Blockchain technology has taken many by surprise. Blockchain is a digital ledger used by cryptocurrencies like Bitcoin – the 2008 invention of which is attributed to the person (or persons) known by the name Satoshi Nakamoto. Though the internet is divided over the use of cryptocurrency, there is no denying that people have started taking note of the technology that powers cryptocurrency, namely, blockchain technology.
Some believe that blockchain technology is a mirage, and it will take some time before you see its wide-scale adoption. However, the headline of a Reuters report says it all: “Wall Street finds blockchain hard to tame after early euphoria.”
Organizations – especially financial institutions, technology vendors and large retailers – have shown tremendous interest in the blockchain technology, and are investing big to find the uses of this innovative technology. Facebook recently announced its decision to start its virtual currency, Libra, on a blockchain-based payment system.
One of the main reasons for the popularity of blockchain technology is the kind of security it offers. Blockchain technology is said to be safe and secure, and it is very difficult to hack a blockchain application.
Blockchain technology created ripples in the business world, especially the financial sector, because the technology was said to be transformational. That is what generated huge interest in the blockchain technology and led to investments in this technology. Blockchain can settle trades instantly, fast-track international payments and remove expensive intermediaries – thereby saving billions of dollars for industry.
According to research firm IDC, blockchain investment across industries is projected to touch $12.4 billion by 2022. For example, IBM has a team working on the new technology to find its uses in different sectors.
Business benefits of blockchain are obvious. But to reap the full benefits of the technology, it is important that blockchain projects work on three areas simultaneously: technology, demand and compliance.
When it comes to implementing blockchain technology, here is what you need to do:
- Select a platform
- Set the blockchain
- Choose the right consensus tools
- Run your first smart contract
- Debug and scale up
But to know more about the blockchain technology, you need to understand something about smart contracts.
Understanding smart contracts
According to Investopedia, “Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network.
Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible.”
Though the blockchain technology was primarily developed for the cryptocurrencies like Bitcoin, but it has evolved over the years and is now being thought to be useful for businesses in several other verticals.
Computer scientist Nick Szabo first proposed smart contracts in 1994. He invented Bit Gold – a virtual currency predating the invention of Bitcoin. Szabo is rumored to actually be Satoshi Nakamoto – an allegation he denies.
According to Szabo, smart contracts were computerized transaction protocols that could execute term of a contract. Szabo wanted to spread the scope of electronic transaction methods like POS or point of sale to the digital landscape.
Szabo also proposed the execution of a contract for synthetic assets like derivatives and bonds. He wrote, “These new securities are formed by combining securities (such as bonds) and derivatives (options and futures) in a wide variety of ways. Very complex term structures for payments can now be built into standardized contracts and traded with low transaction costs, due to computerized analysis of these complex term structures.”
Much of Szabo’s predictions he mentioned in his paper have come true in the context of blockchain technology. For example, derivatives trading is typically conducted through computer networks using intricate term structures.
Blockchain offers secure cloud storage
In the near future, blockchain technology could have a significant impact on the day-to-day functioning of businesses in various verticals. One of the applications for blockchain in your business could be cloud storage. Businesses can take advantage of blockchain technology in the cloud storage industry.
Companies can now offer secure cloud storage with decreasing dependency. Currently, cloud storage services are centralized, but has the potential to decentralize with blockchain technology. By using excess hard drive space, businesses can store the traditional cloud more than 300 times, which is similar to how Airbnb rents out property.
With the world spending more than $22 billion on cloud storage, the new technology is likely to open many opportunities for ordinary users – and all of that at a much-reduced storage cost for businesses in particular and individuals in general.
The ability to make payments quickly and securely with blockchain
Another place where blockchain technology will likely leave its imprint is providing financial compensation to employees. Because blockchain was developed for cryptocurrencies, it could eventually be legally recognized as an application to compensate employees. If you have an international workforce, it could make sense to incorporate Bitcoin into the payroll process, as it would significantly reduce costs.
And, the Fair Labor Standards Act requires that employers pay employees in “cash or negotiable instruments payable at par.”
Because the IRS treats bitcoin as property, it’s very likely that the Department of Labor (DOL) will not consider it “cash” or a “negotiable instrument” (i.e., a paycheck) for purposes of wage payments.
Thus, if you are not properly paying your employees under the FLSA, you have failed to pay them a minimum wage (a big FLSA no-no), no matter how valuable the bitcoins you’re providing may be.
Obviously, while blockchain technology shows exciting promise, it still has a way to go before reaching its full potential. As an industry leader in encrypted data security, eServe provides content security in the cloud, mobile access, security at rest and in motion, remote wipe and much more. Contact us to learn about our solutions.