World-changing inventions like the printing press, the radio, and the internet opened new ways for people to communicate and share knowledge. In many cases, blockchain technology expands on these inventions. Blockchain provides a method to secure and distribute knowledge, data, and information so that it can be shared without alteration, interference, or be controlled.
Although many contenders exist for the most important inventions, some people believe blockchain ranks among them. Read on to learn why blockchain might be one of the more important inventions of the early twenty-first century.
Key Takeaways
- Like many other top inventions, blockchain has more than one application or use case.
- Blockchain uses are being developed in the financial and healthcare industries, government, supply chains, and more.
- Many popular blockchains are slower than traditional financial systems; however, blockchain developers are working to increase speeds.
Blockchain in Finance
Money does make the world go ’round, but there are also many issues surrounding its use. Here are some of the ways blockchain can be used in the financial industry.
Fighting Corruption
It is natural for people to want as much money as possible, but with that desire comes the drive to get it in any way possible—many people resort to illegal or unethical means to fulfill their dreams of wealth.
The finance industry is teeming with temptations—money flows in and out of homes, businesses, and countries, and there never seems to be enough. There is so much capital circulating that it needs to be managed in a way that removes the temptation to act unethically.
Blockchain can solve corruption issues within financial systems by eliminating the risk of duplicating or double-spending assets. Transactions are initiated, executed, recorded, encrypted, verified, and stored by nodes who manage “an irreversible ledger of transactions” and must reach a consensus to approve a new block—making it the perfect solution.
Replacing Currency
The primary reason behind creating blockchain and cryptocurrency was to create a decentralized method of exchanging value; in other words, transferring money to someone for services provided or goods received.
Therefore, it can eliminate third parties like banks, payment processors, payment gateways, settlement banks, and other financial entities within our bloated and costly financial systems. Blockchain also allows people who do not have access to financial instruments like loans or other services to access them.
Cryptocurrency can be used if financial systems collapse. For example, during the Russian invasion of Ukraine in 2021 and 2022, cryptocurrency became a major source of funding for the Ukrainians and the government—it recognized cryptocurrency as a legal means of payment in 2021.
As an Investment Asset
Cryptocurrency was created using blockchain technology, but an unforeseen consequence of introducing crytocurrency was that because it held exchangeable value, its value could fluctuate. People started paying for it, demand increased, prices rose, and investors saw an opportunity.
Cryptocurrencies are now widely purchased by investors as investments. It is also used by traders to make profits from price movements.
In Banking and Lending
Blockchain is revolutionizing banking and lending. Not only is it creating ways for consumers to lend to each other, but crypto lending companies have emerged that use blockchain in their loan approval process at significantly reduced costs. Costs are reduced because there are no lawyers, banks, paperwork, or other lengthy procedures.
Insurance
Insurance providers are exploring ways to implement blockchain into their systems and products. For example, insurance providers could collect information through blockchains to customize insurance products and reduce instances of fraud.
Blockchains could be used to securely store client health information, uploaded whenever a patient is seen. The blockchain could send requests to insurance through smart contracts, which in turn, could instantly approve or disapprove care and transfer funds.
Other insurance processes could also be streamlined, from finding coverage that meets your needs to filing claims and receiving payments.
Blockchain and Government
Some critical issues regarding government processes and infrastructure are inefficiency, corruption, fraud, waste, lack of trust, security, and siloing. Blockchain has the potential to reduce all of these issues significantly.
Silos
Government silos are concentrations of information, resources, and decision-making. Critical information that is not shared keeps policy-makers and regulators from making the most informed decisions possible.
Division of information and how it is often channeled creates silos within governments, increasing inefficiency. Blockchain can solve this issue by securely distributing information to reach those who need it more quickly.
Resources can be properly tracked, accounted for, and transferred if needed. Data about businesses and citizens can be better secured, and payroll taxes can be collected more efficiently. Additionally, banks could settle intrabank loans in real-time rather than waiting for the end of the day, increasing transaction volume and making banking more efficient.
Accountability
When information is secured and distributed, it cannot be changed or withheld for the benefit of one party or another. Spending can be falsely reported; sometimes, money can disappear without a trace. Using blockchain, government funds can be tracked, and entities can be held accountable for spending.
Blockchain Tech In Healthcare
Healthcare is an industry that can significantly benefit from blockchain. As a secure method of sharing and storing information, blockchain technology cannot directly improve human health, but it can improve the systems used to share medical knowledge and information.
If blockchain could be integrated into the healthcare system, as some projects are aiming to accomplish, the technology could help improve lives and treatment plans.
Blockchain and the Supply Chain
Blockchain technology can also be used to track the movement of goods. For example, several companies are using distributed ledgers to track perishable goods while keeping track of essential variables like moisture and temperature.
A critical concern in supply chain management is efficiency. Supply chains are vast networks of suppliers, manufacturers, distributors, and retailers. Blockchain provides a method to track raw materials, sourcing, production methods, transportation times, payments, and many other supply chain activities that can create inefficiencies or issues.
Concerns About Blockchain Technology
Enthusiasm for blockchain technology is still far from universal. Many enterprises have been using the distributed ledger technology that blockchain evolved from for many years in permissioned environments. The key difference between the two is that blockchain uses programming to reach a consensus about the state of the distributed ledger.
To come to a consensual agreement about a massive ledger’s state, database researchers and scientists created consensus mechanisms that use encryption methods for proof of transactions on the ledger. One such mechanism is proof-of-work, which requires large amounts of energy because of its competitive rewards nature.
Many blockchains are also slower than centralized systems, with transactions confirmations times between dozens per second to thousands per second. When compared to modern financial systems that confirm tens of thousands of transactions per second, blockchains have been lagging behind—however, many developers are working to increase transactions speeds throughout the networks.
What Is the Greatest Thing Ever Invented?
What might qualify as the greatest invention ever is a subjective argument, but many consider the wheel-and-axle the invention that changed the world the most.
What Are the 5 Greatest Inventions of All Time?
The list of greatest inventions is long, but five of the most important for modern life are the wheel, agriculture, harnessing electricity, the semiconductor, crude oil refining, and batteries.
What Is the Greatest Discovery of All Time?
The discovery that sounds can have meaning (language) and fire might top the list of the greatest discoveries; humans wouldn’t have gotten far without them.
The Bottom Line
Many of the most influential inventions of all time have a broad range of applications. The internet is one of the most recent that has impacted virtually every area of business and personal life since it came into common use in the 1990s. Blockchain, a newcomer, offers as many endless applications as the internet and other inventions proceeding it.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.