Module 5

MODULE 5

BLOCKCHAIN TECHNOLOGY- IMPACT AND IMPLICATIONS

5.1. INTRODUCTION

Trying to figure out the technicalities behind the working of block chain
may feel nothing less than deciphering rocket science. But the impact it has
had can be understood with a basic understanding of the technology. Block
chain and crypto currencies have been read as synonyms very often than
not. Though curtailing the impact of the technology to just crypto currency
is an unfair analysis of the far-reaching capacity of the technology.

Have you ever purchased coffee or produce that is labeled as a fair-trade
product? How can you trust that information? What about when you meet
someone on a dating website? How do you know they’re really the 35-year-
old startup founder and wake boarder that they say they are?

Society today is filled with uncertainty and trust issues -- and with valid
reason. To be sure your purchase is really helping a coffee bean farmer in
Ethiopia or that your date is actually who they say they are, you would need
a system with strong security where records are stored and facts are verified
by many witnesses so that no one could cheat it.

This type of system is called blockchain. No central person or company
owns it. Rather, information is stored across a system of many personal

computers so that there is no middleman. It’s decentralized and
distributed so that no one person can take it down or corrupt it. However,
anyone can use the system and help run it, as information is protected
through cryptography.

It’s essentially an ever-growing list of transactions (listed in blocks) that are
verified, permanently recorded and linked in chronological order. For most
users, the beauty of blockchain will be in the unknown. Just as most of us
are unaware of how 4G technology works or how silicon is processed to
produce central processing units, we continue to use our smartphones on a
daily basis. Similarly, blockchain will be a perfect “backstage” to many
changing technologies and will impact the way we educate, manage,
consume, govern and communicate.1

5.2. FEATURES AND IMPACT

Blockchain will have a huge impact on our future, from banking and secure
communications to healthcare and ride-sharing.

5.2.1. Banking and Payments

Not only will blockchain allow faster exchange of money but it will take
place more efficiently and more securely. Many banks are already working
on adopting blockchain technology to improve their transactions.

1 Kage Spatz, (Published on March 9, 2018), Retrieved from
https://www.forbes.com/sites/theyec/2018/03/09/eight-ways-blockchain-will-impact-the-world-beyond-
cryptocurrency/#4b5791341883), Last visited on 22 January, 2019 at 06:09 pm).

We are following traditional banking system for our financial transactions.
In the conventional banking system, it takes a longer time to do a
commercial operation and the cost is also high. Even though it takes extra
time and cost, we cannot wholly rely on the banking system because of
hackers. Banks are facing the cybersecurity issues.

Due to cyber attacks, the SWIFT network of the banking sector has lost $
100 million in recent years. With the usage of blockchain system in the
financial industry can results in increased efficiency, more transparency,
and decreased cost.

JP Morgan is also entering the blockchain space with the JPM Coin, which
it intends to use to facilitate transactions between institutional accounts.

5.2.2. Cybersecurity

All data is verified and encrypted in blockchain using advanced
cryptography, making it resistant to unauthorized changes and hacks.
Centralized servers can be very susceptible to data loss, corruption, human
error and hacking. Using a blockchain decentralized, distributed system
would allow data storage in the cloud to be more robust and protected
against attacks. "Bitcoin is still getting stronger. It’s a system that is under
a constant denial-of-service attack, that is on the internet being attacked by
hackers, by agents, by other systems, 24 hours a day."2 In security, we have
a really funny term, which is a honeypot. A honeypot is a system that is
designed to attract hackers. What bigger honeypot could you have than a

2 Antonopoulos, Andreas M , 2016, The Internet of Money, Page No. 47.

financial network that has $6 billion on it? If you hack bitcoin, there is a $6
billion reward for you finding a way to hack it. No one has collected that
reward yet, and it’s not because they haven’t been trying. They’ve been
trying nonstop. But systems like bitcoin are resilient.3

5.2.3. Internet of Things

Today the Internet of Things (IoT) includes cars, buildings, doorbells and
even refrigerators that are embedded with software, network connectivity
and sensors. However, because these devices operate from a central location
that handles communications, hackers can gain access to the car you’re
driving or to your home. According to Kamil Przeorski, an expert in Bitcoin
and Ethereum capabilities, Blockchain has the potential to address critical
security concerns because it decentralizes all of the information and data.
This is increasingly more important as IoT capabilities increase.4

5.2.4. Unified Communications

Blockchains can enable faster, safer and more reliable automated
communication. Automated or digital communication based on pre-built
algorithms is already occurring at scale in some industries. Examples of this
include emails, system alerts and call notifications. Matt Peterson, co-
founder of Jive Communications and an early adopter and miner of
Bitcoin has said that “Blockchains can shift the playing field to allow
authorized, bi-directional communications and transactions that occur more

