Brings in Highest degree of Accountability for Transactional Process
The blockchain technology, decentralizes a given computing system (“digital ledger”), suitable for managing records (“blocks”); consequently, making it an exceptionally resilient architecture. Subsequently, the enduring concerns over rudimentary transactional processes muffled with manipulation of records by private entities or corrupt intermediaries can be eliminated, as the data blocks fed in the systems are digitally crypted with a unique identification. Additionally, the data can never be deleted or altered without the consensus of the entire network and the succeeding alteration of all subsequent blocks.
Over a short span since its conceptualization in 2008, the technology has witnessed an exceptional progress, with almost 100% year-over-year growth of bitcoin-blockchain file size, in recent years. Blockchain applications such as “Smart Contract”, with features that enable transactions to be carried with pre-requisite authentication criteria, is a further embodiment to the accountability and transparency of the architecture. The assured resilience of the blockchain technology architecture has catapulted technology vendors to invest into research and development of further value-added services on top of the underlying robust framework, thereby ensuing end users across industry verticals to increasingly adopt services offered by blockchain vendors.
Financial sector globally has been the foremost beneficiary, with reduction in costs associated with training and allocation of resource for transactional services in remote locations, in addition to availability of highly secure network to manage currency flows. Earlier this year, Singapore based technology firm, Locus Chain Foundation, announced the availability of the ‘fourth generation’ blockchain technology, with promising features that enhances accountability and transactional speeds irrespective of the connectivity speed.
The Blockchain technology has been around for just over a year since it started attracting enthusiasm and attention of investors, and already several institutions have started to flag of their speculations over availability of proper regulations to govern the blockchain technology framework. “But isn’t that the point – to keep an open architecture with highest level of accountability and visibility for the blockchain service users?” Government bodies the world over, have started to warmup, to accept the blockchain technology. Consequently, this has bolstered the intent of the players to increase their investments in the technology, which is being seen as the future that will shape up transactional flows within the financial markets, at least for now!
Blockchain business: Revenue Model
There are multiple ways by which blockchain businesses can make money, the primary source being the services offered which could include blockchain-as-a-service and the corresponding SLAs, professional services such as consulting services for blockchain systems, and centres for blockchain mining (utilizing powerful computing hardware). The annual global mining revenues over the last year is overwhelming with an estimated turnaround of about $4 to $5 billion (average cost% of the transaction volume around 1-1.5%) with just over a quarter of a million average daily transactions over blockchain network.
Is there a catch? “Points to be noted in prelude to it becoming a conventional technology”
Blockchain is an exciting proposition for the future, however the computing power needed to authenticate/verify the transactions has been constantly escalating. The concern over the swelling power requirements of the blockchain networks for its computing needs, has put an appalling pressure on this initiative. The estimated power requirement for each transaction is estimated to be the power consumption for 35 households in the US and an approximate CO2 emission for powering up each transaction is almost close to ½ a ton. This is a major roadblock with global warming being an enduring challenge for government bodies globally.
Additionally, the processing speeds for the transactions is a pinning issue as blocks in a chain are sent to distributed network nodes for validation. The time required for mining of each block cannot be anticipated as the miners need to make trillions of presumptions each second to find out the appropriate value of the next instance to make the block valid, and this could range from a few seconds to several hours. Taking an instance of a worst scenario, bitcoin transactions witnessed an average transaction time of close to 2 days, while Ethereum experienced an average block time of about 15 seconds which appears to be more efficient.
Conclusion: Investments in the blockchain technology market will certainly witness steep growth over the next few years with pouring investments from various technology vendors; however, challenges faced from excessive power requirements, could potentially deflate the hype and enthusiasm among blockchain technology vendors, with possible government regulations to regulate the expansion plans of blockchain technology, till the time alternative reliable and sustainable sources of energy is available.
Moreover, increasing cyber-crimes reported with unauthorized mining of cryptocurrencies, “Crypto-jacking” could create doubts among end users with already existing uproar over regulating blockchain technology. So, it becomes inevitable for end users to secure their systems (endpoint/network nodes) with strong protective firewalls and anti-malware protective suites, to avoid the risk of their systems, from being hacked. So, the users should be very careful while accessing external links from the system that is used as blockchain network nodes for transactions.
Overall, it can be stated that currently it’s a huge gold mine for blockchain business including miners and other services providers, and the players are expected to make millions while the hype exists!
– Shiladitya Chaterji,
Senior Research Analyst(ICT),