Three blockchain technology application areas for real-life problems
By Rohit Wad, Chief Technology Officer at Binance
Bitcoin was the first well-known application of blockchain technology in 2008, but it is now widely used across a variety of industries. 1 By 2030, it’s anticipated that about 30% of all customers would be using blockchain as a form of technology. Additionally, blockchain will be beneficial to businesses as a form of facilitating value transfer and will add value by more than $170 billion by 2025.
In various parts of the world, including South Asia, we are already seeing promising growth in blockchain adoption across the public and private sectors.
Corporations will start seeing a significant reduction in operational overheads as we witness a proliferation in the use of smart contracts. With the global economy becoming more interconnected and blockchain enabling the decentralization of stakeholders and business models, smart contracts on the blockchain can lead to the creation of new business models and automated liquidity pools. The top 3 areas where blockchain will revolutionize business are discussed below:
Reaching the unbanked for financial inclusion
People without bank accounts numbered 1.7 billion worldwide in 2020. The unbanked can be reached for financial inclusion with the use of blockchain-based decentralized finance (DeFi). The removal of unnecessary administrative costs and minimum capital requirements can help push for equal financial access. With the wider adoption of DeFi and penetration of digital assets, consumers now have more choice in terms of capital allocation and access to risk-on assets that can play a role in hedging against rising consumer prices.
Additionally, blockchain payment networks enable instantaneous money transfers between users and merchant networks. Most PoS and online networks can easily include crypto-based payments as an option and unlock international consumer access to local products. . These payment options provide a simple, affordable way for those who lack regular local bank accounts. Remittance via digital assets will lower the cost of cross-border transactions and the recent partnership between Triple A and Binance is one of the many examples of how this can bring financial inclusion to the masses.
Cross-border payments and money remittance
Given the drawbacks of the current system for cross-border payments, the idea of distributed ledger technology has been gaining traction in the banking and financial sector. Even in cross-border transactions, blockchain enables instantaneous direct payments without the worry of manipulation. Blockchain technology can enable safe transfers across an essentially limitless number of bank ledgers in cross-border payments. It also helps in bypassing banking middlemen that act as go-betweens to facilitate money transfers between banks. Anywhere in the world, the transaction is secure, transparent from beginning to end, and quick and inexpensive. Additionally, blockchain permits fees that are much lower than those associated with current money transmission techniques.
For instance, Binance partnered with Splyt to allow global Binance users to seamlessly access ride-hailing services. Furthermore, Virtuezone, a Dubai-based business service provider, began accepting cryptocurrency payments using Binance Pay.
Solving the ‘Know Your Customer (KYC)’ problems
The problems with the current regulatory KYC processes could be solved by blockchain technology. For account opening and other crucial functions in almost all financial companies, including banks, individuals need to perform and complete the KYC procedure. Banks must also routinely update the KYC information for each of their customers to make sure there are no inconsistencies. Even while KYC is a labor-intensive, time-consuming process, it is the essential building block without which no banks or financial organizations can operate effectively because it allows for effective transaction monitoring.
Banks will be able to give better compliance outcomes, increase efficiency, and heighten the security for customers with the help of blockchain in KYC and Anti Money Laundering (AML). It will also help in reducing the cost of these procedures. The technology can assist with the institutions’ ability to verify consumer information, and it also efficiently monitors and analyses the data required for background checks, KYC, and AML.
Challenges and How to overcome them
Although the future of blockchain appears bright, it is impossible to overlook the fact that there are still a lot of unresolved issues that make it susceptible. The biggest obstacle to the successful implementation of the blockchain is a lack of harmonized regulation and compliance. Making blockchain a part of everyday life is a difficult endeavour given that millions of people still do not understand the fundamental technology behind digital assets. Blockchain technology is still very much in its infancy, and there are many use cases yet to be built on top of this new technology that allows for permissionless and decentralised execution of smart contracts. Concerns that businesses have about using blockchain and integrating it with old systems are only exacerbated by the cost and difficulty of finding qualified experts in this field. This is the reason why it is important for both the private and public sectors to encourage investment in blockchain education and countries that make the first moves in such structured educational programs will be able to reap the benefits of having an international exportable workforce for this upcoming new technology.
Many of blockchain’s most significant difficulties can be viewed as typical growing pains for any new technology. Blockchain can be a formidable solution once implemented, given the advantages that companies are already getting from it and the rising need for visibility and transparency inside and across enterprises. It can also reduce the overheads of launching new business models and change the way value is exchanged – providing we can solve the issues around scalability, efficiency, and security.
We are seeing multiple experiments and companies come up that are working with Governments and big corporate players in each market trying to foster awareness and increase use cases for this new technology of blockchain. With the right policy efforts across major markets like India which are the technical talent hubs of the world, we would be able to unlock the full global scale potential for this new-age technology.
Photo Caption- Rohit Wad, Chief Technology Officer at Binance