Blockchain Applications: An Update on Use Cases and Developments Across Industries

A view of raw blocks from different blockchains such as Bitcoin and Ethereum (top), title deeds (middle) and dictionary definitions of blockchain properties (bottom). Blockchains have applications to real world use cases across different industries dependent on contracts, delivering unbundled services and trusted third party intermediaries.

Introduction

The blockchain tech (protocol to be accurate) is viewed as an emerging technology which is widely anticipated to change how value is transferred using the world wide web. It is considered similar to early days of email communication and later, ecommerce applications. The applications in different industries are only limited by innovative thinking on blockchain applications and use cases. Naturally, start-ups have come up inspired by the design principles of the blockchain demonstrated by cryptocurrencies such as bitcoins.

Bitcoin is of course, the most emphatic validation of a blockchain application. But blockchain is not a technical achievement alone. Satoshi Nakamoto’s invention currently at a $6 billion market cap has demonstrated a technology that has immense significance in an area which is critical for functioning of systems (human, technological, societal, economic and so on). It is the making, securing and enforcing contracts.

At the cost of repetition, let us recap the properties of a blockchain as realized in Bitcoin. A blockchain is a distributed database. It is decentralized. It enables peer to peer transactions. It works in a trustless environment. It uses consensus methods to verify transactions in a peer to peer network. Transaction records are secured and verified using public private key cryptography. The longer and older the blockchain and the larger the network supporting it, the more impervious it is to attack or tampering. 

A blockchain can be implemented by making use of existing Internet infrastructure, technologies and encryption techniques with some innovative rules based programming. It does not require massive investments in timeline or money. The blockchain protocol is now considered as pervasive as http. 

Blockchain Properties and Key Use Cases

If the blockchain uses existing technology, its properties are what makes for the disruptive innovation and promise. This is how blockchain applications are being designed for different industries.

Application 1: Ownership History (Provenance) and Proof of Authenticity 

A blockchain represents an object as a public private key token which is generated from within it. As the blockchain grows, it retains an immutable history of the object right its inception through various events in time.  It can be called a single system of record that can be designed to represent a physical object identifier with characteristics such as state, ownership, behaviour depending on the application context. With a single system of record and held by public private key, a blockchain allows storage of contracts with the proof of ownership belonging to the owner of the private key. 

Another feature of Bitcoin is that ownership is pseudonymous, which also allows for secure records while preserving privacy and confidentiality. For example, in a pseudonymous property record blockchain,  a property owner can retain secure control with their private key over information on how many real estate assets they own and share it at their discretion without a third party (such as bank) having access to the same level of detail. Information required for public or third party verification remains secure on the blockchain structure. 

This has application to almost any area of rights or ownership. Different applications are being developed that enforce provenance (history of ownership) by maintaining the asset as a secure cryptoken on the blockchain from the time of its creation (or manufacture) through its lifetime.

Application 2: Decentralized, Trustless, Smart Contracts

Many blockchain applications can not only function as proof of ownership but go a step further by enforcing contract rules as well. Reclaiming ownership on lease expiry or transferring options in derivatives can be enforced as rules in a blockchain. 

A blockchain is not maintained or controlled by a central trusted authority that defines rules of operation in return for a service. This takes away the requirements of minimum scale and cost which are required to sustain central third party institutions. It also supports peer to peer transactions at lower transaction costs. 

One of the blockchain innovations is the use of smart contracts language which create automated rules for enforcing token values, security and distribution (example Ethereum’s in-built Turing-complete programming language). Transaction fees can be embedded within the blockchain rules. In doing so, transactions are fully automated without manual intervention or interpretation. This not only makes transactions possible over a wide magnitude of values but also at very high speed and scale. For example, bitcoin payments can be made for as less as 1 satoshi (1/100 millionth of a bitcoin) to purchases in millions. 

Blockchain is viewed as threat to intermediary institutions by reducing their bargaining power substantially. This is a pessimistic view, as use cases can be applied to instances where the costs of having a trusted party or intermediary are too high to sustain peer to peer or micro-transactions use cases (see the article on Bitcoin remittances regarding World Bank concerns on high costs of remittances). 

Based on these principles, these are among the first wave of blockchain applications that are being developed or proposed for industries as diverse as financial services, energy and entertainment.  

To keep it simple, we start off with an honourable mention to the pioneering Bitcoin as number one followed by the wave (or tsunami) of cryptocurrency 2.0 start-ups that grew through the crowdsourcing route. Many of them power blockchain applications in the examples that follow.

Payments Industry: Digital Cash

The first and most important the is digital cash use case for micro-payments and cross-currency, cross-border remittances with long settlement times across financial institutions. Bitcoin of course, to which we have devoted an entire series, addresses both issues and has launched the cryptocurrency revolution where the blockchain token of value is the scarcest of commodities – money. As also mentioned, the wave of altcoins that followed suit also have similar applications. 

Finance Industry: Trade and Settlements

Trade and settlements work through intermediary models and trusted third parties such as brokerages and clearing houses. Settlement times are driven by exchange of information and updating of records at each checkpoint, a process which takes days. By using a blockchain, settlement transactions can be made in minutes, upending the speed and scalability of settlements. Ripple, the payments protocol is based on this principle, allowing same day settlements at lower costs. R3 the bank consortia backed blockchain based on Ethereum is also being developed and tested  for trade and transaction settlements.

