The Growing Application of Blockchain

The Growing Application of Blockchain

Aside from the buying and selling of various cryptocurrencies, there are two other major developments in the crypto & blockchain space generating significant attention in 2021: the rise of Non-Fungible Tokens and targeted government adoption of blockchain application. Neither one of these directly relate to Bitcoin (the most common and well-known cryptocurrency), Dogecoin (the internet meme-coin sensation), or deal with price volatility within the crypto markets. Instead, these are real-world applications of blockchain technology. Blockchain and cryptocurrency are intertwined and cannot be unentangled.  However, newer blockchains like Ethereum and others mentioned below represent new internet infrastructure and are more than just coins.  The following is a brief look at each of these developments and how blockchain technology is being used by industry and government.

What Exactly Is an NFT & Why Should I Care?

First, we focus on “NFTs” or Non-Fungible Tokens. While NFTs have been around since late 2014, they did not really become popular until 2020-2021. But what is a Non-Fungible Token or “NFT”? A Non-Fungible Token is information stored on blockchain that validates the authenticity of a digital asset. While more often these digital assets are types of art, images, and videos, they may also be music or other digital representations. Blockchain is distributed ledger technology, meaning it’s a digital ledger that cannot be tampered with or hacked. Based on the recent frequencies in security breaches of technology, the security of a blockchain has made it highly attractive for those looking to corroborate or validate ownership and authenticity of their art. While NFTs are being used to sell and authenticate art, videos on YouTube, etc., the longer-term application is found in using NFTs to validate authenticity and ownership of commodities and products. For example, if a product is rare or collectible, its legitimacy is critical to purchasing it. This application carries over into collectibles, rarities, and other items like wine, where authenticity needs to be validated to value the asset. The buyer of the NFT then becomes the owner of the art, collectible, or rarity as the transaction, asset, and certificate of authenticity are all embedded on the blockchain. As the blockchain ledgers are distributed across the internet, the records cannot be hacked. This makes it a perfect use case for validating ownership in a highly digital world.

But why is blockchain secure when other technology seems to be frequently hacked? The key benefit is decentralization. If a business has its servers in a few central, private locations, hackers can focus their efforts to disrupt a system or steal information as the networks are closed. With blockchain, the information doesn’t exist in one place, but rather many places across the internet; so, there aren’t one or two places to “hack in and change information.” Distributed, decentralized systems are a different environment and perfect for authenticating and validating ownership. Expect NFTs to continue to grow in functional adoption where items need to be validated as authentic. Analysts predict this technology will disrupt existing systems that validate ownership in real estate, automobile registration, and issue in a new wave of product verification.

Blockchain Adoption by Ethiopian Ministry of Education 

Now let us turn our attention to the use of blockchain technology in industry and government.   If you are unfamiliar with this practice, your first thought might be, “what does cryptocurrency have to with education in Ethiopia?” It’s a good question, and the answer is it really doesn’t. Blockchain, however, absolutely underpins this use case. Earlier this year, the Ministry of Education in Ethiopia signed the largest deal in history to deploy blockchain. The Ministry of Education will be using the Cardano blockchain (3rd generation blockchain that uses less than 1% of the energy of Bitcoin’s blockchain) to aggregate the educational records from primary, secondary, university, and professional education for at least 5 million Ethiopian students. Consider your own education and academic records. You either have a high school diploma or would track down the appropriate official to obtain one. If you don’t have your university diploma or transcript, you must pay to track that down. It is unlikely that you have access to proof of educational courses taken outside of your current company.   In contrast, this governmental use of Cardano blockchain will essentially provide a virtual identity to said 5 million students. The ripple effect created is the ability to help establish credit scores, easier access to loans through decentralized finance and microloans, proof of education to potential employers. Ethiopia’s use case shows how blockchain can aggregate unhackable permanent data while simultaneously providing a virtual identity to millions of previously unverified people.

While Cardano has an associated cryptocurrency called ADA, named after 19th-century mathematician Ada Lovelace, these students will not pay to have records written to the blockchain, nor will they need cryptocurrency to access the records.  ADA is used to pay the validators in staking pools as part of the writing records to blockchain. Students do not see it, and the Ethiopian government doesn’t really care about it.  The only governmental concern is using the Cardano blockchain to provide their students with an easy, online way of proof of identity, their education history, and their trustworthiness.  Virtual identity on unhackable systems provides this new opportunity.  As a side note, this same blockchain is being used to provide access to mobile phone and web services to hundreds of thousands of people in Tanzania.

Cryptocurrency & Blockchain Cannot Be Separated

Cryptocurrency and Blockchain, while inextricably connected, are not the same. In fact, more and more tech start-ups are using blockchain and issuing new cryptocurrencies to raise capital. This contrasts with traditional private funding or venture capital methods. Here, tech start-ups issue cryptocurrencies to raise money to bring blockchain capability directly to the consumer or business community without additional layers of credit and venture capital oversight. As such, blockchain start-ups take their message to the public for funding.

These are just a few real-world blockchain applications. This capability is what really separates technology like Ethereum, Cardano, Polkadot, and Algorand from older cryptocurrencies like Bitcoins and Dogecoins (copy of Bitcoin with a meme logo). The former are energy efficient, 3rd generation blockchains with real-world application, whereas Bitcoin is essentially a store of value and provides little application outside of trading capabilities. Blockchain technology underpins cryptocurrency and represents deeply disruptive technology through easy validation of ownership of digital assets, unhackable distributed ledgers, and Web 3.0.  It is far more than the publicized, popular, and volatile trading markets and internet dogs. Blockchain technology is ushering in new, disruptive applications that will change the way all of us interact with and use the internet today.

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