Blockchain is one of the technologies to watch in the years to come. It could revolutionize several sectors of the economy, starting with banking and insurance.
- Blockchain applications
- Private blockchain vs public blockchain
- Consortium Blockchains
Blockchain is the new buzzword in the tech world. All sectors are starting to work on concrete use cases. However, few players can claim to have developed revolutionary solutions. For good reason: blockchain technology is still very complex to understand.
What is Blockchain? Definition
The blockchain (whose translation in French is chain of blocks) is a technology that allows the storage and transmission of information in a transparent, secure manner and without a central control body. It looks like a large database that contains the history of all exchanges between its users since its creation. Blockchain can be used in three ways:
- For the transfer of assets (currency, securities, shares, etc.)
- For better traceability of assets and products
- To automatically execute contracts (“ smart contracts ”).
The great particularity of the blockchain is its decentralized architecture, that is to say that it is not hosted by a single server, but by a part of the users. There is no intermediary, so that everyone can check the validity of the chain themselves. The information contained in the blocks (transactions, title deeds, contracts, etc.) is protected by cryptographic processes which prevent users from modifying them afterwards.
Why Blockchain Matters:
Business runs on information. The faster they are received, the more accurate they are and the better. Blockchain is ideal for the dissemination of this information because it provides immediate, shared and completely transparent information, stored in an immutable ledger that only authorized members of the network have access to. A blockchain network can track orders, payments, accounts, production, and more. Because members share a single view of the truth, you can see every detail of a transaction end-to-end, which builds trust and generates new efficiencies and opportunities.
Key elements of a blockchain
Blockchain and NFT, how does it work?
NFTs refer to non-fungible tokens in English, i.e. non-fungible tokens in French. They represent a unique object that is not interchangeable, like a work of art (photography, digital painting…). The NFT designates a digital file, associated with an unforgeable certificate of authenticity. It is designed using blockchain technology. The latter makes it possible to register proof of ownership of the asset in a digital register. Ethereum is the platform on which the majority of NFTs are distributed .
In 2021, American artist “Beeple” (Mike Winkelmann) sold a digital photo named ” Everyday: the first five thousand days ” for over $69 million through Christie’s auction house in New York. This digital photo in NFT can however be consulted and downloaded by all Internet users who wish to do so. Popular on the art market, NFTs reassure collectors against the risk of counterfeiting. However, they raise concerns. NFT transactions from wallets linked to illegal transactions increased in 2021, reaching $1.4 million in the fourth quarter, according to Chainalysis .
The bitcoin blockchain, what is it?
Bitcoin is the best-known use case of blockchain. It was created in 2008 by an unknown person whose pseudonym is Satoshi Nakamoto. It denotes both a secure and anonymous payment protocol and a cryptocurrency . Anyone can access this blockchain (it is public, therefore open to everyone) and therefore use bitcoins. To do this, simply create a virtual wallet, downloadable from the application stores. Cryptocurrency is used to buy goods and services and can be exchanged for other currencies.
Some platforms offer the conversion of dollars, euros or yuan into bitcoins . This is the case of Paymium, a French company that allows you to exchange bitcoins for euros. Bitcoin has a very volatile price. It can increase or decrease by 20% in just two days. This volatility is linked to the strong speculation around this currency and the absence of a regulatory authority. At the beginning of December 2017, the price of bitcoin exceeded $ 15,000 for the first time . It increased by more than 1000% over the year 2017. Faced with this surge, the Financial Markets Authority (AMF) and the Prudential Control and Resolution Authority (ACPR) warned investors about the risks associated when buying bitcoins.
“This valuation may as well collapse in the same way. Buying/selling and investing in bitcoin to date takes place outside of any regulated market. Investors are therefore exposed to the risk of loss. very high in the event of a downward correction and do not benefit from any guarantee or protection of the capital invested”, indicates the two regulators in a press release. The latter would be increasingly solicited by savers on this subject. In Japan, bitcoin was recognized as a legal means of payment on April 1 , 2017. The capitalization of the first cryptocurrency reached 1 billion in November 2017.
What is the Ethereum Blockchain?
The Ethereum blockchain has become as popular as bitcoin. Created in 2014, Ethereum also uses its own cryptocurrency: ether. Its price is lower (around 2,300 euros in February 2022, compared to 33,000 euros for bitcoin). Unlike bitcoin, which only allows simple transactions (mainly payments), Ethereum goes further. It makes it possible to run ” smart contracts “, autonomous programs that automatically execute actions previously validated by the stakeholders.
