How are Blockchain Technologies Paving the Way for a Decentralized Future?

For many people, the first thing that comes to mind when thinking about the Blockchain is cryptocurrencies, objects of widespread speculation. Investors like Warren Buffet, for instance, are highly skeptical of crypto assets, famously stating that “if you offered me all the Bitcoin in the world for $25, I wouldn’t take it.” Whether one agrees with that statement or not, one must acknowledge that cryptocurrencies are only a fraction of the possibilities enabled by the blockchain in the greater trend of decentralization.

To establish the distinction, Blockchain is a digital ledger technology that allows for secure, transparent, and instantaneous transactions, while cryptocurrencies merely consist of a store of value to support these transactions.

Cryptocurrencies

Cryptocurrencies are the most widely known applications of blockchain technology as it serves as the ledger to record all peer-to-peer transactions completed using a certain crypto. The most well-known example is Bitcoin. Through the use of blockchain, Bitcoin holders will be able to send and receive tokens that have real-world value. When miners verify transactions that are undertaken using Bitcoin, the transaction data will be grouped in structures called blocks and added to an unalterable chain to record them. With the rising popularity of Bitcoin and other cryptocurrencies, the underlying blockchain technology has become a fundamental part of this new era in finance. It is definitely eliminating the need for intermediaries for financial transactions. However, with the volatility of the market, the future of crypto is still in question.

Supply Chain Management

Features of confidentiality and access to transactional data have paved the way for a peer-to-peer network that is backed up by the digital shared ledger, with positive implications on the management of supply chains. The requirement of all parties’ consent secures a safe network for business operations. It helps avoid contract fraud and protect user privacy such as healthcare records, copyright, and so on. Leading franchise firms such as Walmart are applying blockchain to manage their supply chain on invoices and payments of third-party carriers. Blockchain enables Walmart to automate the process of the enterprise system with its single source of shared information for Walmart and the third party carriers. Similarly, Nestle incorporates blockchain technology into the payment process. With a QR code, consumers can track information in regard to shipping certificates, information on the supply good’s origin and more. The blockchain technology enables traceability with different product lines that Nestle supplies on a large scale operation. Unilever Plc, which manufactures and supplies consumer goods, also introduces its customers with blockchain accessibility on its products.

Identity Management

Blockchain also assists in managing individuals' identities. It brings auditability, traceability, and verifiability on profile information, enhancing connectivity and user security. Tech companies use blockchain as a way to build a decentralized identity platform and use tokens to validate the following information. For example, Microsoft launched “Azure Active Directory verifiable credentials in the spring of 2021. For individuals to access the Microsoft Authenticator app, Microsoft requires the users’ transcripts, diplomas, and professional credentials, as well as a two-factor code, to build a profile. The technology is also accessible to businesses with the release of a software development kit for organizations. Some users are Keio University in Tokyo, the government of Flanders in Belgium, and the United Kingdom's National Health Service. IBM has established an ecosystem model of identity management without a central repository of databases. It brings an alternative to password authentication, which has appeared to be insecure for users to approach online transactions. IBM believes that it tackles an existing identity problem, which occurs when user identity is being shared and stored elsewhere without user consent. Accenture has built-in biometrics based on blockchain proof to provide users with security and control over verification and compliance. Accenture has developed a partnership with Microsoft and Avande on the identity prototypes that enable multi-entities to share access to data with security.

Smart Contracts

Smart contracts are automated programs that execute a specified transaction on a blockchain when predetermined conditions are met, eliminating the need for third-party interventions. The terms of the contract must consider any possible exceptions to ensure both parties are satisfied, and include a framework to resolve potential disputes. Such terms are immutable, and cannot be changed once uploaded on the blockchain. The adoption of smart contracts has already proven to make businesses more efficient. Home Depot’s reliance on smart contracts on the IBM blockchain is a perfect example of how the blockchain can be used to enhance the relationships between retailers and vendors: by creating a transparent and automated process to resolve supplier-vendor disputes, both parties can avoid unneeded distractions and focus their efforts on more important matters of business. Similarly, smart contracts can be used to automate compensation once a service has been delivered, seamlessly and instantaneously transfer ownership of goods and real estate and even register vehicles. To contrast with traditional paper contracts, smart contracts offer great advantages when it comes to speed, efficiency, transparency,

trust, security and execution.