3 Antonopoulos, Andreas M , 2016, The Internet of Money, Page No. 51.
4 Kage Spatz, (Published on March 9, 2018), Retrieved from
https://www.forbes.com/sites/theyec/2018/03/09/eight-ways-blockchain-will-impact-the-world-beyond-
cryptocurrency/#4b5791341883), Last visited on 22 January, 2019 at 06:09 pm).

freely in an automated environment and produce an immutable record of
communication.” This will greatly enhance the safety and reliability of our
communications.5

5.2.5. Government

With blockchain, we could reduce bureaucracy and increase security,
efficiency and transparency. Welfare and unemployment benefits could also
be more easily verified and distributed and votes could be counted and
verified for legitimacy.6

5.2.6. Crowd funding and Donating to Charities

Donating to a worthy cause is never a bad idea. But what percentage of your
donation is actually being given to those it’s meant for? Blockchains can
help ensure that your money gets exactly where you need it to go. Bitcoin-
based charities are already creating trust through smart contracts and online
reputation systems and allowing donors to see where their donations go
through a secure and transparent ledger. The United Nations’ World Food
Programme is currently implementing blockchain technology to allow
refugees to purchase food by using Iris scans instead of vouchers, cash or
credit cards.7

5 Ibid.
6 Ibid.
7 Ibid.

5.2.7. Healthcare

Wouldn’t it be great if doctors did not have to "fax over referrals”
anymore?Why can't all of our medical information be stored in a central
database? The centralization of such sensitive information makes it very
vulnerable. With all of the private patient data that hospitals collect, a secure
platform is necessary. With the advent of blockchain, hospitals and other
healthcare organizations could create a centralized and secure database,
store medical records and share them strictly with authorized doctors and
patients.8

5.2.8. Rentals and Ride-sharing

Uber and Airbnb may seem like decentralized networks, but the platform
owners are in complete control of the network and naturally take a fee for
their service. Blockchain can create decentralized peer-to-peer ride-sharing
apps and can allow car owners to auto pay for things like parking, tolls and
fuel.

While blockchain is still relatively new and many experiments will fail
before they succeed, the possibilities for innovation are endless. Along with
the eight points listed, it will affect retail, energy management, online music,
supply chain management, forecasting, consulting, real estate, insurance
and much more. Let’s prepare ourselves for a future where distributed,

8 Kage Spatz, (Published on March 9, 2018), Retrieved from
https://www.forbes.com/sites/theyec/2018/03/09/eight-ways-blockchain-will-impact-the-world-beyond-
cryptocurrency/#4b5791341883), Last visited on 22 January, 2019 at 06:15 pm).

autonomous solutions will have a huge role -- both in our personal lives and
in business.9

The blockchain is ready to disrupt the insurance industry with its unique
capabilities. In the traditional way of insurance process, it has a long
process, and it will take time to settle the matured claims.

Blockchain can detect the fraudulent acts, and it can process the matured
claims instantly. Blockchain implementation in insurance sector leads to
gaining the people trust and thereby we can increase the sales.

In the industry as a whole, interest in blockchain is booming. A 2019 report
from Aite Group interviewed 40 blockchain professionals from a number of
major insurance companies, reflecting the growing demand for insurance
employees dedicated to understanding and implementing blockchain.

Air Travel: Think of the data that goes into booking a flight: names,
birthdays, credit card numbers, immigration details, destinations, and
sometimes even hotel or rental car information, depending on how flights
are booked.

Implementing blockchain technology to secure and reconcile this data can
make for a safer journey — and one that’s more convenient for the traveler.
Transforming a material ticket into a digital token provides a new layer of
security. Using a smart contract as part of the ticket token can help airlines
control the sale and use of tickets to provide verified experiences for

9 Ibid.

customers. It can also be used to create more accurate logs of aircraft
maintenance, prevent overbooking, and more.

Gambling: Online gambling has seen significant growth over the past few
years. But some of its core issues namely a huge gap in transparency haven’t
yet been solved.

Introducing blockchain technology can help establish transparency and
build trust between a business and its consumers. The technology helps
ensure fair games: records can’t be manipulated on the ledger, so there’s no
such thing as “the house always wins.” Sites like Wagerr play on the idea of
“trustless betting,” meaning that the system is so decentralized, you don’t
need trust.

Decentralization makes gambling more universally accessible and reliably
balances costs for online casinos. Plus, it enables anonymity, which is
important for many gamblers. Sites that require too much documentation
and verification hinder people from playing, and could be seen as good
targets for hackers.

