Non-fungible tokens (NFTs) have recently become the talk of the town, with collectible digital assets launched by celebrities being snapped up en masse by eager buyers. NFTs offering access to artwork like photographs, paintings, media and short videos are at the forefront of the trend. But for investors, the blockchain technology that encrypts the assets is more interesting than the NFTs themselves.
Apart from NFTs, another star of blockchain technology is the cryptocurrency Bitcoin. This comes as no surprise, considering it was the cryptocurrency market that first brought blockchain technology to the public’s attention.
A blockchain is an electronic database consisting of a collection of data packets or “blocks”. When a block is filled, it is connected to the next block, thus forming an unambiguous data chain. Unlike traditional databases, blockchain is decentralized, providing users or network participants with a new way to securely transmit and record information. This technological breakthrough helps reduce costs, improves efficiency and reduces fraudulent activity, thereby creating an ecosystem with a high level of trust.
Blockchain technology has four major characteristics which give it an advantage over conventional databases:
- Consensus checking: All network participants share the same documentation, which can only be updated through consensus.
- Decentralised: Control and decision-making in a distributed network optimizes transparency and facilitates resource distribution with less process friction and single point of failure risk.
- Unchangeable: Blockchain ledger records data permanently. Once data is written to the blockchain, it cannot be tampered with and is permanently stored on the blockchain.
- Secure: Thanks to decentralization, hackers would need to simultaneously control 51% of the copies of the blockchain for their new copy to become the majority copy. This threshold effectively curbs unlawful behavior.
estimated economic impact of blockchain over the next decade
With a total market value of US$1.9 trillion1, the financial and trading power of Bitcoin cannot be underestimated. However, cryptocurrency is just one of the ways in which blockchain is being used. Today, the technology has penetrated a wide range of industries including financial services, healthcare, supply chain management and food safety, in part because of the ongoing pandemic, which has accelerated digitization of the world, as well as the development and implementation of blockchain solutions . Market projections predict that by 2027, as much as 10% of global GDP could be stored on blockchains2. In addition, the impact of blockchain on value-creation levels in the global technology market is expected to reach US$3.1 trillion by 20303.
To illustrate how blockchain is reshaping the business model, a leading retail coffee chain has introduced an initiative using blockchain technology which serves to monitor the entire process from the time a coffee bean leaves the farm to the point when it reaches a customer’s cup. Furthermore, blockchain is able to create a clear data stream that the company can use for its inventory management systems and pricing.
Here is another example of blockchain being used in business, this time involving a multinational shipping and logistics operator engaged in container vessels, supply ships and reefer container box businesses. Trade documentation administration and processing accounts for around 20% of its total shipping costs. After leveraging blockchain technology, the company digitises and automates the filing of paperwork, including bills of lading, making it possible to more efficiently and securely submit, validate and approve paperwork. The introduction of blockchain technology results in significant cost and time savings in clearance and cargo movement. The real-time tracking of shipment events powered by blockchain technology also strengthens the company’s risk management while reducing human error.
Thanks to the numerous benefits of blockchain technology, studies have shown that 22% of businesses have already implemented it in 20194.