1 – Authenticating Identity
In today’s society, we rely heavily upon intermediaries to build trust between two parties. Without them, it would be impossible to get access to basic financial services such as loans and bank accounts. This practice gives these institutions an enormous power.
How can Blockchain change this?
One of the most important and game-changing concept Blockchain brings to the table is smart contracts that can be programmed to establish trust between two parties. This trust could potentially make the intermediaries that handle this today obsolete.
2 – Moving Value
The financial system we all rely upon today moves an enormous amount of money each day. The system in place ensures that money is not spent twice and that the parties involved can trust that settlement will be done.
How can Blockchain change this?
This brings me to the second thing I find Blockchain to be such a fantastic technology. In this example, we are thinking of the concept of moving money, but it can also be moving anything of value. There are multiple startups trying to handle the concept of moving value between parties. For example diamonds, gold, stocks and so on. By moving a token, which is a digital small program that runs on the Blockchain we are able to symbolic represent an ownership of an underlying asset. The beauty of this is that we can move this ownership almost instantly all over the world.
3 – Storing Value
For the average Joe the bank is traditionally the place that value is stored. If there are other values a safety deposit box could be used.
How can Blockchain change this?
One of the potential benefits that Bitcoin should have brought to the table was the ability to store value over time. Practically speaking this has yet to happen since Bitcoin and other digital currencies are a way too volatile to make this possible. My thoughts on this are that it’s still early days and the tokens/coins are too unstable to make this possible. I do however believe that this will change over time and that there will be good ways to store a value using a coin or a token.
4 – Lending business
The lending system originated in ancient Greece and Rome more than 3000 years ago. The oldest system of lending was by using pawnbrokers that collected collaterals from the borrower to reduce risk.
Today the lending industry is huge with corporate intermediaries making fortunes lending out money to borrowers. Consumer credit loans, for example, are exploding all over the world. Already now we see multiple startups disrupting this industry with so-called peer-to-peer lending. In Europe, however, we have just seen the start of this since there are only a few countries that this is possible due to regulatory issues.
How can Blockchain change this?
With Blockchain we have the benefit of trust in the smart contracts. As soon as we solve the problem with volatility it will be possible to create systems that handle peer-to-peer lending extremely efficient. Let’s say a group of investors lends their money into a pool and on the other side there are borrowers that receive this money through a smart contract. Typically this would be unsecured loans but I do think the future might also bring secured loans into such systems.
5 – Funding and Investing
As you probably have noticed there is a concept called ICOs. 2017 was the year ICO gathered huge amounts of money, typically using the cryptocurrency Ether, then issuing tokens to the investor. Typically when startups need to raise the money they would use an intermediary, such as investments banks or Venture capitalists.
How can Blockchain change this?
When using a Blockchain for raising money to startups or a new service that a company wants to offer it’s possible to do this in a peer-to-peer fashion. Meaning that the investor will receive a token representing something in the future. Let’s say a company wants to start a new service challenging Uber, by selling tokens long before the actual launch the tokens could be used when taking rides at a later point in time. This makes it possible to crowdfund the startup product and the investor will hold something that might have a value in the future.
6 – Accounting
Accounting is a huge industry dominated by big players such as Deloitte, Ernst & Young, PriceWaterhouseCoopers, and KPMG. I think traditional accounting will be radically changed when Blockchain technology enters into this space. One of Blockchains main features is to maintaining a ledger of accurate financial information
How can Blockchain change this?
Blockchain is a shared ledger where transactions happen almost in real-time. Blockchain has the potential to enhance the accounting profession by reducing the costs of maintaining and reconciling ledgers. Blockchain could help accountants gain clarity over the available resources and obligations of their organizations, and also free up resources to concentrate on planning and valuation, rather than record-keeping.
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