Ethereum and its smart contracts are of interest to banking and insurance players, but also to the legal professions. In the future, these players will be able to certify transfers of ownership more securely or even automatically pay compensation. Axa was the first insurer to release blockchain-based insurance. In September 2017, it launched automated insurance for plane flight delays. Based on the Ethereum blockchain, this insurance is actually a “smart contract”, an intelligent contract that triggers automatic reimbursement once the delay has been noted. This offer called Fizzy was developed with the start-up Utocat, which publishes a platform to accelerate the design of blockchain prototypes.
On the banking side, many projects are underway. Other industries are experimenting with blockchain, such as Boeing. The American manufacturer has filed a patent application for a blockchain-based system that would strengthen aircraft GPS systems. The application published on December 14 by the United States Patent Office mentions a “backup and anti-spoofing (GPS location spoofing) on-board GPS system” that could be used in the event of a malfunction in the main system of an aircraft.
What are the applications of blockchain?
Blockchain technology is still young. However, some applications are already operational. One of the most common is food traceability . Carrefour is one of the precursors with its QR code affixed to several types of food (chicken, tomato, egg, etc.) which allows you to know everything about the origin of the product (origin, name of producer, date of packaging, etc.). .). Automatically triggering compensation is an application of great interest to insurers. This is made possible via smart contracts, autonomous programs that run automatically following pre-defined conditions.
Axa, for example, makes it possible to compensate passengers for a flight that is late. Finance has also made good progress in the field of the blockchain, particularly in the field of ” security tokens “, financial securities digitized and recorded on the blockchain. For the issuer of the token (or token), there are only advantages: fewer intermediaries, almost immediate execution and settlement and cheaper process.
The video game world has found a use case in blockchain: digitizing features . Thanks to a system of tokens (or tokens), players actually own their objects (and no longer the publisher) and can therefore buy, sell and exchange them as they wish. There are many others such as securing commercial transactions in trade finance or even disintermediation in advertising .
Private blockchain versus public blockchain, what are the differences?
What differentiates the private blockchain from the public blockchain is its degree of openness . The public blockchain can be viewed and used by anyone. Anyone can send transactions to it and expect them to be recorded in the ledger (if they follow the rules of this blockchain). This is the case of the Bitcoin and Ethereum blockchains. In the private blockchain, an organization can change the protocol whenever they want. No one can participate without being authorized but everyone can consult it.
Private blockchains are used a lot by companies for internal experimentation. They can also make it possible to connect different information systems that do not speak well within the same organization. There is also the “permissioned” blockchain in which an entity has control authority over the network. This is the case, for example, of the Rippe blockchain because it is a start-up (of the same name) that determines who can validate transactions on the network.
The “consortium” blockchain brings together several actors who have rights and the decisions are made by the majority of the actors. For example, a dozen financial institutions could agree and organize a blockchain in which a block should be approved by at least 8 of them to be valid. So it is very different from the private blockchain and the public blockchain. Not only are participants in the approval process limited and selected, but majority rule is no longer required.
This hybrid blockchain is a real advantage for players in the financial sector, because they operate in regulated environments and are notably obliged to know the identity of the participants (which is not the case in the public blockchain). The best-known blockchain consortium is R3. It has around 100 financial institutions including BNP Paribas. In May 2017, he raised 107 million euros.
Benefits of Blockchain
What needs to change: Operations often waste time keeping duplicate records and performing third-party validations. Archiving systems can be vulnerable to fraud and cyberattacks. Limited transparency can slow down data verification. With the arrival of the IoT, transaction volumes have exploded. All of this slows down business, drains the bottom line and forces us to find an alternative. Enter the blockchain.
With blockchain, as a member of a restricted network, you are sure to receive timely and accurate data, and that your confidential blockchain records will only be shared with network members to whom you have specifically granted permission. access.
Consensus on data accuracy is required from all members of the network, and all validated transactions are unalterable, as they are permanently recorded. Nobody, not even a system administrator, can delete a transaction.
With a distributed ledger shared among members of a network, time-consuming data reconciliations are eliminated. And to speed up transactions, a set of rules, called a smart contract, can be stored on the blockchain and executed automatically.
Risk management systems for blockchain networks
When building an enterprise blockchain application, it is important to have a comprehensive security strategy that uses cybersecurity frameworks, assurance services, and best practices to reduce risk against attacks and corruption. fraud.