Education: In fact, most important factor in the educational sector is
academic credentials must be universally identified and acknowledge. By
nature in both the secondary and primary university and schooling
environments, tracking academic credentials by the manual is the big
challenge for management. (burdened by cumbersome paperwork and
manual processes).

Using blockchain technology in the education sector, we can reduce the
unauthorized claims and unearned educational credits.

Education organization KnowledgeWorks released a report of how
blockchain could work in primary k-12 schools. The report described how
blockchain technology could possibly be used to simplify administrative
tasks, decentralize learning materials to make them more accessible, create
a network for parents to share experiences, and store learning-related data.

5.2.9. Solving Payment Problems

If you think about starting up a business in an international environment,
there are two primary barriers to becoming a global business. The first
barrier that it is difficult to transport products and services across borders.
Withthe internet, we solved that. We can now create products and services
that are virtual, ones that we can sell anywhere in the world. So, we can
deliver the product, but we still have one big problem: How do we get paid?
Bitcoin solves that part. It allows us to receive payments from anywhere in
the world, instantaneously. The bitcoin network allows any individual to
send an amount that is as small as 100-millionth of a bitcoin, which in
today’s terms is a very tiny amount of money. "Credit cards were made in
the 1950s, and they were most certainly not made for an internet age.
Bitcoin is made for the internet age."

You can do micro transactions. You can collect payments from millions of
people in tiny amounts and make them, in aggregate, be worth something.
On the same network where you can send one-thousandth of a euro or one-
millionth of a euro, you can send a billion euros or a trillion euros. The fee

will be exactly the same, because fees depend on the size of the transaction
in kilobytes, not on the amount or content.10

5.2.10. Neutrality

Bitcoin is neutral to the sender, the recipient, and the value of the
transaction. That means it gives every citizen, every user of bitcoin, the
ability to innovate in terms of financial instruments, payment systems, and
banking. You can operate on the same level as Citibank. That is truly
revolutionary.11

The real power of the internet comes from net neutrality. Net neutrality is
the concept that the internet does not discriminate based on source,
destination or content. "Bitcoin is the first financial network that exhibits
neutrality."In a bitcoin transaction, the network doesn’t care about the
source, the destination, the amount or what type of financial application it’s
supporting. The only relevant question is, did you pay a sufficient fee to use
the network resources? And if you did, your application is valuable.12

5.2.11. Impacting Lives around the World

Bitcoin is the internet of money. As a technology, it can bring economic
inclusion and empowerment to billions of people in the world. An example
of a specific application that is going to fundamentally change the lives of
more than a billion people in the next five to ten years. Every day, an
immigrant somewhere cashes their paycheck and stands in line to wire 50

10 Antonopoulos, Andreas M , 2016, The Internet of Money, Page No. 15.
11 Antonopoulos, Andreas M , 2016, The Internet of Money, Page No. 16.
12 Antonopoulos, Andreas M, 2016, The Internet of Money, Page No. 40.

percent of that paycheck back to their home country to feed their extended
family. In the US, 60 million people have no bank accounts, yet they cash
their paychecks and send them abroad. Overall in the world, $550 billion is
transmitted every year as remittances from first-world countries. Much of
that money is sent to five major destinations: Mexico, India, the Philippines,
Indonesia, and China. In some of these places, remittances represent up to
40 percent of the local economy. Sitting on top of that flow of $550 billion
are companies like Western Union, and they take, on average, a cut of 9
percent of every single one of these transactions out of the pockets of the
poorest people of the world. "Imagine what happens when one day one of
these immigrants figures out that they can send money back to their home
country with bitcoin — not for 15 percent, not 10 percent, not 5 percent, but
for 5 cents. Not a percentage; a flat fee." As an immigrant you can change
your financial future by not paying 9 percent to send money home, imagine
what happens if every month, instead of sending 91 dollars home, you send
100 dollars home. That makes a difference. There are a billion people, right
now, with access to the internet and feature phones13"Consider what we’ve
been talking about: financial transactions, banking, payments. It’s a fancy
credit card. It’s Paypal, basically. It’s a global Paypal. But it’s not. It’s
something completely, radically different." "For me, the vision of bitcoin is
not to bank the other 6 billion; it’s to unbank all of you.”

