This post was originally published on Tech.co
The adoption of blockchain is surging. Users have registered over 70 million blockchain wallets as of halfway through 2021, up from just 10.98 million at the end of 2016.
They’re spending on the blockchain, too. As of June 2021, the world saw 2.58 cryptocurrency transactions every second.
What is blockchain? Why should you care? Here are all the statistics and data to know about the relatively new technology. We’ll also cover the potential benefits and downsides — there are a lot of both.
In this guide:
- What Is Blockchain?
- Why Blockchain Is Important
- What Industries Use Blockchain the Most?
- How to Use Blockchain Technology for Your Business
- What Are the Most Common Problems with Blockchain?
- Blockchain Case Studies
- The Future of Blockchain
Blockchain is a technology that records data through a system that can’t be changed or copied. This creates a digital ledger that grows longer with each transaction.
It is most commonly used for cryptocurrencies like bitcoin since the unchangeable ledger prevents counterfeiting without reliance on a centralized administrator.
To get more technical, the blockchain is composed of a list of “blocks” — each block carries transaction data, a timestamp, and a cryptographic hash of the previous block for authentication and security. Blockchain was invented in 2008 by the pseudonymous Satoshi Nakamoto, although similar protocols had been proposed since the early 80s.
Total spending on various blockchain solutions across the globe in 2021 will reach $6.6 billion. And, if the Statista forecasts are accurate, global spending will reach nearly $19 billion by 2024. But the business value-add of the technology will be far higher, reaching $176 billion by 2025 and passing $3.1 trillion by 2030, according to Gartner estimates.
All the core elements of blockchain are designed to make the protocol impossible to fake or replicate. Each block’s timestamp marks the date of any previous transaction, and the cryptographic hash in each block maps to the previous block so that no single block can be changed without disrupting every other block.
Blockchain drastically reduces the time and resources to verify transactions.
As a result, technology is most important as a way of easily verifying any transaction. The practical impact of this for a business lies in the time and money a streamlined verification process saves. It also allows some people to avoid restrictions and regulations tied to other forms of transaction like legal tender — although the question of whether this impact is good or bad may be up for debate!
Finance is the biggest sector that blockchain is in today, but it’s not the only one. Any industry that relies on transactions of any sort could potentially benefit from blockchain. And given the rapid pace at which blockchain technology has grown in recent years, they likely already do.
Blockchain Use in Financial Services
Cryptocurrencies are by far the most common use of blockchain technology, and the financial industry has noticed: Around 90% of all banks in the US and Europe had started blockchain-related projects by 2018. It’s a trend in accounting as well, as it helps with record-keeping.
Adapting blockchain is among the industry’s streamlining processes that could add up to a cost savings of $12 billion for banks, $7 billion for insurers, and $4 billion for capital markets firms, according to a report from Accenture. Blockchain protocols can reduce as much as 30% of banking infrastructure costs, CoinJournal reports.
Implementing blockchain could save banks $12 billion.
Settlements are another area that can be streamlined: Traditional trade processes can be clunky and long-winded, but blockchain tech can help everyone involved in a transaction stay on the same page and view the same data.
Blockchain for Travel & Mobility
Blockchain has streamlined car leasing and ride-hailing operations, cutting down on the payment and verification process for each.
Even entire airlines have adapted the technology: The Russia-based S7 Airlines operates with an Ethereum-based blockchain to power smart contracts when selling tickets. They have (reportedly) cut settlement times from 14 days to 23 seconds.
Hotels have adopted blockchain in a variety of ways as well, from internal inventory tracking to powering direct marketplaces or loyalty reward systems.
Tourism and travel had a monumentally bad year in 2020 thanks to the COVID pandemic, with 381 million international travelers, down from 1.461 billion in 2019 according to the New York Times, for an estimated global export revenue loss of $1.3 trillion. But the industry put $8.8 trillion into the global economy in 2018 according to the World Travel & Tourism Council’s annual report, and it can hit those highs again in the future with a little help from blockchain tech.
Blockchain and Infrastructure
Blockchain’s faster and more secure transactions could be a big boon for the construction industry: In the UK, a 2018 report from the Institution of Civil Engineers found an impressive 75% percent of capital projects run over their budgets, with 20% of these overruns due to errors including inefficiencies and limited control. In the US, the industry has the highest business turnover rate, with 59.2% of all construction businesses failing in their first five years.
How much can blockchain help? A 2017 McKinsey study determined blockchain could increase the industry’s productivity by up to 9% and boost cost savings by 7%, all just by improving progress monitoring as well as cost and schedule estimate accuracy.
Blockchain could increase the construction industries productivity up to 9%.
