To understand the future of blockchain, we must first understand what it is.
Blockchain or distributed ledger is a shared medium designed to facilitate the process of recording transactions and tracking assets in a business network. It’s a peer-to-peer network that relies on a decentralized approach for its technology implementation. Blockchain depends on a consensus method to verify and write transactions on the network, and because of decentralization, there is no need for a governing body. Instead, the nodes on a blockchain work together to validate a transaction.
The independent verification procedures that occur amongst the member computers on a blockchain network operate under a high level of cryptographic security. The data stored in the blockchain is immutable in nature — meaning that once verified and saved, it cannot be changed or tampered with. This makes blockchain ideal for storing documents, cryptocurrency, and other high-value digital assets.
Given its nature as a tamper-resistant distributed ledger, blockchain technology offers many possible uses to business ventures spanning numerous industries. One of the quickest industries to invest in blockchain has been the financial sector, with over 60 percent of the technology’s market value. Other sectors with a current stake in the technology include health care, supply chain logistics, and insurance, with future uses of blockchain possible or imminent in various other disciplines.
But is blockchain the future? That’s an issue which we’ll be exploring in this article.
A Glimpse into the Future of Blockchain
Blockchain future applications based on current developments were the focus of CES 2020, an industry event showcasing ideas and prototypes, illustrating the potential future of blockchain technology. Among the highlights were products in data management, the Internet of Things (IoT), and communication devices.
In the communications arena, Pundi X displayed the CES 2020 Innovation Award-winning Blok On Blok — the world’s first blockchain phone, powered by a new operating system called Function X. The device enables users to decentralize apps, websites, and services, effectively empowering them to reclaim ownership of their information. With the Blok On Blok in blockchain mode, users can call, send messages, or browse the internet without third parties monitoring or blocking their data.
For data management in web services, the Open Index Protocol creates a public space for content distribution on the internet. A pioneering permission-less system with a decentralized and transparent index, the Open Index Protocol enables open-source record indexing, file storage, distribution, and transaction management.
Incorporating blockchain logistics management and the Internet of Things, IBM’s new blockchain system IBM Food Trust digitizes transactions in food supply chains, allowing partners to confidently and securely share food information. With the ability to trace the source of the ingredients for each item shipped, the system may enable stakeholders to create a more transparent and trustworthy global food supply chain.
An Assessment of Blockchain Potential
Deloitte’s 2020 Global Blockchain Survey polled a sample of nearly 1,500 senior executives, who are now putting money and resources behind the technology in more meaningful and tangible ways. This suggests that initial doubts about blockchain potential are fading, as business leaders now see it as an integral component for innovation.
From a policy-making and strategic perspective, analysts from the European Union have been assessing blockchain, with observations that have relevance for the present and future adopters of the technology anywhere in the world.
In terms of its benefits, by removing the middleman, blockchains offer institutions the service of moving value from one place to another more quickly and more transparently. Blockchain also has enormous potential for simplifying all the bureaucratic procedures for state actors and making transactions transparent and more accessible.
Blockchains can allow larger enterprises to increase transparency and speed while decreasing their expenses. Permissioned blockchains, in particular, can protect the privacy necessary for companies to operate and provide safety for their consumers.
Adopting blockchains can also transform the way consumers communicate with brands and companies. With the ability to track and record actions, movement, the sources of goods, and even the temperatures of certain products, brands can give information access to the consumer to build trust. Blockchain also has the potential to become an essential tool for holding companies accountable for their claims and actions in the future.
However, because of its infancy, blockchain has many complex challenges to overcome. One of the principal issues that blockchain adopters must deal with is energy efficiency. Current blockchain designs run on algorithms that consume around 215 kilowatt-hours (kWh) per transaction. This is equivalent to letting an incandescent light bulb of 25 Watts burn for a full year and results from the huge computing power it takes to validate and secure transactions on the blockchains.
Besides power consumption, the complexity of blockchain architectures may make it difficult for new users to make transactions, as the methodology requires at least some level of technical knowledge. If blockchain’s future is to feature widespread global adoption at various levels, blockchain infrastructure will have to become more environmentally and user-friendly.
Projections for Blockchain Growth
Based on information gathered by Statista.com, forecasts suggest that global blockchain technology revenues will experience massive growth in the coming years, with the market expected to climb to over $39 billion by 2025. Due to the technology’s potential applications and the widespread business interest in the capabilities it can provide, blockchain has become an industry in its own right, even at this relatively early stage in its development.
Though North America was the largest region in the blockchain growth market in 2019, Asia Pacific is expected to be the fastest-growing region in the forecast period covering 2020-30, according to the Blockchain Global Market Report. Federated or consortium blockchain is expected to be a significant trend in shaping the blockchain market during the forecast period. This is a private permission variant of blockchain, which gives permission for multiple entities to have access to the network via a voting or token system.
Despite these blockchain growth predictions, problems with scalability in blockchain technology impede the blockchain market. The inefficiency of scalability results from a partial dependence of the blockchain network’s health over the number of nodes in the network and the spread of those nodes across the world. With larger blocks, the increase in the size of the blockchain is even faster, which obstructs the processes involved, and can ultimately result in a pile-up of transactions. An increase in the number of transactions results in scalability issues, which hampers adoption and confidence in the technology and ultimately hampers the growth of the market.
As a counterbalance to this, the growing demand for blockchain technology in industries and the public sector is expected to drive market growth. An increasing need to simplify business processes and a demand for supply chain management applications integrated with blockchain technology will drive the overall blockchain market.