5.2.12. Currency Creates Sovereignty

After 2008, currency creates sovereignty. The internet has its own currency,
which means that the internet has purchasing power. Which means the

13 Antonopoulos, Andreas M, 2016, The Internet of Money, Page No. 64.

internet has economic freedom. Which means the internet can exert that
economic freedom in a post-nationalist way, in a way that ignores borders
and makes the nation-state not obsolete, but simply less relevant.14

"The dream of nation-states, to create a totalitarian financial system, died
on January 3rd, 2009, with the invention of bitcoin and the mining of the
genesis block."15

The rationale behind block chain being highly valued is because of the way
the data is recorded and linked to the database. It is a technology which
protects the integrity of the digital piece of information. All the computers
participating in the block chain network stores and verifies the data, making
it robust in the first go. Every new data that is added or new transaction is
linked to the previous one and is notified to all the users. This makes it
impossible to modify the data in anyway. And since all the data are
recorded, the system becomes transparent. Also, there is no specific or
single authority.16

The impact of block chain is widespread across various fields and markets
within the economy. While internet revolutionized the world, phase two of
such a revolution was caused by block chain technology. You pick any
industry, and this technology holds huge potential to disrupt it, creating a
more prosperous world where people get to participate in the value that they
create. The financial-services industry is up for serious disruption—or

14 Antonopoulos, Andreas M, 2016, The Internet of Money, Page No. 102.
15 Antonopoulos, Andreas M, 2016, The Internet of Money, Page No. 44.
16 Gupta, A. (2018). Understanding Blockchain Technology and its Impact on Procurement - Zycus

Procurement Blog. [online] Zycus Procurement Blog. Available at:

https://www.zycus.com/blog/procurement-technology/understanding-blockchain-technology-and-its-

impact-on-procurement.html [Accessed 10 Jan. 2019].

transformation, depending on how it approaches this issue.17 We shall
discuss the various fields in which this technology has caused an identifiable
impact.

5.2.13. Impact on digital marketing

Now it is also growing in the digital marketing industry, adding a new
revolution to the relationship between consumers and businesses. Block
chain aims to increase transparency in all sectors of a business as the
information is stored digitally.

§ Addresses the issue of online privacy

The consumers can protect their online profile by determining the amount
of content they share with the companies. The technology allows for greater
protection of consumer interests on the internet via the peer to peer systems
technology.

The menace of hacking and data leaks can also be controlled via block chain
technology providing for a higher protection of the consumers data.

§ Transformations in digital advertising

The numerous pop up ads that bombarded the screen when a new website is
accessed can be frustrating for the consumer and prove pointless if those ads
do not attract their attention. The block chain technology operated

17 McKinsey & Company. (2016). How blockchains could change the world. [online] Available at:
https://www.mckinsey.com/industries/high-tech/our-insights/how-blockchains-could-change-the-world
[Accessed 6 Jan. 2019].

companies have developed a mechanism which provides for a win-win
situation for all parties involved. Considering how block chain technology
is decentralized, no one party has control over it, it provides for a better
platform and creates a targeted group for the ads.

§ Elimination of intermediaries

Advertisements are displayed on the social media apps through the parent
company and they act as the middlemen to these contracts. But with the
adoption of block chain technology, such intermediaries can be eliminated.
Previously this job was done by sites like Facebook or Google to make the
communication between site owners and digital marketers. But with block
chain, there is no need for intermediaries when users sign a contract related
to advertising. This ensures a significant increase in the income of digital
marketers due to the cutting of cost that went to intermediaries previously.18

5.2.14. Solving the problem of IP in a digital age

During the first generation of the internet, many creators of intellectual
property were not properly compensated. Musicians, journalists,
playwrights, photographers, fashion designers, artists, architects, artists and
engineers were not only obliged to record labels, publishers, film studios,
galleries, universities, and large corporations - these inventors now also had
to deal with digital piracy that became possible on the web.

18 Hooda, S. (2018). The impact of block chain technology in digital marketing. [online] YourStory.com.
Available at: https://yourstory.com/2018/08/blockchain-technology-impact-digital-marketing/ [Accessed 6
Jan. 2019].

Block chain technology provides a new proposal for creators of intellectual
property to get the value they create. Consider the digital registry of artwork,
including the certificates of authenticity, condition, and ownership. A new
startup, which runs on the block chain technology, lets artists themselves
upload digital art, watermark it as the definitive version, and transfer it, so
similar to bitcoin, it moves from one person’s collection to another’s.19

5.2.15. Impact on the construction industry

Despite the rising openness to technology in construction, advances have
primarily supported the current approach to building. By implementation of
Block chain in the construction industry may see the essential disruption
underway in other industries. Currently, the number of direct contracts with
a client is limited to consultants and a main contractor. The main contractor
engages subcontractors to carry out the specialized work.

