How is blockchain being applied to businesses today?
While blockchain technology is still at its early stages, it has already become a powerful new tool. Unrestricted access to a global and open database gives this technology the ability to be accessed anytime, anywhere, by anyone. This is a major pivot from the closed and centralized systems we are used to having today, and it can offer tons of new advantages in the digital age.
Cryptocurrency has been the first major use case of blockchain and has acted as a proving ground for demonstrating that the technology truly works. What used to be dismissed as ‘fake internet money’ only a few years ago has blossomed into a marketplace worth over 1 trillion dollars. However, it is only the tip of the blockchain iceberg. Blockchain, sometimes being referred to as a distributed ledger in the business world, has become a more widespread and accepted technology over the last several years.
Financial firms such as JPMorgan and BlackRock have even begun to take interest in blockchain concepts such as:
- Tokenization of real world assets
- International monetary transfers
- Storage of wealth
As blockchain technology continues to evolve and become more widely adopted, new use cases will be discovered every day. Below are just a few ways that companies are already applying blockchain to their business practices.
Cryptocurrency as a Financial Tool
Think about how much work is needed to open a bank account. Banks require numerous forms of documentation, proof of steady income, a high credit score, and so much more. Even being able to open a bank account, however, is a privilege a lot of people globally don’t have. Large portions of populations in developing countries don’t have access to legitimate banks, leaving them unable to participate in the global economy, particularly within e-commerce and online retail.
Cryptocurrency can fix this issue.
Anyone with an Internet connection can set up a digital wallet in only a few minutes. From there, users are able to purchase crypto, whether it’s through the use of physical infrastructure such as Bitcoin ATMs or financial services, and begin transacting with the global community.
This system can connect hundreds of millions of people to the global infrastructure of the Internet and create tons of new business opportunities that these people would otherwise never have access to.
Cryptocurrency today is being used as a hedge against inflation.
Countries such as Turkey, Argentina, Venezuela, and dozens of others are experiencing out-of-control inflation. While the US battles 5% inflation, these countries are fighting 50-100% inflation rates of their local currencies. This has led to residents converting their savings into stablecoins such as USDC or USDT as a means to retain the value of their money. As a result, cryptocurrency has much higher adoption rates in developing countries where people rely on it as a way to safeguard the worth of their money instead of viewing it solely as an investment opportunity.
On top of using stablecoins to retain wealth, another popular use case is international monetary transfers.
With centralized solutions such as Western Union or other wire transfer systems charging high fees for international monetary transfers, many began turning to stablecoins instead. Since blockchains operate as global systems that don’t recognize borders, the amount a user has to pay in fees does not change based on distance.
Whether you’re sending money to your neighbor or to someone on the opposite side of the planet, cryptocurrency has become the fastest, cheapest, and most secure way to send money because of its peer-to-peer nature.
Imagine you live in the US and want to send $10,000 to a relative in Europe. You want to use Western Union, but then you see that it charges a $250 fee for the transaction and has a settlement time of 1-2 business days.
Instead, you decide to send USDC on the Polygon network. You ask your relative to create a digital wallet and send you their wallet address. You then proceed to send them the $10,000 worth of USDC. They receive the money nearly instantly, and it is now directly in their wallet.
The whole process, from setting up the wallet to the transaction being settled, took less than 10 minutes and cost less than a dollar in fees.
Check out this article by The Financial Times and this article by Coin Telegraph to learn more about how people are using cryptocurrency to combat inflation and excess fees.
DeFi is the new global marketplace.
Now, anyone can use DeFi to take full control of their finances. A globally accessible financial system at the tip of your fingers that is open to anyone, anytime, anywhere. Thousands of unique dApps already exist to help you maximize the potential of your assets through decentralized lending, staking, trading, and borrowing. DeFi offers an unprecedented new marketplace operating in a peer-to-peer system that can’t be manipulated by banks, companies, or even governments.
Imagine you are a small business owner in Venezuela. You need capital to cover your operational expenses and overhead, but you’re worried that the high inflation rate and lack of financial resources will make it difficult to take out a loan and even more difficult to pay it back.
Instead of going the traditional route, you choose to use the Aave platform to take out a loan using cryptocurrency as collateral. Instead of spending weeks or even months dealing with bureaucracy and paperwork only to get a loan with a double digit interest rate attached, you’re able to take out a USDC loan within 5 minutes and an interest rate a third of the amount. In addition to getting a much better deal, your money is also in USDC tokens that are backed by the US Dollar and is therefore no longer vulnerable to the high inflation rate plaguing the Venezuelan Bolivar.
