Bitcoin’s underpinning technology, blockchain, has galvanized the financial and technology communities. Blockchain’s innovative architecture allows it to securely send digital assets while dispensing with the need for trusted third parties.
The ability to convey a shared truth that everyone agrees on without the need for intermediaries, or centralized authority, is a major selling point of this remarkable new technology:
- Definition – According to IBM, blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.
- Market dimensions – AngelList has 5,582 companies in its Blockchains Startups list, a figure that is growing by two companies a day or 200% in just three years. This is by and large the fastest any area of technology has taken off in terms of new company formation.
- Opportunity – Global banking is a $134 trillion industry built on old-school, three-day bank transfers. Even at its slowest, a bitcoin transfer takes just 16 hours, and, quite often, much less time.
- Smart contract – Another significant advantage of blockchain is the “smart contract,” which uses a distributed ledger that automates many of today’s tedious business processes, including compliance, claims processing, title searches, and delivery verification. One possible application is to provide both manufacturers and e-merchants with a permission-based, private blockchain. Smart contracts would then allow contracted parties to write new entries into a system of record, addressing some of the biggest pain points in e-commerce — promised delivery date compliance, defective claims processing, and delivery verification.
- Venture capital – VentureScanner reports that funding of blockchain technology companies actually dropped for a second consecutive year in 2020 to $1.5 billion.
While venture activity in blockchain technology companies has declined, the uptick in interest in blockchain-based NFTs (Non-Fungible Tokens), which promise to revolutionize the digital art market, plus the crypto boom, will certainly result in a renewed interest in blockchain technology.