Financing Industry: Mortgage and Lease

Smart contracts for mortgage and leasing have started arriving, with a prototype of a digital vehicle record on a blockchain now available. Visa, global payments processor and Docusign, a solution provider for esignatures and digital transactions management, unveiled a proof of concept for a car leasing contract that uses the Bitcoin blockchain to assign and manage a unique digital identity for a vehicle and update subsequent related transactions on the blockchain.  

Capital Investment: Crowdfunding

Blockchain applications are not only relatively low on investment but they can fund themselves. The blockchain crypto tokens or coins have applications in many crowdsourcing use cases such as crowdfunding, where users can buy an equity in the platform currency or go one step further and create their own currency and drive crowdfunding for their Kickstarter type projects. Ethereum   and Augur  are among examples of crowdfunded blockchain platforms. Crowdfunding enables users to get a stake with minimal investments and provides an incentive to maintain a large network for a strong blockchain.

Insurance Industry

The insurance industry is almost entirely a system of contracts and a major use case for blockchain. From smart contracts for risk pooling in underwriting to enforcing claim pay outs and preventing fraud, insurance industry is probably only next in line of financial services after banking and finance for block chain applications. 

At the moment, the insurance industry is at the drawing board for the insurance killer app like Bitcoin– a smart contracts blockchain, reinsurance being a promising area. Allianz France, a subsidiary of German insurance giant Allianz, is working with Everledger, a blockchain start-up that certifies diamonds, to explore uses of blockchain as an asset registry. Axa another leading French insurer is also exploring applications for the blockchain and has invested in Blockstream, a Bitcoin platform provider  and pioneer in side chains.  

Energy Industry: Peer to Peer Micro-grids

Consumer energy is distributed through utility company grids. But solar cryptocurrency based start-ups are pioneering the idea of peer of peer solar energy micro-grids using the concept of energy blockchains. TransActive Grid, joint venture between consensus networks start-up LO3 Energy and Consensus Systems has launched a community microgrid project in a New York neighborhood that will enable homeowners and buildings in a neighborhood to buy or sell excess solar energy. The blockchain allows users to charge fees denominated in blockchain fees as well as enforce distribution rules. Transactive Grid’s blockchain is based on Ethereum.  

Entertainment Industry: Music Recording and Distribution

PeerTracks is a peer to peer network that allows musicians to distribute songs directly to fans. Buyers can acquire equity, purchase or stream songs by using the blockchain token. Costs are low as transaction fees are lower than other forms of payments (such as credit card fees). PeerTracks blockchain is called MUSE and is built on the Bitshares platforms. 

In future, music blockchains like PeerTracks can be used to protect artist rights by creating contract token and rules on the blockchain thus preventing piracy or unauthorized distribution without depending on recording companies and DRM technology. 

Luxury Goods Industry: Certificate of Authenticity

The luxury goods counterfeit industry may well be threatened by blockchain applications that can serve as provenance ledgers for high end goods, rare objects, gems and collectibles, in short, anything of premium value. 

Chronicled is a blockchain start-up targeting the premium “original” sneaker market.  Their Provenance blockchain platform provides a secure registry for high end sneaker brands, assigning and tracking smart tags embedded during manufacture on the blockchain, enabling owners to track history for proof of authenticity, using a mobile phone app. Everledger is another start-up focusing on the certification use case maintaining a registry of diamonds to combat theft, fraud and counterfeits. 

Internet of Things (IoT) Applications

In the IoT series, we covered self-actuation, context awareness and secured protocols as critical quality attributes in use cases for IoT solutions. The decentralized, crypto tokened blockchain can implement these attributes, furthermore, in a peer to peer network as opposed to cloud based brokers and middleware, a driving principle behind IoT blockchain applications. 

Filament  is an IoT meets blockchain start-up that provides an ad-hoc wireless infrastructure (branded Tap) through a network of sensors. Sensor data is encoded on the blockchain with private-key crypto hardware, enabling a decentralized peer to peer communications network. IBM, in partnership with Samsung has also created a proof of concept called ADEPT, an IoT transactions blockchain that combines Ethereum blockchain with peer to peer communications and network protocols.

Public and Personal Records on the Blockchain

Several start-ups are focusing on in this space creating applications that will serve citizens and government interests in preserving and securing records. A slew of online voting platforms such as FollowMyVote and BitCongress are making use of blockchain to create immutable voting records. Other start-ups are building applications on platforms such as Factom to build real estate registries and health histories. 

Governments are following suit. The European nation of Estonia,  is one of the leading adopters of blockchain implementing applications for voting in 2015, securing public health records, notarizing services and many others under its e-governance project. 

This is just the beginning. Everyday new start-ups and use cases arrive with applications as diverse as voting applications, health care and academic records on a blockchain. It is like early days of Internet and finding uses for it. In less than four score and twenty years, we are more than halfway towards a sentient web. That may well be a future scenario for blockchain.