Cryptocurrency within itself offers a tremendous amount of value, but when combined with the principles of Decentralized Finance, it has the power to revolutionize the entire global monetary system.
Many businesses have even begun to accept cryptocurrency as a form of payment. The rise of Point-of-Sale crypto processors such as Slice has made it easy for business to directly integrate crypto payment processing into their payment systems. Businesses can accept tokens such as USDC as payment for physical or digital goods and can then choose to either retain it as cryptocurrency or convert it to fiat. These types of tools are critical for developing the required infrastructure to process crypto payments and make it an effective alternative payment solution.
As more of our daily financial transactions move onto the Internet, it’s important to make digital payment platforms accessible to everyone. Our current digital payment system relies heavily on the use of credit and debit cards and is racked with excess fees. From credit card companies charging a processing fee for every transaction to Western Union charging huge sums for international transfers, this system is inefficient and relies heavily on the use of middlemen that make money off of your transactions. Cryptocurrency offers a viable, cheap, and effective alternative to this broken system. With far less fees, nearly instant settlement times, and a system that is native to the digital world, cryptocurrency is a far better payment processing system than what we use today.
Data Storage
The secure and immutable nature of blockchain technology makes it an ideal storage medium for all types of digital data. The entire system is so secure that the whole concept of cryptocurrency relies on the fact that blockchain is so immutable - it’s impossible to edit the database to shift currency from one address to another without the whole network having to approve the move. This makes blockchain an ideal storage method for documents, records, and other digital data.
By storing data on the blockchain, it becomes much more resistant to fraud and manipulation because the original data can’t be edited or manipulated once it’s on-chain.
Blockchains offer an ideal environment for fraud-proofing on-chain data. As discussed with NFTs, each tokenized asset will have a unique identifier that can prove it is the original copy of a good. To verify that a piece of data is legitimate, all you’d have to do is check its on-chain ID and you’ll be able to see the full transaction history of that item. The associated data can be stored as metadata attached to that token, creating an effective system to verify that token’s origins and audit the entire transaction trail.
With the rise of AI generated artwork, verifying digital media to be legitimate has become more of a necessity than ever before. As AI gets better at imitating people’s voices, deepfakes are becoming a major issue that can lead to significant harm.
Imagine if a video came out of a prominent political figure calling for war against another country only for everyone to learn that it was a deepfake once it’s too late. Blockchain can solve this issue by creating a public ledger that can be used to trace digital media to its publisher. In this situation for example, people would be able to go to the public address of that political figure and determine that it was not actually them that posted the video, but rather an anonymous user with no actual evidence of the politician making such a statement.
Blockchains also do not have to be public.
Businesses can utilize private blockchain networks that only allow access to vetted groups. As a node in this group, you’d get equal access to a private database that would be upkept by you and all the other nodes within the network. This would also remove the need for cryptocurrency, since it primarily acts as an incentive mechanism to make people contribute to the chain, and instead the chain would simply operate as a shared database.
These private blockchains can utilize consensus mechanisms such as the Practical Byzantine Fault Tolerance (PBFT) to operate without the need for cryptocurrency. This type of system reaches a consensus through multiple rounds of voting that can tolerate faults, such as a node either refusing to vote or acting maliciously. It does not require any token incentive to create new blocks, and offers security and a high throughput rate to handle a large load of transactions. This can let multiple businesses or other entities create a trusted network for exchanging information securely.
Today, accessing and storing medical records is a hassle that requires tons of work. Whenever you switch doctors or healthcare providers, the process of going through and transferring all of your medical records can be long and arduous.
Now imagine if there was a private blockchain network that existed for containing these records, with each patient having their own digital address on-chain and all their medical information stored at that address. Hospitals, insurance companies, and general healthcare providers could request access to this blockchain to view your records whenever necessary, and transferring medicals records would become as easy as sending cryptocurrency from one address to another.
Public databases are generally not maintained as well as they need to be, leading to constant confusion when it comes to filing and retrieving public records.
Public databases can include data such as land ownership deeds, public works projects, or even local and state treasury allocation information, which should all be maintained in a secure environment and kept up to date. Using blockchain technology, public records can be displayed on-chain and moved around with ease. This will lead to less bureaucracy around these issues and a massive increase in efficiency.
