Blockchain: Features, scope of use, limits and possible solutions

Blockchain: Features, scope of use, limits and possible solutions

Over 11500 Startups to date work with Blockchain technology to meet the needs of businesses and consumers. 10 billion in funding has been channeled into this sector, half of which has only been in the past two years. Numbers that testify the great attention paid to this technology, in which many applications are recognized as a useful tool to revolutionize a large number of sectors, thanks to the possibility of recording information in a secure and decentralized way.

For many years the term Blockchain has been associated with and often confused with the concept of cryptocurrency. In fact, thanks to the Bitcoin project, the first to actually use this type of technology, more than ten years ago we started hearing about this new data management methodology.

In recent years, however, it has been possible to witness a paradigm shift that has allowed us to understand the true potential of this technology. The attention towards Blockchain, initially restricted to developers and traders, has widened by involving professionals in various sectors, from Healthcare to Public Administration, from Gaming to Retail, but not only.

What is Blockchain, how does it work and what advantages can it offer? Let’s try to give some answers and hypothesize how the Blockchain will revolutionize entire sectors of the market.

Blockchain: operation, advantages and uses

funzionamento e utilizzi blockchainThere are many definitions of Blockchain, but the easiest way to understand how it works is to conceive it as a database containing information, free to add on it and distributed in many equal copies. The term Blockchain derives from the structure of this archive, which we can imagine as a long chain composed of blocks of data linked together and continuously increasing.

The information is distributed in a global network made up of thousands of data interchange nodes. For example, the Ethereum network, used by the Bitmonds project, today consists of around 8000 nodes. A node is the point where information can be created, received or transmitted.

This long chain of blocks is decentralized, i.e. not controlled by a central body with the exclusive right to manage its information. This is one of the main differences from the classic centralized databases and also the reason why this technology has not attracted the enthusiasm of intermediation bodies in data management. The Blockchain is often nicknamed the New Internet and, as the web did at the time, could help make certain sectors more democratic.

There are intermediate Blockchain solutions, not entirely decentralized, currently used in private business contexts.

Within the chain, an operation that would seem to modify data, in reality does not erase the trace of previous operations, keeping intact the history that led us to that final value. This is an additional security element provided by this technological model.

To write data on a block of the blockchain you need a consent and private keys. Access is encrypted using the formula of the exponential equation, which provides for a starting point and infinite arrival points (which makes it difficult to trace back to the starting point).

Decentralization and the inability to delete information are the elements that make the Blockchain model extremely secure. Unlike centralized databases, there is not a single access point, this means that a user willing to manipulate a data item should simultaneously alter all the copies distributed on the network.

This technology represents a concrete solution in all sectors in which it is needed:

  • register and share the ownership rights of a product or access to a service
  • connect suppliers and customers to carry out economic transactions securely, without paying brokerage services track a large number of data and constantly changing, keeping an indelible track of the change history
  • quickly and globally access centralized information
  • certify the history of an asset from the producer to the consumer

Blockchain and Cryptocurrencies, a limited view

Blockchain e collezionismo digitalAs anticipated, the use of the Blockchain has been linked for many years to the world of Bitcoin and cryptocurrencies in general, unfortunately often leading the least informed to believe that they were synonyms.

To summarize the functioning of Bitcoin, it can be defined as a new decentralized currency which, in order to be used, requires a virtual wallet. Each wallet is associated with an address (the equivalent of an IBAN). Each transaction between two virtual wallets is secured through a private key, a signature that protects the sender and the recipient of money and prevents the transaction from being altered.

When a transaction occurs, all nodes on the network update the registry.

If you have reached this point in the article, you have thus understood how the Blockchain is a technological model and a cryptocurrency is one of the many types of projects that can be built on it.

One of the examples in which the Blockchain was most successful (or unsuccessful for some) was in the context of Crowdfunding and Startup funding. Through what have been called ICOs (Initial Coin Offering), Startups that develop Blockchain solutions can receive financing directly from private individuals, avoiding the classic bank selection and evaluation processes. The company issues tokens to its investors who, if the Startup is successful, would see their value increase in view of a resale or use of the Startup services.

Tokens can be compared to the shares of a publicly traded company and can also fluctuate in value.

Also in this case it can understand how the Blockchain is only a technological model at the basis of a business model, in this case aimed at financing a Startup.

In recent years we have witnessed an indiscriminate use of ICOs, often with fraudulent purposes, thanks to their great ability to attract capital. Mainly by private investors, attracted by false promises, with a level of risk very different from that of an institutional investor accustomed to managing the Startup mortality rate.

Unfortunately, the Blockchain model also paid the price for all of this, often even due to the media unable to differentiate the projects based on each business model.

Blockchain is not just Bitcoin: the different uses of this technology

Blockchain is therefore not only Bitcoin or ICO, thanks to the transparency, immutability, traceability and security it can offer, it is possible to foresee applications of this technology in numerous sectors. Let’s see some examples.

Health

Thanks to the Blockchain, it is possible to create health files for each patient to keep track of any chronic diseases or allergies, shared between hospitals throughout the globe or based on the patient’s movement. This would offer a greater chance of creating accurate and timely diagnoses based on the patient’s medical history.
Some examples that are moving in this direction are Connectingcare, an application that collects the progress of patients discharged from the hospital, and Humanity.co that allows people to select the use of their medical data.

Supply chain

It is possible to create an open chain, in which producers, logistics staff, marketing managers, retailers and consumers can find information on the origin and status of each individual product.
Data is updated at each stage of the process that brings the product to the consumer. The most obvious benefits are conceivable in the food sector: thanks to the traceability of any significant information, producers can make the history of their products more transparent.
Walmart is experimenting with the use of the Blockchain to trace the path of vegetables.