The construction business reinvests less than 1% of revenues into tech infrastructure for future projects (compared to 3.5% to 4.5% in the aerospace and automotive industries), so a money-saver like a blockchain could go a long way.
Blockchain Use in Healthcare
Programs to integrate blockchain into the healthcare industry will reach a total cost of $5.61 billion by 2025, according to estimates from the Bank for International Settlements. That’s good, because medical professionals’ miscommunications cost the industry up to $11 billion a year, according to a survey from the Ponemon Institute covering more than 400 providers. Blockchain-based medical records can reduce that toll.
How can it help? Blockchain tech can help handle electronic medical record data and point-of-care genomics management. One proof-of-concept study found that transaction processing speed on the blockchain dropped to “just a few hundredths” of the conventional credit card’s payment speed — although this speed would need to be scaled up to meet needs.
When it comes to proving blockchain healthcare can work, look no further than the country of Estonia. Since adopting the tech in 2012, all of Estonia now uses blockchain-based healthcare billing, while 95% of health data is on ledgers.
Blockchain for Retail & Consumer Packaged Goods (CPG)
In 2019, the retail industry lost a tidy $62 billion to just one issue, fraud. With a blockchain receipt from every manufacturer, retailers could verify their deals and dramatically reduce that number.
Blockchain’s potential benefits to retail extend to the consumer experience and all payments and contracts, in addition to the supply chain itself. 42% of executives in the consumer product and manufacturing industries aim to invest at least $5 million into blockchain projects shortly, a 2018 Deloitte report determined.
What applications could blockchain have for you? Security and speed are the main advantages, but these can manifest in a range of benefits, all showcased here.
Accepting blockchain as a payment method
The total market cap of all cryptocurrencies surpassed $2 trillion in value for the first time in April 2021. It dropped back down soon after, in a reminder of the volatility that still poses a concern for anyone dealing with the currency. Still, that’s a massive value by any measure, and businesses that offer cryptocurrency as a payment method will gain access to another form of investment to connect with their customers. As long as their accounting software can process the currency.
Secure your payments
Greater security is a big reason why blockchain has swept so many industries. Payments can be confirmed and deals can be verified with greater accuracy but fewer steps. 23% of respondents to a survey from CompareCamp cited the higher degree of security as the reason why they pushed for blockchain.
Increase your transparency
Blockchain transactions can be public or private. If public, they can be double-checked and vetted by anyone who chooses, ushering in an unprecedented level of transparency to the chain of transactions they document.
90% of government organizations worldwide have investigated the potential of investing in blockchain technology, an IBM study found in 2017, with more clear audit trails and better overall transparency among the reasons why.
Not everyone believes blockchain technology is the future, and these concerns shouldn’t be taken lightly. If blockchain tech isn’t adapted as a widely used standard, it won’t be useful enough to stick around in the long term. Here are the biggest reasons why it might eventually fail.
Blockchain uses a lot of resources
Just one bitcoin transaction takes an amount of power equal to what the average American household uses in a month. Replacing Visa transactions with a bitcoin transaction increases the carbon emissions by a factor of roughly 1.78 million, according to Digiconomist. One bitcoin transaction is also estimated to be equal to the carbon footprint of more than 130,000 hours of watching Youtube. These costs will increase with time, too.
Just one bitcoin transaction takes an amount of power equal to what the average American household uses in a month.
The total annualized carbon footprint of all bitcoin is 68.98 Mt CO2, or about the same as the country of Israel, while the annual electrical energy is 145.21 TWh, comparable to the power consumption of Ukraine, and the total annual electronic waste is 7.08 kt, or about the same as that of Luxembourg.
Switching to renewable energy can reduce carbon emissions while maintaining the same energy consumption. Lowering the amount of bitcoin mining through local regulation can also help, as China has shown: The country dropped from 75.5% of the power used for bitcoin mining globally in September 2019 to just 46% in April 2021. But even impressive measures have limits, and as bitcoin use grows, that environmental impact grows with it.
Difficult to scale
The more nodes that join a blockchain network, like a bitcoin network, the slower that network becomes. The records (also called blocks) have built-in limits on size and frequency of use. How slow? Bitcoin can manage 4.6 transactions per second currently, compared to a centralized system like Visa, which can do 1,700 transactions per second.
Bitcoin can manage 4.6 transactions per second, while Visa can do 1,700 transactions.
Some adjustments could help blockchain networks scale up to an extent — for instance, bitcoin’s block size is set to 1MB right now but could be reset as high as 4MB, and block generation time can also be decreased — but no fix can get rid of the hard limits surrounding blockchain scalability.