Fileverse is a new application that emulates Google Docs but does so fully on-chain. Just like the traditional version, this app lets you create your own files that operate just like normal Docs but with the unique twist that all of these documents are stored fully on the blockchain. Each new file you create belongs to your digital address, making each document truly yours. You can collaborate on and share files, upload data onto the network in all different formats, and even directly embed links, images, and more into a doc.
With its peer-to-peer nature and advanced encryption, blockchain is the most advanced digital database structure that exists today. Both public and private blockchain networks offer a massive increase in efficiency while at the same time offering significantly reduced costs. As new apps continue to be developed to utilize blockchain as a data storage mechanism, its effectiveness and existing use cases will only continue to grow.
Supply Chain
Within the business world, supply chains are a critical part of business infrastructure. As a result, the supply chain industry is worth almost 30 billion dollars. However, supply chains are often become more complicated and cumbersome as more steps are added into them.
Some of the issues plaguing supply chain include:
- High amounts of float time between when a good is delivered and when the vendor is paid
- Active synchronization of data across the different CRM systems involved in tracking goods throughout the chain
- Tracing inventory throughout the entire supply chain and determining potential points of failure
All of these are issues blockchain can fix.
Thanks to the use of decentralized oracles, blockchain can take in external data from Internet of Things (IoT) devices responsible for collecting data about the state of a product and bring it on-chain. These devices can include GPS, thermometers, humidity and liquid sensors, and any other device that can be attached to goods as they flow through the chain. All of this data can then be brought on-chain and utilized accordingly to create an immutable ledger of the entire path of a product through the supply chain.
To remedy the issue of high float time between delivery and payment processing, companies can utilize smart contracts. These contracts can take in the allotted vendor payment and release that payment directly to the vendor as soon as the product is delivered. This system would greatly cut down the time it takes for a vendor to get paid by removing the need for humans to check whether their goods have been delivered. It would also reduce the settlement time for monetary transactions, since on-chain transactions can be settled within minutes as opposed to banks taking several business days to process them.
Blockchain technology can be used to create a permissioned network where only the parties involved in a specified supply chain have access to the same data and the same level of permission. A shared blockchain makes it possible to synchronize logistics data, track shipments, and automate payments without requiring significant changes to the firms’ internal processes or information technology systems. Each movement within the supply chain is broadcasted and timestamped, creating a complete chain of all the movements of goods throughout the process.
Source: Toptal.com
To create an effective tracking system that tracks a product throughout the entire supply chain, you can create a system that mints NFTs to represent shipments of goods. The NFT can be minted once a shipment is created at its point of origin, and then passed along a chain of addresses where each address represents a company responsible for transporting the shipment.
Here’s what the process would look like:
Transaction 1 - Company A creates the shipment and mints an NFT to represent it
Transaction 2 - A truck owned by Company B picks up the shipment, Company A sends NFT to Company B
Transaction 3 - Company B drops of shipment onto ship owned by Company C, Company B sends NFT to Company C
Transaction 4 - A truck owned by Company D picks up shipment from the ship once it arrives, Company C sends NFT to Company D
Transaction 5 - Company D delivers shipment to Company E who placed the order, Company D sends NFT to Company E
Each transaction would contain a timestamp of when the action occurred, as well as any tracking data from sensors attached to the shipment. This would create not only a complete map of where and when the shipment was at any given point, but it would also make it much easier to identify any points of failure throughout the route.
Companies such as Origin Trail are already building out this type of infrastructure. These types of systems allow companies to become much more effective in tracing all shipments throughout their respective supply chains while at the same time offering a cost effective and efficient solution to do so.
Utilizing a blockchain database for supply chain will help revolutionize the industry and help usher it along into the new era of the Internet.
Artificial Intelligence
Artificial intelligence is another rapidly evolving technology that has become a driving force in business. However, there is a looming threat to this industry: centralization.
AI today is primarily controlled by the likes of OpenAI, Meta, Google, and other massive corporations. While they have been effective at bringing this product to market and making it readily available to the public, private ownership creates a veil of secrecy about how AI models are being trained. When you ask ChatGPT a question and it gives you a response back, there is no way to verify exactly where the data it’s using came from or how accurate it is.
This training secrecy can give rise to issues such as:
- Inherent social/political bias in AI responses (like when Google Gemini made white historical figures as people of color)
- Misleading claims or information about specific topics (like when Google AI said it’s healthy to eat rocks)
- High amounts of censorship (like how multiple AI engines refuse to answer politically motivated questions)
The quality of the output relies directly on the quality of the data it is being trained on - garbage in, garbage out.