DeBeers is working on a similar project with physical diamonds. Maersk, the shipping company, records the sensitive information of its containers on the chain.

Insurance

Through a shared and distributed database, the law enforcement agencies will be able to verify the insurance coverage in real time, it would also avoid the creation of multiple requests for the same accident and the payment could take place automatically with a significant saving of time.

The Blockchain would reduce brokerage costs as well as offer quick access to updated information.

Music

The management of intellectual property rights has always been a problem in music. With the Blockchain the problem of the remuneration of artists, authors and musicians who contribute to the realization and diffusion of a product would be solved.

Through the use of smart contracts, each insider could be automatically remunerated on the basis of his participation fee.
Mediachain, a startup purchased from Spotify, works with the aim of creating a platform where each work is identified and registered with information on the content. PeerTracks is developing a music streaming platform where users pay the artists directly. Mycelia allows artists to sell their songs directly to fans without any record labels.

Bank and Finance

The sector in which the developments of this technology could be more immediate is the banking sector, due to the large number of intermediaries taking part in the business process. In this context, the use of the Blockchain as a decentralized money management system would reduce the cost of banks’ commissions as well as guarantee maximum security and reliability in transactions.

Bank Hapoalim in collaboration with Microsoft, is building a blockchain platform to manage bank guarantees.

Circle allows the transfer of money and seven different cryptocurrencies through a simple message, without any exchange fee. SALT offers the opportunity to apply for cash loans by paying in cryptocurrencies. Ripple is a payment network to transfer money around the world, now also used by American Express.

Internet of Things and others

Even innovative sectors such as IoT would benefit from the use of a technology that would allow data exchange and rapid and secure communication between connected products, also registering their identity and ownership.

Some major car manufacturers such as BMW, Ford, General Motors and Renault have created the Mobility Open Blockchain Initiative (Mobi) project, which aims to develop applications that allow cars to communicate with each other, identify each other, collect data during the trip and make payments independently.

The limits of the Blockchain and possible solutions

The main feature of the uses of the Blockchain is the recording of information. Sometimes, however, especially when it comes to physical goods, information on identity, production and transactions do not guarantee the authenticity and integrity of the product.Bitmonds e blockchain

There is no guarantee that the latter has not been altered along the supply chain. This is one of the most important limits of this technology applied to material goods, the human factor. While today it remains very valid as a solution for completely digital services or products.

Other elements that represent a point of improvement of this technology concern the recording performance and the fact that many of the projects that use the Blockchain require today a knowledge of the use of Cryptocurrencies by the final consumer.

Let’s now see how the Bitmonds project managed to overcome these limitations, coming to take full advantage of the Blockchain technology.

When it comes to a native digital product, such as Bitmonds, the security of authenticity is guaranteed by its own use. None of the features provided for a Bitmonds could be used otherwise (Album, Showcase, Wearability, Gift, Loyalty Program).

Furthermore, the recording of the technical and proprietary characteristics of each Bitmonds on the Blockchain allow us to be sure of its actual rarity.

At the performance level, the registration of Bitmonds on the Ethereum network takes place with a proprietary multi-wallet technology that allows performance to be scaled over time in a manner consistent with the evolution of the project. In addition to identifying the times of day when registration costs are more convenient.

Furthermore, Bitmonds has always been a project within the reach of each user, choosing at this time not to accept Cryptocurrencies as payment. This with the aim of bringing the Blockchain model into people’s lives to appreciate its qualities, without the obligation to have high technical skills or take the risk of exchange rate fluctuations.

Technologically, Bitmonds are configured as Digital Collectibles registered on a Smart Contract Ethereum. Other projects in the past have used NFT to manage their product. The choice of the Bitmonds team went in a different direction, to be able to fully benefit from the advantages of the Blockchain (security, rarity, authenticity, data register), but without linking the outcome of a project and the hard work invested, as well as the collectors’ capitals, to the evolution of a single Blockchain network. Which an NFT solution would entail.

Currently the Blockchain networks available are different and it is not yet certain which over the years will be configured as an industry standard. New solutions come out every day to improve the above mentioned limits, by teams scattered around the globe. In a still immature sector, Bitmonds has chosen to configure themselves as a smart contract, maintaining the flexibility to move to a better Blockchain tomorrow, in case the Ethereum proves to be a bad choice. An NFT would not allow the same type of flexibility and therefore would not offer the same guarantees to the customers.

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Sources

Reddit: https://www.reddit.com/r/ethereum/comments/bqji3o/how_many_total_nodes_does_ethereum_have/
Forbes: https://www.forbes.com/sites/jessedamiani/2017/11/06/simplyvital-health-blockchainrevolutionize-healthcare/#743ae801880a
Venture Beat: https://venturebeat.com/2018/09/06/hu-manity-co-uses-ibm-blockchain-to-giveyou-the-right-to-control-your-personal-data/
Forbes: https://www.forbes.com/sites/biserdimitrov/2019/12/05/how-walmart-and-others-areriding-a-blockchain-wave-to-supply-chain-paradise/#5c1cc1687791
Reuters: https://www.reuters.com/article/us-anglo-debeers-blockchain/de-beers-tracksdiamonds-through-supply-chain-using-blockchain-idUSKBN1IB1CY
Internet of Business: https://internetofbusiness.com/ford-renault-gm-bmw-ibm-co-found-mobiblockchain-consortium/