If you have been keeping up with the world of bitcoin, you may have come across the term “blockchain”. For those wondering what it is, here is a brief introduction and our 2021 trend forecast for blockchain in APAC.
Blockchain and bitcoin are terms that often go hand in hand. However, blockchain technology is a lot bigger than just bitcoin and can benefit our society in many more ways than just digital currency (cryptocurrency). Blockchain may seem like a complicated concept, but its core concept is simple. In a nutshell, blockchain is an open source software containing chains of records stored in ‘blocks’ of data, hence, the word “blockchain”.
So why are people choosing to use blockchain instead of other data storage software? The biggest differentiating factor blockchain has is the way it tracks and stores data. Blockchain is a decentralized system where information is distributed to several computers (servers) instead of just one, thus enabling the network to be long lasting and sustainable as it is not owned by a single entity. Because blockchain is a decentralized system, it makes it harder for someone to tamper with it as there is no direct or single source of information. Each block in a blockchain holds a record of all transactions of one thing, i.e. one bitcoin or a piece of digital art.
To create, tamper, or make changes to a block, three things have to happen: a cryptographic puzzle must be solved by at least one computer, the solution has to be verified by all blockchain servers (proof of work), and the network has to re-verify it. The confirmation process ensures trust between each computer to make sure something is legitimate, as once a block has been changed or tampered with, the whole chain will become completely different.
Companies like HSBC, Pfizer, and AIA Group have already started to integrate blockchain. It is estimated that global spending on blockchain will increase to US$16 trillion by 2026. Due to the Asia-Pacific region’s growing manufacturing and supply chain trend, blockchain in APAC covers around 19.3% of global blockchain spending. With Japan’s manufacturing industry already covering 20% of the contributing numbers, the blockchain network is only expected to grow dramatically in the next five years. On that note, here is a list of trends for blockchain in APAC to keep an eye on this year.
1.Trust in Transparency
Transparency and trust are one of blockchain’s many appealing factors as it makes it harder for records to be altered or tampered without recording the changes. Since a blockchain records all transactions across a system and cannot be easily influenced, this shifts trust towards the blockchain system. Promoting transparency gives the public more purchasing control to be able to make smart purchasing decisions as they are able to access the full purchasing record of any given product.
Currently, pharmaceutical companies have the right to sell and commercialize your medical data. Through implementing blockchain in the healthcare industry, patients are given ownership of their medical records and the ability to control who can access their information. Information can be encoded via a specific key which can only be accessed by select individuals. This also allows patients’ medical records to be securely stored without any way for it to be altered or deleted.
Within the pharmaceutical industry, blockchain allows for the improvement of the verification process of pharmaceutical drugs. The public is given full transparency to search if the pharmaceutical drug they’re consuming came from a legal manufacturer and distributor. Blockchain also makes it easier in the retail sector where companies can verify each transaction with distributors, track their product’s shipping process, and locate where the product originates from. A global accountancy firm in Japan plans to launch a “SAKE blockchain” platform where users can track and trace a sake brewer’s history and also receive food pairings through scanning QR codes.
Blockchain can also positively contribute to the environment. Cryptocurrency is the future, and it will reduce paper production, decreasing pollution coming from production plants. The WWF in Australia, Fiji, and New Zealand teamed up with a tuna fishing company to develop the Tuna Project, a blockchain tuna tracking app. Its purpose is to allow consumers to check where their fish was caught and what method was used to catch it. The Tuna Project is the first step to creating a blockchain system for sustainable solutions, aside from knowing where your fish came from, it can also be used to provide evidence of a company’s ecological responsibilities and keep them accountable for obtaining their products sustainably.
Voting and the Media
Media manipulation has been affecting the news industry for a long time. With the rapid advancement of technology, the world of “fake news” and “deep fakes” is slowly causing the world to doubt the validity of news sources. With blockchain technology, news and media sources will be required to report accurately and based on facts and sources which can be easily verified.
2. Smart Contracts
Smart contracts are the terms of agreement written into lines of codes between two parties. Usually used during the exchange of money, property, or shares, smart contracts are used without the need for a central authority, the legal system, or any middleperson. Instead, transactions are stored on a public database that cannot be altered and blockchain technology ensures that each transaction made is verified by multiple computers, making it more trustworthy than traditional contracts. With the integration of smart contracts into society, banks and insurance companies will become obsolete. China’s Ant Group, an affiliated company of Alibaba group, recently launched Trusple, a financial services platform giving SMEs and financial institutions opportunities to trade globally through smart contracts.
Decentralized Finance (DEFI)
Financial and banking industries currently dominate markets by developing specialized payment systems and offering niche banking products and services. Due to the Covid-19 pandemic, many non-traditional financial institutions have started to turn into online blockchain platforms to provide financial services. The purpose of DEFI is to create a global and open alternative to services like savings, loans, and insurance while also cutting out any mediators, i.e. banks or other financial institutions. Along with smart contracts, DEFI is used to increase financial security, and unlock liquidity for everyone to support an integrated economic system, whilst also being immutable.
3. The Rise of Digital Currency (Cryptocurrency)
With Covid-19 guiding people further away from physical coins and bills, banks will be forced to turn towards digital currency.
Digital Currency reduces the risk of users being hacked and having their private information leaked. It also eliminates most processing and transaction fees, giving clients the flexibility to limitlessly conduct business.
Blockchain is infamous for Bitcoin, a digital currency operating without a central authority. However, some argue that the cryptocurrency Ethereum is slowly catching up and will become even better than bitcoin. Launched in 2015, Ethereum is an open-source, blockchain-based, decentralized software, famous for its cryptocurrency of the same name. It is one of the building blocks used to build DEFI and a platform used for smart contracts. Recently, Ethereum just reached $1 billion in revenue and is positively growing every day.
China is expected to dominate blockchain with its already advanced electronic payment format along with the country’s newest development of Central Bank Digital Currency: Crypto Yuan. China is making the fastest and most proactive progress, with its blockchain spending estimated to hit US$2 billion by 2023.
Even with the security provided by blockchain technology and cryptocurrency, there are always scams that will follow. Hacks on DEFI companies have accounted for more than 20% of blockchain theft volume in 2020, mainly due to companies not having a secure online platform, making them more susceptible to breaches. Some hackers also use social media, infamously hacking into famous CEO’s Twitter accounts and asking users to pay money with the promise of increasing its value. Some hacks also involve email scams, where clicking a link will leak users’ personal and financial information. Ways to avoid getting hacked include using secure websites and servers, avoiding sending money to account holders you are unfamiliar with, and not clicking on suspicious links.
Blockchain was first created in 1991 by researchers Stuart Haber and W. Scott Stornetta, with the goal of implementing a system that is hard to tamper with. Since then, blockchain has been transforming multiple industries, and with the rise of cryptocurrency, it is projected to become more prominent in the next few years, growing 67.3% by 2025.