Why Blockchain (DLT) is not equal to Bitcoin
If you ask managers about blockchain technology, most of them will dismiss it immediately — stating they find it too uncertain and volatile. Even though Bitcoin has an average daily trading volume going up to approximately US$50 billion in just thirteen years of market presence, the negative headlines from the crypto world are always aligned with Blockchain technology.
Enlightenment is necessary because entrepreneurs will otherwise miss the boat on technological progress.
Short introduction
Bitcoin is a deflationary financial product limited to twenty-one million units, which can be purchased by anyone in the form of tokens (coins). The idea came from a cunning stranger who gave himself the pseudonym “Satoshi Nakamoto”, and as a trigger of the 2008 financial crisis, introduced Bitcoin as a deflationary and decentralized financial asset to the market in 2009.
For his idea to work, he used an ancient IT technology called peer-to-peer network in which every client (peer) can communicate directly with every other client (peer). Whereas previously such networks were mostly closed, Nakamoto put the clients on the public internet — aiming to allow anyone to join the P2P network and secure it (known as “mining”) and be rewarded with Bitcoin in return for their currency. The sophisticated system combining encryption and consensus mechanisms ensures that all clients always have access to identical data of each other within the chain.
After 13 years of operation since its creation, the first blockchain is still considered secure today — without ever needing any supervision from companies. This is why now dozens of blockchains with various focuses have arisen and successfully move several billion US$ of capital back and forth daily (e.g. Ethereum, Solana, Ripple, Cardano).
Furthermore, the aspiring Web3 era is currently causing the blockchain market to grow rapidly. Solutions are now emerging for almost every industry.
Blockchain the next generation of IT
Blockchain technology (also known as Digital Ledger Technology — DLT) enables the audit-proof storage of information in business-critical applications. Smart contracts are stored on the respective blockchain to constantly control and monitor the properties defined in the network and automatically alert or regulate if the programmed contract is violated. Human intervention is not longer necessary.
For example, if the legally required minimum temperature for transported goods has been breached during a supply chain process, the information is irrevocably stored in the underlying blockchain and can no longer be manipulated or changed. The smart contract constantly monitors the temperature values of the goods written in the blockchain. So if the temperature falls below the minimum, it automatically determines the removal of the goods from the supply chain and forwards them for disposal.
Due to the success of DLT, an infinite number of applications are currently being developed, leading to more profitable trust among partners and end users, in addition to higher efficiency as well as lower operational costs.
Blockchain as the foundation for Web3 and the Metaverse
Without blockchain technology, Web3 and the Metaverse cannot be realized at all — as DLT generally is the foundation for such projects. Yet DLT is simultaneously growing ever closer together with Defi and NFT.
Under the umbrella of Decentralized Finance (Defi), the eCommerce applications of tomorrow emerge and allow transactions to be sent from one continent to another in a matter of seconds — and at a fraction of today’s fees. Non Fungible Tokens (NFT) on the other hand, represent the intellectual property (IP) of the future in form of digital certificates of authenticity and ownership. The newly arising infinite possibilities, in addition to the classic economic aspect, move us forward in especially important economic issues, such as the climate crisis.
For example, current solutions on the market can be used to acquire Co2 certificates in an audit-proof manner, if the company’s Co2 guidelines are not met. These can for example be invested in the reforestation of the Amazon, and reliably prove who remains responsible for each tree even in twenty years to come. Projects like GoodCarbon already have solutions.
Many companies have recognized it — others not yet at all
Many well-known companies have already recognized the potential of blockchain. For example, The Alphabet Group (Google) has invested over US$1.5 billion into the new market within the last ten months. Samsung, PayPal, Microsoft, etc. also want to gain a foothold in the market with amounts as high as in the three-digit millions. They invest relentlessly to defend and further expand their market position, and are constantly on the lookout for cool startups and companies. According to a recent survey conducted by Deloitte, 86% of IT decision-makers believe that blockchain technology offers significant benefits to their environment.
The situation in Germany looks quite different according to a recent study by the German association Bitkom. Only one in eight companies (12%) is open to the new Distributed Ledger Technology. Even among companies that have more than five hundred employees, the situation is not exemplary, as only 54% of the executive floors carry it on their agenda. Only a pitiful 17% of large companies currently even postulate working on blockchain projects.
Skills shortage
The blockchain industry is currently one of the fastest growing industries worldwide. Many companies are desperately looking for professionals with blockchain expertise, but complain about the lack of skilled workers to tackle upcoming projects. According to a well-known international job portal from 2021, the number of job applications in countries such as Canada, Spain, and Brazil has increased by 500% (Germany 82%). The biggest demand comes from the US, India, and China.
Food for thought: In the US, a blockchain developer earns an average of US$91,715 per year according to Glassdoor. In Germany on the other hand, the average is around €50,000 (source: Stepstone).
When selecting a blockchain expert, all of the above skills should be disproportionately strong. A person’s ability to communicate should not be neglected — considering that the prospective new IT world lives strongly from decentralization, where communication plays an important role.
Facts, savings and forecasts
The blockchain industry is estimated to grow at a compound annual growth rate of 56.3%, resulting in a market volume of US$163 billion in 2029. According to The Economics Times, the financial sector alone could save US$12 billion annually by using blockchain technologies, such as Ripple and Co.
Moving securities and shares to blockchains could eliminate middlemen and generate savings of annual trading fees of 17 to 24 billion US$ (source: CBInsight). In healthcare specifically, data integrity, patient digital identity, as well as innovative patient care could be dramatically optimized through breakthrough technology. For this area, blockchain technology is expected to grow 63% annually (US$231 million today). Huge annual savings of up to 200 billion US$ are projected in the healthcare sector (source: Deloitte).
Security / Regulation
Indeed, there are currently still many problems that prevent companies from getting involved with blockchain technology. A lot of money has been lost due to security issues. However, the market grows more professional day-to-day and currently attracts experts who are holistically involved in the topic. The current development demonstrates that the security of applications on a blockchain no longer plays a major role if the blockchain has been professionally evaluated and is supported by specialist personnel.
The topic of regulation must not be disregarded either — especially if linked to DeFi projects. Because the market can no longer be ignored, all countries are working at full speed to ensure a safe market space, including Germany with MiCA (Market in Crypto Assets) Regulation. Permanent legal advice with an international focus should always be sought for public DeFi projects. However, this is less relevant for companies that aim to operate a closed blockchain.
Conclusion
Companies of all sizes must realize today that blockchain technology has already leaped out of its infancy and can be used in an effective and cost-reducing manner. The resulting technological and material competitive advantage is not to be overlooked. Companies planning to start or revise an IT project should consult a blockchain expert from the beginning and evaluate costs including DLT and ROI planning.
Remarks
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About the author
Ralf Emanuel is a passionate entrepreneur. He founded two companies in the IT industry after managing large-scale IT projects since 1995. After developing and operating several critical enterprise applications in the tourism and finance sectors, he now specializes in IT consulting, focusing on digital transformation, cybersecurity, and blockchain while advising companies on their strategic direction.
