Blockchain is the buzzword of the year if not the decade. Companies are already changing their names to sound more blockchain-y and announcing blockchain projects in order to catch the tsunami of hype surrounding the new technology. But what are the real-life applications of blockchain and more importantly what are the challenges they face?
To answer the first question: there are many of them. The EmTech China conference organized by MIT Technology Review held a panel on blockchain on Monday that brought some of the more interesting blockchain ideas to light. It also showed that cryptocurrencies are only one piece of the puzzle.
“Comparing blockchain with cryptocurrencies is like comparing the internet to Yahoo: it’s just one application,” said Brian Behlendorf, Executive Director at the Hyperledger Project.
Mo’ money, mo’ problems… mo’ tokens?
Tokens, however, are an important part of the puzzle. Behlendorf believes that the future will bring the tokenization of many assets, both virtual and real.
“I think we are going to be able to see a lot of opportunities for people to put their assets into systems that have the advantages of blockchain systems: moving assets very quickly and still having a really clear accounting of who owns what,” he said.
According to Neha Narula, Director of the MIT Digital Currency Initiative, to understand why Bitcoin and other cryptocurrencies are rising, we need to understand the fundamental nature of money: it is only a piece of paper that we decided has value and therefore it does.
“These things are valuable because there is a network of people that think they are valuable,” said Narula. Narula also believes that cryptocurrencies could become more popular than fiat currency, especially in certain unstable areas. One interesting example is Venezuela where many are mining Bitcoin because of skyrocketing inflation.
Panelists also said that we are likely to see national fiat currency being represented with digital tokens on a blockchain ledger which will be transferrable through a digital wallet.
What will blockchain change
We are only at the beginning of finding out what blockchain could do and for now, the possibilities seem quite diverse. For one thing, it will change the financial space because payments will be possible to process automatically with no agents, according to Narula.
One blockchain application that we should all be aware is its potential to change governance and business. Some countries like Estonia are already brainstorming on how to include cryptocurrencies in its business e-residency system.
(Image Credit: EmTech China)
“There are ways of taking existing government systems and modeling them through blockchain technology,” Behlendorf said adding that the technology doesn’t have a political vision but can enable automated and auditable processes for governance.
“[I]f your view of the world is having a balance of interests, a competitive marketplace, equal providers, equal parties coming to the table—whether it’s a supply chain or a network of things like sending money back and forth or citizens working to solve village-level, regional or global level—this is technology can help implement that.”
Healthcare—where blockchain can help keep patient data secure—energy distribution, digital identities and property, retail, and the supply chain are all areas that will be affected by this new technology. This last area does not sound too exciting but it is one of the more interesting ones for China due to health concerns over tainted food and faulty goods, said Behlendorf in an interview with TechNode following the panel.
Blockchain hurdles on the horizon
Blockchain, of course, is still a very young technology which means there are plenty of barriers to cross. For Behlendorf, the general challenges in blockchain include education on building applications in the blockchain space, as well as setting up projects.
“The biggest hurdle might be that any meaningful projects are going to involve more than one company,” said Behlendorf. “Even in the proof-of-concept phase, you need to talk to business partners, suppliers, customers even competitors. That can be really challenging because companies want a competitive edge in everything they do and this is really about common networks and systems.”
Blockchain is also an intersection of different disciplines. Tokens, for instance, require expertise in monetary policy, something belonging to the domain of economy, according to Narula.
“Something that is also challenging in this particular area is that it crosses so many boundaries,” Nerula said. She also noted there is a lot of crazy things happening with tokens with seemingly no one responsible for vetting the technology. One notable example was the security flaws found in $2 billion-worth cryptocurrency IOTA that supports the Internet of Things (IoT) transactions by MIT researchers.
China, of course, has its own blockchain landscape accompanied by a strict regulatory atmosphere.
“A lot of companies are talking about blockchain right now in China,” said Huan Chen, Chief Strategy Officer at CreditEase. “The biggest obstacle—besides the technology, the lack of responsibility, energy waste, and perhaps security—is regulation.”
Aside from cracking down on ICOs and cryptocurrency trade, regulators have not yet made up their mind about blockchain development, especially in the financial industry, Chen noted. Another issue is that business models have not matured. Blockchain has its benefits but its central idea is decentralization and companies need to whether sacrificing control is the right solution for them, he said.