This is exactly where decentralization can play a huge role in benefitting AI: decentralized data markets.
Currently, acquiring training data to make high quality models is a complicated process that many people are unable to undertake. Companies like OpenAI are facing dozens of lawsuits where they are being accused of not fairly compensating those who’s data they used to train ChatGPT. Some companies are paying out millions of dollars to buy up user data to train their own models - like how Google cut a $60 million per year deal with Reddit to use Reddit’s user data to train their AI models.
Smaller companies and individuals that want to train their own AI models generally are not able to gain access to this huge scope of data, creating a huge advantage for large companies that possess the resources required to do so.
Blockchain can create a fair and open market for buying and selling AI training data. Just like how decentralized exchanges are made for a peer-to-peer system of swapping cryptocurrencies, they can be repurposed for use as an AI training data exchange.
Companies such as Kaggle already offer dataset marketplaces where users can buy and sell their own datasets on various topics, but blockchain can take this a step further by creating immutable proof of exactly where the data in that dataset came from. Blockchain is able to accomplish this by publishing a public data record on-chain that can track the origins of any dataset. Each on-chain dataset will come with metadata that shows exactly who published this data, where it originally came from, and any other required information to more effectively credit the source.
Source: OECD AI Policy Observatory
This data tracking system has the potential to make AI models that are not only much more accurate in their responses, but that are also able to more effectively credit those that created the data it is trained on.
For example, if you go to GPT4 and ask it to write a paper on frogs and it generates a response, you have no idea whether the data it used to generate that response came from a published scientific journal or from Wikipedia. With an AI model backed by blockchain, each response could contain metadata that shows the exact sources it pulled data from to generate that response. This would create a much more effective data reference system, where users are still able to use AI to generate responses but then they could back those responses with the actual data from which that response was generated.
Grass Protocol is a L2 rollup that acts as a data scraper to generate AI training data. Here’s how the process works:
- Grass nodes operate by collecting data from the Internet and scraping it to turn it into proper organized datasets
- Metadata that contains information on the origin of the data, the time it was collected, and which node collected it is attached to each new dataset to create a system where all of the data collected can be correctly referenced when used
- Nodes are then paid in cryptocurrency for their work, which acts as the incentive mechanism
Check out the Grass Protocol blog to learn more about how this process works.
Companies such as Phind are already introducing data source sidebars to provide external evidence to back their AI responses
While training data is a critical part of AI, the ability to actually train an AI model is equally as important.
Training AI models is a very compute intensive process that requires expensive hardware and a lot of energy. Sam Altman even hinted that GPT4 cost over $100 million to train, which shows the massive amount of effort that needs to go into training high quality models. Luckily, blockchain does not only help with creating an effective sourcing mechanism for training data, but it can also be used to distribute the cost and effort of training an AI model.
Instead of relying on a huge data center containing millions of dollars worth of computer hardware, blockchain utilizes its decentralized properties to split up the workload across an entire network. This system lets anyone participate in training the model by delegating their own computing power to the network and receiving cryptocurrency in exchange. To participate, users would simply install the designated software on their device and let it run, similar to how Bitcoin mining works.
An example of a popular project already following this process is Bittensor, a network that is pioneering the concept of decentralized AI.
Bittensor works in a very unique way - it is split up into a bunch of smaller networks, or subnets, where each subnet operates individually and is responsible for a specific aspect of AI modeling. For example, Subnet 1 is responsible for text prompting, Subnet 7 is responsible for storage solutions, and Subnet 27 is responsible for computing. Subnet 0 acts as the main subnet of the network and is responsible for all of the governance aspects of the Bittensor network. All the subnets work together to create a censorship resistant, open source, and community owned AI modeling system that is available for anyone to use.
Bittensor has its own token called TAO, which is the main currency of the network. Node operators are paid out in TAO, and users can directly stake TAO on subnets to contribute to the security of the network and earn interest.
Check out the Bittensor documentation for a more detailed breakdown of this system.
To dive deeper into the role of cryptocurrency and blockchain within AI, check out this report by MV Capital on Crypto x AI.
Source: Bittensor
Blockchain within AI offers new and innovative solutions that can greatly enhance our ability to create accurate, non-biased, and censorship resistant AI models. The open and collaborative nature of blockchain lets anyone participate, and more importantly earn money, by contributing computing power or liquidity to the network. It is critical for AI to follow this route and to avoid becoming a technology solely controlled by powerful companies.
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