blockchain being capitalized on to fully optimize operations?
Organizations can do this in various ways. One way is a private blockchain network, which is peer-to-peer. The company has complete control over the network and keep a ledger. Public blockchain networks, on the other hand, include stuff like Bitcoin, which everyone can buy and engage in. Elon Musk recently drew attention to the fact that Bitcoin consumes a whole lot of energy, so it’s faced some flak. But even the way organizations operate currently must be observed. Many of the things we consume weren’t by just one entity, it’s an amalgamation of suppliers who sold different components and then the product or service came together by an institution who astutely marketed it. A fair metaphor would be a set of pillars that hold something up a fort. If one of those pillars collapse, the whole system falls apart.
The supply chain of an enterprise is a composite network of data, relationships and schedules. One tiny error could disrupt a perfectly oiled machine. Thus, companies need to speed up and become more cost-effective. One possible suggestion is to make use of Blockchain by digitizing systems across supply chains by connecting everyone from banks to ports to services to customs to logistics providers and much more across various organizations and countries. Products and services also have stages of their life: from barley to beer, for example. The problem with this system is that if one of these components fails, the whole thing falls apart. The technology of Blockchain makes for a better mousetrap by endeavouring to provide records that are easily accessible and digitally permanent so that the concerned individuals would be able to see the status of the product that show stakeholders the state of the product at every single step.
A new phenomenon within Blockchain is the concept of a smart contract, which refers to a contract that self-executes. With all terms and conditions of all parties pre-agreed to and pre-determined and written directly into the code, they exist on the aforementioned decentralized blockchain network. Making external parties obsolete, these smart contracts make sure that all parties in the agreement adhere to the terms and conditions while running without any downtime. As long as one party follows through on their end of their deal, smart contracts ensure that they’re paid. If another party reneges, goods are returned. If this were to happen in the real world, you’d probably have to wait for ages, what with all the intermediaries, including government members, lawyers, judges and more to intervene, advocate and adjudicate. Furthermore, in the smart contract process, when all the conditions of a contract are met, the next action is triggered.
This also helps with KYC (Know Your Customer), just in a different way. Employees and customers would have digital IDs and with this data stored on a secure blockchain network, it would minimize the risk of any kind of fraud, be it money laundering or identity theft. With its information being unchanging, there would be complete transparency; furthermore, Blockchain could also be used by institutions to learn about various patterns of consumers and how to build a loyal consumer base. This also means that adept marketers could use the data available to them to ameliorate the ROI they accrue.
With something as significant as formulating an enterprise blockchain application, it is absolutely imperative to make sure one has a comprehensive and robust security strategy that utilizes efficient cybersecurity frameworks and the very best mechanisms to mitigate cyberattacks, fraud and any other forms of risk. In this new Industrial Revolution, when companies are aiming to be antifragile, employees need to be nurtured and encouraged to employ non-linear thinking, which means that they need to upskill and re-skill to acclimate to the digitization around us. Speaking of employees, Blockchain can also be used to pay the labour force via cryptocurrency, especially in bigger conglomerates with even international workers. Why use this? Transactions without exorbitant transaction fees that are generally associated with traditional banking systems? Sounds like a boon. Another feather in the cap that’s the phenomenon that is Blockchain.
When Satoshi Nakamoto first wrote about his invention of Bitcoin 12 years ago, he probably wasn’t prescient enough to know he’d significantly contribute to the positive disruption that Blockchain could be able to render. No doubt, cryptocurrency has had its fair share of both endorsers and cynics. In the world of tech and finance, it’s never not going to be a polemic subject as to what its limitless possibilities are, its drawbacks and where it’s headed. Blockchain can definitely help businesses elevate their operations and efficiency. Are Blockchain and its uses in tech a feasible idea? Yes. Is it a possible idea? Yep. Is it a probable idea? Undetermined. As long as all eyes are on cryptocurrency and the legality of it, Blockchain will never be properly talked about and will probably stay inhibited as a technology, never to see the light of day. To be honest, it’s probably ahead of its time, but good Socratic discourse around Blockchain as a technology may help make it a reality; as a step in the right direction. Bit by bit.
By Ashwin Malik Meshram, MD at a US-based Artificial Intelligence company, Entrepreneur, Education Reformer and an IIT Bombay alumnus.