With the implementation of Block chain technology there could be a visible
shift to more direct contractual relationships with the client and reduce the
intermediaries involved in the process of construction. This would further
go along with the trend of the gig economy and may even help in providing
a remedy for shortage of skill in the market. Though it would not lead to a
complete breakdown of company structure but it could result in smaller
companies that habitually collaborate. There is already a form of
procurement called Construction Management, where a Construction
Manager is engaged by the client to manage the sub-trades who are

19 Tapscott, D. and Tapscott, A. (2016). The Impact of the Block chain Goes Beyond Financial Services.
[online] Harvard Business Review. Available at: https://hbr.org/2016/05/the-impact-of-the-blockchain-
goes-beyond-financial-services [Accessed 7 Jan. 2019].

contracted directly to the client. The implementation of the Block chain will
take us further by using Smart Contracts and the formation of DAOs to
deliver projects and automate the administration of the building and sub
contracts. This would create an auditable record of transactions and
certifications of events in the life cycle of the building.20

5.2.16. Developing an inter-dependent market

Many companies which share the market are really service aggregators.
They access the collective willingness of suppliers to sell their excess
capacity (cars, vacant rooms, equipment, handyman skills) through a
centralized policy and then resell them to users, all while collecting a cut off
the top and valuable data for further commercial exploitation. Block chain
technology can make available the suppliers of these services a means to
join forces that deliver a greater share of the value to them. Just about
everything Uber does could be done by smart agents on a block chain. The
block chain’s trust protocol allows for cooperatives, or autonomous
associations, to be formed and controlled by people who come together to
meet common needs. All revenues for services, except for overhead, would
go to members, who also control the platform and make decisions.21

20 Hughes, D. (2017). The Impact of Block chain Technology on the Construction Industry. [online]
Medium. Available at: https://medium.com/the-basics-of-blockchain/the-impact-of-blockchain-technology-
on-the-construction-industry-85ab78c4aba6 [Accessed 9 Jan. 2019].
21 Tapscott, D. and Tapscott, A. (2016). The Impact of the Block chain Goes Beyond Financial Services.
[online] Harvard Business Review. Available at: https://hbr.org/2016/05/the-impact-of-the-blockchain-
goes-beyond-financial-services [Accessed 7 Jan. 2019].

5.2.17. Enabling supply chain transparency

§ Greater Obedience and Pellucidity

Pellucidity and transparency are the primary benefits of Block chain
technology. The adoption of the technology would eliminate on hand
organizational silos, driving organizational unification, and process
simplicity and leadership empowerment and make room for a better and
improved system of functioning within the organization and therefore
creating an intelligent medium of performance.

§ Efficient Order and Asset Tracking

Block chains offer superior visibility and tracking capabilities across the
operational blueprint. Companies can now eagerly produce meticulous
information about a products life cycle, including supplier data,
manufacturing details, and logistics information.

§ Reduced Auditing Errors

Occasionally, banks may be incompetent of identifying all the probable
overbillings or overpayments. Block chain can address a complex situation
such as this, by creating finite paper-trails, and isolate key impediments.
Companies can further verify all operating systems that were affected and
recover preventive capacities.

§ Easy Identification of Endeavored Fraud

Block chain offers resistant security and monitoring potential – firms can
identify frauds without difficulty, amid the enormous data volumes. Prompt
recognition of fraud, manages costs, and controls possible attempts with the
Block chain’s patch-based approach further fortifying the transaction
matrix.

§ Better Retention of Consumer Trust

Enhanced clarity into the supply chain and knowing the origin of a product
is a great trust-builder – reaching beyond supplier information, by offering
real-time, ‘live’ and consistently ‘connected’ updates.

§ Enhanced Real-time Consumer’s Response

Real-time customer response is a key takeaway for Block chain technology.
For instance, a customer may seek to place future orders on an item after it
drops below a specified rate. Steady feedback, conveyed to providers,
retailers and manufacturers would help create more accurate forecasts.

§ Improved Scalability

It’s immensely important to understand how Block chain technology
ensures scalability.

The technology can be leveraged to identify future trends, help
organizations plan future business strategies and keep the sector as a whole,
free of pernicious activities – allowing new entrants to easily enter the space.

Block chain is clearly a game-changer – with the power to disrupt the way
goods are produced, marketed, purchased, or consumed - while also
transforming tracking and customer feedback flowcharts.22

22 Ranjanghatmuralidhar, M. (2017). Blockchain Technology: Enabling Supply Chain Transparency through
Greater Visibility | HCL Blogs. [online] Hcltech.com. Available at:
https://www.hcltech.com/blogs/blockchain-technology-enabling-supply-chain-transparency-through-
greater-visibility [Accessed 12 Jan. 2019].