The past couple of months has been a very interesting period for crypto enthusiasts, with the Bitcoin going through the roof after rising 300% in 12 months to scale to over $40K mark on January 8, which meant cryptocurrency startups too have caught investor’s attention. USA based Coinbase, which offers secure platform to buy, sell, and store cryptocurrency like Bitcoin, Ethereum, and more has filed for IPO. Offering more than 30 crypto currencies, the company holds more than $25 billion in assets on its platform and its total trade volume exceeds $320 billion. According to some sources, Coinbase’s potential IPO valuation could be as high as $30 billion. 

Distributed Ledger Technologies and Blockchain:

Enabling technology here is Distributed Ledger Technology (DLT) is a decentralized peer-to-peer digital system for recording transactions between participants in multiple places at the same time. DLT can effectively address trust, fairness and participation bypassing the intermediaries to provide scale, economy of things and machine to machine transactions, smart contracts and auto-settlements.

Blockchain is a type of DLT that enables the existence of cryptocurrency (among other things). A cryptocurrency is a medium of exchange, such as the US dollar, but is digital and uses encryption techniques to control the creation of monetary units and to verify the transfer of funds. Bitcoin is the name of the top ranked cryptocurrency, the one for which blockchain technology was invented.

Distributed ledger technology (DLT) was introduced in the early 90’s. In DLT, the data is spread across different nodes & computers and each of these nodes operates independently, making data processing a decentralized and independent process without a central authority. After the data is independently constructed, each node communicates with the other nodes in the network to reach consensus on the best version of the data. After a consensus is reached, the distributed ledger updates itself by storing the “agreed-upon” version of the data at each node.

The blockchain version of distributed ledger technology was introduced in 2008. Oftentimes, “blockchain” and “distributed ledger” are used interchangeably, which is incorrectly. In fact, blockchain is just one type of technology based on a distributed ledger model. Blockchain became extremely popular, with the cryptocurrencies coming to the fore. Some other popular forms of DLT that exists apart from Blockchain are Holochain, Hashgraph, Direct Acyclic Graph (DAG).

Application of DLT in Industry:

Financial Services: In the financial service sector, Blockchain technology has already been implemented in many innovative ways. US Federal Reserve implemented a blockchain-based digital payment system. Nasdaq, is using blockchain for their Private Market Platform. According to World Economic Forum, more than 100 central banks are actively engaged in implementing blockchain for their global transactions and more than 2,500 patents were filed related to this technology.

Retail: There is a huge opportunity for Blockchain technology to be applied in the retail sector. This includes everything from ensuring the authenticity of high value goods, preventing, fraudulent transactions, locating stolen items, enabling virtual warranties, managing loyalty points and streamlining supply chain operations. Walmart launched its blockchain-based supply chain and crypto currency in 2019 while Amazon launched its AWS Blockchain-based managed service.

Government: Blockchain technology holds the power to transform Government’s operations and services. It can play a key role in improving the data transactional challenges in the Government sector, which works in siloes currently. The largest port operator in the United Kingdom, Associated British Ports (ABP), is testing the use of blockchain to facilitate trade through its marine terminals. The Smart Dubai project leverages blockchain, AI, and IoT technology in attempts to make Dubai the happiest city on earth. Denmark’s Liberal Alliance party was the first local association in the world to perform an internal election utilizing blockchain technology. 

DLT benefits are not restricted to only the Finance or Retail sectors. For instance, DLT has huge potential in Healthcare, Travel & Hospitality, Oil & Gas sectors, etc. In fact Music industry can effectively solve royalty issues using blockchain technology.

Its interesting to note London is currently the second most active city in the world for blockchain development programs with around 900 projects in development. UK’s Financial Conduct Authority (FCA) is now recognized across the globe for its innovative regulation of blockchain business and applications.

The Past year has been a year of reckoning for distributed ledger technology. However, with the pandemic the picture has changed. Budgets for purely experimental and speculative projects went on hold. In contrast, projects with clear benefits are not only continuing but are doing so at a faster pace. Also, there has been an increase in the number of companies interested in adopting DLT to help address some of the supply chain challenges.

Conclusion:

Blockchain is a game changer for technology companies to provide service to industry to address secure, efficient data transfer with trust. DLT networks are created to eradicate false entries and hacking attempts, which is a key reason for this to be successful in the coming years. Perhaps, it has even greater ramifications for a developing world to promote scale/economy of things to facilitate smart contracts without intermediaries. If used carefully, DLT is here to stay for a long time and to provide real value to all the stakeholders!

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