Voting

Founded in 2016 by Nimit Sawhney, Voatz is a mobile application that allows for a secure, accurate, accessible and seamless voting experience. Upon submitting one’s vote, the user receives a password-protected confirmation receipt on their ballot, summarizing the selection. User information and biometrics are then stored on a blockchain, appearing as anonymous transactions and creating a verifiable “paper trail”, facilitating the auditing process for the administrator. This system not only prohibits identity fraud and tampering but streamlines the voting process through its mobile app. In a tamper-proof system where ballots cannot be lost, user identity is protected, verified, and paired with a maximal level of participation, the adoption of Voatz can therefore guarantee optimal security in the outcome of an election.

Decentralized Finance (DeFi)

Decentralized Finance (DeFi) is an emerging technology that eliminates the need for financial intermediaries by allowing individuals to undertake financial transactions such as lending and borrowing. Individuals hold assets in a digital wallet and can conduct transactions which are then verified by others users and added to the blockchain. The process eliminates fees and other services charged in a traditional centralized financial system bank transaction fees. One of the largest examples of DeFi is Aave which is a decentralized lending protocol that facilitates the lending and borrowing of cryptocurrencies. On the Aave platform, users will deposit their assets into what is known as liquidity pools, the protocol then can lend out the assets in those pools using smart contracts. The people who provide assets into the liquidity pools will be provided a Tokens as a form of an interest payment. The obvious advantage of the Aave protocol is the elimination of the intermediary for getting a loan which makes the borrowing process more efficient. However the platform only allows for borrowing and lending in crypto, and due to the volatility of the market, platforms like Aave will require very high amounts of collateral which decreases the accessibility of borrowing. Currently, such DeFi protocols are mostly used by crypto traders for arbitrage purposes instead of other borrowing purposes. This shows that even

though DeFi is definitely changing the way that lending practices work through emerging

technologies, it still has a long way to go to become a primary source for borrowing needs.

Gaming

Blockchain in video games has enjoyed high praise from gamers as it veers away from the traditional concept of a game company-dominated, centralized gaming experience. Oftentimes, players detest the hegemonic power that game creators have over the games they enjoy, so blockchain, became the natural solution. Games use blockchain in three main ways: currency, non-fungible tokens (NFTs), and mass-event organization. Currency is the traditional way of using blockchain, and games like Decentraland, a land plot-based game, and Axie, an Ethereum-based NFT-driven battle game, have all actively implemented cryptocurrencies as a payment method. Here, players can even earn cryptocurrencies in a play-to-earn scheme. Also, traditional pay-to-win and gacha genres have implemented NFTs, allowing players to have ownership of in-game assets, making exchanges easier than ever. Lastly, blockchain’s decentralized nature allows server diversification, allowing games to host massive virtual events without putting a strain on physical servers.

In conclusion, blockchain technology is not limited to cryptocurrencies, but rather it offers a wide range of possibilities for decentralization in various sectors. From supply chain

management to identity management, smart contracts, voting, and decentralized finance (DeFi), blockchain is enabling secure, transparent, and efficient transactions that eliminate the need for intermediaries. While the future of cryptocurrencies is still uncertain due to market volatility, the underlying blockchain technology is changing the way we approach finance, identity, and supply chain management, among others. As more industries continue to explore the benefits of blockchain, it is likely that we will see a significant shift towards a decentralized future.

Authors: Ghassan Jisr, Sean Kim, Zoe Chen, Omer Kervanci