Blockchain use cases, advantages, and pitfalls to consider

Trevor was in his 50s when he shared his story with The Guardian. Trevor started making non-fungible tokens (NFTs), a blockchain-enabled technology, back in 2019 and quickly accumulated wealth. Blockchain use cases expand to different industries, and businesses can leverage this technology to replicate Jones’ success. And many are already doing this by turning to blockchain consultancy firms to build a suitable solution. MarketsandMarkets project the global blockchain market size to amount to $67.4 billion by 2026, jumping from $4.9 billion in 2021 at a CAGR of 68.4%. Are you interested in learning more about blockchain use cases to see if the technology is right for you? Then keep reading. The article also explains which blockchain advantages you can count on and which drawbacks you will need to address. We also offer a few tips on how to start with blockchain implementation.

Technically speaking, blockchain is a decentralized distributed database where data is shared among different computers, and no single entity has full control. Blockchain keeps the entire history of the data it contains. So it can’t be faked or changed without all the other parties noticing. Blockchain first appeared in 2008 as the technology behind Bitcoin transactions. Currently, it has applications in different fields, including finances, healthcare, insurance, sports, and the public sector. Deloitte explains how blockchain works in a relatively simple way: Imagine if you are a node, and you have a file of transactions stored on your computer, representing a ledger. Several accountants (let’s call them miners), have this same file on their computers, so it’s distributed. When you make a transaction, your computer notifies the accountants, and they rush to verify whether you can afford it. The accountants get paid their salary in Bitcoins. The first accountant to validate your transaction will notify everyone else, attaching their verification logic. If everyone agrees, they all update their files. You can get more information from this short but informative video posted by the consultancy firm.

Blockchain was originally presented to serve as the technology behind Bitcoin. Now, blockchain is not limited to the financial sector and can serve other purposes. But cryptocurrency remains one of the most prominent blockchain use cases. Some cryptocurrencies, such as Ethereum, are volatile, but there are attempts to bring more stability to the market. For example, Stablecoins’ price doesn’t fluctuate frequently as it is tied to a flat currency while maintaining cryptocurrency’s mobility. According to a recent research, blockchain adoption can save large banks up to $12 billion per year. One cryptocurrency blockchain example comes from the New York-based Gemini. The company facilitates digital asset exchange, purchase, and storage. It allows participants to handle their assets as they see fit and even offers the Gemini Earn program enabling subscribers to receive up to 7.4% interest on their wallets.

Smart contracts are similar to regular contracts, but they are stored on a blockchain and automatically executed when certain conditions are satisfied. They are computer programs coded in an if/then manner to ensure every participant receives benefits and penalties stipulated by the contract. For instance, the insurance sector can leverage this blockchain use case to automate travel costs reimbursements. If a flight is cancelled, smart contracts automatically pay policyholders so that people don’t get stuck in the traditional lengthy claim approval process. There is no middleman with smart contracts, and every party is held accountable. This arrangement reduces costs and eliminates human errors, while it can still handle a large number of different rules. One of EY’s clients reported that deploying smart contracts helped them cut deal processing time from 45 days to less than a minute.

NFTs are different from Bitcoin and other cryptocurrency units. The technology represents a digital work of art and has various applications in the arts sector. It can manifest itself in photos, videos, and even memes and tweets. Every NFT is unique, like a limited-edition trading card. People purchase NFTs to support their favorite artists or to have the rights to own the piece, such as playing the NFT audio in their commercials. NFTs can be sold/procured at rather high prices. For example, a Nyan cat meme was purchased for around $600,000, and Twitter's founder Jack Dorsey sold his first tweet in the form of NFT for almost $2,900,000. Not long ago, NBA’s Golden State Warriors introduced their collection of NFT items that fans can procure.

The statistics on identity theft are scary; 33% of Americans have been victims of identity theft at one point in their life, and it cost them $56 billion in 2020 alone. One of the blockchain use cases is personal identity protection. It enables users to store their information, including social security number, birth date, address, etc. in a blockchain, giving them more control over which pieces of information they want to share and with whom. For example, if you only need to reveal your age, you don’t have to show your driver’s license (which contains more than just the age). It will suffice to share the blockchain token that contains your birth date. In the governmental sector, for example, the state of Illinois experimented with distributed blockchain to store death and birth certificates, voter registration cards, and more.

Harvard Business Review advises companies that aren’t confident with their blockchain skills to start with single-use applications to minimize risks. For example, you can add Bitcoin as a payment method. And while you are experimenting with this simple blockchain use case, your different departments will start building blockchain capabilities that you can later extend to more complex applications. Another option would be using blockchain as a database for managing assets and recording transactions. This is especially useful for organizations that are trying to reconcile several databases. If you are rather ambitious and want to work with transformative applications, such as self-executing smart contracts, it makes sense to re-evaluate your current possibilities and work on acquiring talent and technology first. These applications are very powerful, but they work best when tied to an innovative business model. For example, if a law firm wants to deploy smart contracts, they will need blockchain programming expertise and will have to rethink their payment model and test it first.

EY proposes to answer five questions, and if you tick at least three of them, then blockchain is a viable solution to your problem:

There are several blockchain platforms that you can choose from based on your requirements. For example, Ethereum provides a truly decentralized network and supports smart contracts, but it’s slow, and transaction processing costs are relatively high. EOSIO also deals with smart contracts and claims to provide faster transaction processing than Ethereum. Tezos allows you to work with novel financial instruments, such as NFTs. Hyperledger Fabric platform allows companies to create their own private blockchains.

Despite all the hype behind this technology, it is important to understand that blockchain will not change the world today. It is not a disruptive technology in the sense that it can attack traditional business models with high-performance solutions. Blockchain has a foundational nature. It will create the basis for our systems and generate enormous value, but it will take a while as the adoption process will be gradual. Michela Menting, Research Director at ABI Research, describes the situation well by saying, “It is important to understand that there's been a lot of hype around blockchain, and while it's revolutionary in theory, it's not going to transform society today. Maybe it will be 10 to 20 years from now, but it's not a short-term technology." Even if we know that blockchain will only reach its full potential decades into the future, organizations can already start preparing for those days. One way to do that is to start small and reap blockchain benefits by incorporating it into your single-purpose blockchain use cases. And we will be happy to accompany you on your journey. Our team can help integrate your system with the right existing blockchain platform. We can also help with smart contract development.