Backend isn’t 100% secure
Blockchain enables total transparency, which gives users transactional integrity. So why isn’t it totally secure? Well, blockchain needs to work with other, less secure software, and hackers can get into the backend of an implementation system: Hackers successfully stole $460 million from one bitcoin exchange site in 2010 with this method.
Opportunistic fraudsters are a concern
Those operating behind the scenes might not be trustworthy, either. Some cryptocurrencies have already collapsed due to fraud: Centra coin was one, with more than $25 million raised to go public in 2017 with an initial coin offering (ICO) until the co-founders were arrested by the Securities and Exchange Commission (SEC) for fraud. One cofounder has been sentenced to eight years for the debacle.
It’s worth noting that the FBI owns 1.5% of the world’s total bitcoins — this doesn’t mean they’ll be able to track them or prevent fraud, but it’s a sign that governmental powers aren’t looking the other way when it comes to cryptocurrency.
A built-in security flaw: the majority attack
The “majority attack” is one major flaw built into how blockchain works: It refers to the fact that if a group of attackers can gain the majority of control over a blockchain (owning 51% or more), they will be able to control the distributed ledger and confirm fraudulent actions as if they were secure transactions. This is possible because the tech uses a consensus model rather than a single arbiter.
Granted, it’s unlikely that a majority attack will ever happen, given the huge amount of coordination required, but it’s an upsetting potential security hole given that it can never be prohibited.
It can be inefficient and complex to set up
Small operations setting up bitcoin technology will face a few challenges, such as the bitcoin ledger, which can easily take up hundreds of gigabytes and grows in size with every update. Larger operations will face additional cost items including hiring web developers, managing a team of blockchain specialists, and licensing fees for software solutions.
All that can add up quickly, reducing the financial benefits that blockchain tech can bring into a business.
Blockchain protocols have rapidly expanded across a wide range of industries in the decade and change since their creation. Here are three examples to illustrate just how diverse the applications can be.
Since cryptocurrency can be used to safely speed up any kind of monetary transaction, it can be used in virtually any industry. One case study from the owner of a sporting goods store in Fort Lauderdale, Florida, models just how functional blockchain tech is in daily life:
“In addition to accepting cryptocurrency payments for our products, we have also set up a good relationship with a wholesale vendor in China, where we receive a lot of our goods from. We make our payments seamlessly using cryptocurrency, (Sometimes Bitcoin, sometimes Ethereum) and this drastically cuts down the waiting time we would see from a traditional bank transfer.”
When the COVID pandemic first began in early 2020, the importing and exporting industry began seeing large delays in most shipments. Since the sporting goods store used cryptocurrency, it was able to quickly front-order everything needed in the coming months. These shipments made it out before any international trade delays were announced.
Crowdz is an invoice financing platform that aims to offer small and midsize businesses a simple financing solution as an alternative to traditional bank financing. They use Ethereum private chain as a ledger for their invoice transaction system.
“We use Ethereum for multiple reasons including operational efficiency (24/7, less human interaction), security (blockchain cryptography), and transparency,” says Payson Johnston, CEO of Crowdz. “For both our current system and the plan that we hope to implement in October, blockchain is a big benefit to the company because of the ease of conducting transactions, compared to the traditional finance system.”
Since the company’s goal is to reduce cash flow bottlenecks and pass the time saved on to small businesses to get them the working capital they need, it’s safe to say that blockchain technology is core to what Crowdz does.
In the future, Crowdz plans to add even more blockchain functionality into their system to streamline abilities like letting SMEs post and sell invoices on the platform as well as help investors fund invoices and receive their profits.
Pelicoin operates the largest network of cryptocurrency ATMs in the Gulf South, with over 30 locations throughout Mississippi, Louisiana, Texas, Alabama, and Tennessee. Needless to say, the cryptocurrency ATM business relies heavily on the blockchain.
“We help to ensure that everyone can have easy access to cryptocurrencies, rather than gatekeeping this rapidly expanding market. We are constantly adding new ATMs to our network to supplement our 30+ current locations. Our ATMs allow even the most novice crypto investor to become involved, while remaining the most secure way to convert cash into crypto.”
At the ATMs, open 24 hours a day, users can either buy coins or convert to cash. They can also create a paper wallet — a physical piece of paper that hold the keys and the QR codes needed to speed up future cryptocurrency transactions.
Where will blockchain go next? Technology has seen plenty of ups and downs but appears to be increasingly dominant in a vast range of industries.
Bitcoin, the biggest blockchain success, won’t scale up to the level of centralized transactions like credit cards in its current state, given resource use and lack of scalability. But success doesn’t require massive scale, and blockchain processes can be great streamlining processes that save billions in reduced infrastructure costs. Any business that uses transactions of any sort can benefit from blockchain.