Although 2020 saw a greater adoption of digital services, this process was already well underway. From smartphone development to contactless payment, each new technological innovation has been quickly adopted as a way to make life easier. The Coronavirus pandemic simply amplified a trend that has seen the registration of forms, online banking and remote working become commonplace.
As people become more comfortable with innovations such as cloud-based solutions, technology based on blockchain will also become more widely accepted. Is 2021 the year of blockchain? With the amount of utility it can give businesses, it very well could be.
Blockchain technology explained (in short)
Blockchain, or distributed ledger technology, is a shared, fixed record of information on a shared network. As no changes can be made without consensus from the group of computers on the network, it is seen as a safer way to record information and promote transparency.
While blockchain is presently mainly known for recording cryptocurrency transactions, it can realistically be the basis for the entirety of a business’ online operations, whether that be tracking orders on a supply chain, making payments or automatically verifying the terms of a contract once certain conditions have been executed.
Companies like IBM and Microsoft have been pushing forward with blockchain technology, and there is uptake from businesses, but mostly on private networks that run with permission based access. Public blockchains that are open to everybody (although they can also be permissioned) are underutilized, due to the fact that they are more at risk of attack; however, it should be noted that in 2020 greater security meant that attacks decreased.
How to invest in blockchain technology
Broadly speaking, investing in blockchain involves either investing in companies that make and promote blockchain technology, or investing in cryptocurrencies that run on blockchain networks.
Just like with any other type of startup, fledgling companies developing blockchain based solutions are open for public investment. Although risky, putting money into a new company not only aids the development of the blockchain sector, but can also allow you to reap financial rewards further down the track. Funding can be direct or through institutions such as Bank of America, who buy blockchain patents for the purposes of investing.
Some people invest in cryptocurrencies for the same reason they may bet on a horse, because they like the colors and its form over the last week. Regardless, investing in cryptocurrencies is still causing money to flow and helping the development of blockchain technologies. While Bitcoin grabs most of the headlines, many altcoins have made huge gains in the last year thanks to growth of the De-Fi (decentralized finance) sector. Coupled with further blockchain development and the principles of supply and demand, prices could again rise significantly over the coming year.
The business blockchain: promise, practice, and application of the next internet technology
As mentioned above, blockchain for business is a powerful force, and it is only just starting to be utilized.
Living in a globalized world with remote working technologies, business is only becoming more competitive. Speedy and accuracy are two of the main ways an organization can ensure that they stay ahead of the competition. Blockchain provides immediate, shared and transparent information within different arms of an organization. Especially for conglomerates that have multiple offices spanning different time zones, blockchain technology can offer a way to find efficiencies and get better value for money. Here are just a couple of the ways it can reasonably be done in 2021:
Smart contracts for globalized supply chains — Supply chains are complex beasts. They rely on many different parties verifying and signing off on the transfer of goods while handling associated paperwork. How can blockchain assist?
Smart contracts are self-executing agreements where the terms of a deal are written in code and stored on a blockchain. This means that the time-consuming sign off procedures can occur automatically and instantaneously, visible to any party given permission to the business’s blockchain. In addition to greater speed and oversight, auditing is made more simple and any irregularities can be inspected and acted on proactively.
The COVID-19 pandemic has highlighted just how important supply chains can be, with effective distribution of vaccines across the world literally a matter of life and death. Smart contracts are continuously evolving, with developments such as using real-time data feeds (Oracles) as a decentralized source of truth when executing the terms of a blockchain-based contract.
Financial services — It wasn’t so long ago that international bank transfers took a week and incurred significant fees. While things have generally improved, blockchain points to a solution where money can be moved across borders with security and certainty in a matter of seconds. The vast majority of big banks are investing in blockchain solutions with JP Morgan asserting that financial institutions will have adopted blockchain within the next 3-5 years.
Firstly, as with supply chains, records of transactions can be easily tracked by anyone given permission. KYC (Know Your Customer) and other security checks can be made automatically and with accuracy. The faster settlement of funds means happier businesses and consumers, due to greater accessibility and operational cost reduction.
With the De-Fi sphere, we have seen the potential for blockchain to facilitate complex borrowing, lending and trading transactions. Due to the fact that public rather than private blockchains are utilized, coupled with a lack of proper regulatory standards, De-Fi is not yet mature enough to be used safely by the wider public. However, the technology is definitely there to be utilized by reputable organizations in the near future.
While smart contracts and the rapid transfer of funds most readily benefit institutions that rely on trade and finance, blockchain application goes much wider and can bring advantages to any business, from retail to healthcare.
2021 the year of blockchain?
The future of blockchain technology has historically been judged based on the rise and fall of cryptocurrency prices. At the end of 2017 when Bitcoin’s meteoric rise began, many startups came out of the woodwork, promising blockchain solutions as the answer to all problems in order to garner funds from investors. After this boom, cryptocurrency prices dropped dramatically and those simply jumping on the bandwagon fell away.
During this period blockchain once again became a fringe topic, but proper developers and technologically inclined businesses continued creating innovative and sustainable products. In the last year we have seen Facebook introduce their cryptocurrency, Libra (now called Diem), that is slated to form part of a global payment network in 2021. The Chinese government has also been working hard on its digital currency, DCEP, which it says will rival Bitcoin. While this currency is not using blockchain (as its decentralized nature is incompatible with the Chinese government’s policy of central control), it shows that the country sees blockchain based currencies as powerful enough to warrant an imitation.
With Bitcoin and other altcoins now seen as an investment that could rival safe havens such as gold, legitimacy is coming to an industry that has previously been touted as too much of a risk. With big banks poised to introduce blockchain technology, the creation of more reliable data for smart contracts and increased blockchain security, it is likely that 2021 will see huge gains for the sector in general. Wider adoption and investment signals a strong future for blockchain technology.
You may also be interested in our latest Fundraising report:
Preparing for 2021 by Learnings of 2020