For a lot of people, mention the blockchain to them and they will immediately think of Bitcoin and perhaps some of the nefarious activities that the cryptocurrency is accused of promoting. But there is a lot more to it than that as the biggest players in the tech industry are embracing blockchain technology. Companies such as Microsoft, IBM and Accenture are heavily committed to bringing blockchain to real-world use and the anticipated value of blockchain business is seen to be $60.7 billion by 2024. Microsoft is powering the blockchain trend as its enterprise clients are making a transition to cloud services and blockchain on Azure with its Blockchain as a Service platform. These fast emerging decentralized ecosystems have a huge potential to become significant revenue generators for the companies involved.
In the realm of banking, despite the skepticism expressed by the likes of Jamie Dimon, CEO of JP Morgan Chase, blockchain and distributed ledger technology (DLT) are starting to replace and revolutionize elements of the banking system.
Payments for instance can make use of blockchain technology as it offers a high-security, low-cost way of sending funds that cuts down on the need for verification by 3rd parties and beats processing times for traditional bank transfers. Banks have continued to use the old-style correspondent banking system for international payments despite their inherent weaknesses of being expensive, slow and complex. In the correspondent banking system, both the originating bank and the foreign bank retain their own ledgers from which they make reconciliations and settlements. This may lead to a lack of transparency but also make them vulnerable to hacking. These new technologies are completely changing the way we pay and transfer money all over the world. With the advent of mobile banking, e-commerce and digital wallets, banks have to rethink their correspondent banking system of making cross-border payments. If adopted in a large way, blockchain can bring about a huge transformation within the global payment system and disrupt banks, forcing them to realign or rethink their products.
The payment processor SWIFT has seen the writing on the wall and has developed a cloud solution called Global Payments Innovation (gpi) to connect all clients in the payments chain. Currently, gpi accounts for more than 55% of its cross-border payments. Half of these transactions are reaching recipients within minutes, but all of them within 24 hours.
But the question has to be asked, can we, as individuals, trust this technology to keep our private information really private? There is talk about encrypted digital identities soon being commonplace and as such everything about us will be kept on the blockchain. Yes, it will be an immutable record but will it be safe? When it comes to a blockchain being hacked, the biggest risks are the human ones such as reusing passwords, falling for phishing scams or shoddy practice by website operators.
With its immutability in mind there is no delete button on the blockchain and whatever is on there concerning you or anyone else will be on there forever. With GDPR now in force in the EU, those who reside there have better control over their private data but its provisions concerning the right to erasure are in direct conflict with the blockchain's immutability. Data on the blockchain cannot be tinkered with or otherwise rendered inaccurate. If something needs to be corrected, it will be accurately reflected as such but a modification of preexisting data is not possible. One way to have compliance with GDPR would be for those specific blockchains to be “permissioned” where the nodes are not anonymous. Access to this type of blockchain is subject to the consent of other participants and the data may be susceptible to change, plus as decentralization diminishes, so too will its benefits, namely security.
With its hallmark decentralization and powerful cryptography, blockchain offers one of the best solutions to cybersecurity issues. However, keeping consent to a bare minimum will always be the best way to protect your data.