The Blockchain Effect – Technology

When discussing about blockchain and its existing or potential
uses across various industries, many are those who instantly wonder
as to what blockchain really is and then declare it “far too
complicated”, without any further analysis. Others may
directly relate blockchain with cryptocurrencies, instantly
dismissing any further discussion since cryptocurrencies have had
their share of bad publicity by being considered to enable money
laundering/terrorist financing. Nonetheless, the capabilities of
the underlying technology of blockchain are far more numerous than
just for rewarding miners with cryptocurrencies.

The technological innovation stemming from blockchain technology
is challenging social and legal concepts which we have for years
considered set in stone. The use of blockchain has demonstrated to
fundamentally speed up transactions, reduce costs, remove middlemen
and provide transaction transparency, for which businesses spend
hefty fees to safeguard and ring-fence their rights.

In its simplest form, blockchain is a decentralised technology
or distributed ledger on which data is anonymously recorded based
on pre-agreed consensus algorithms in the network of users. It is a
form of database where data is stored in a chain of fixed
structures called ‘blocks’, hence the name
“blockchain”. The stored information is mirrored on all
participating computers, called “nodes”, over the
distributed network of users. Blockchain technology offers a
decentralised solution that is not locally or centrally stored nor
maintained by one single party. Depending on the blockchain type
and whether it is a permission-less or permissioned blockchain,
transactions are only recorded on the chain if all the users agree
with the transaction’s accurateness. Once a transaction is
codified and added on the blockchain it is permanently stored,
cannot be modified or erased and can be traced all the way back to
its origination. This makes the blockchain ledger exceptionally
accurate and secure. The use of blockchain technology is spiralling
in almost all industries, examples of which are included below.

Insurance Sector

In the efforts of establishing a more transparent and
trustworthy experience in the insurance sector, blockchain
technology is being utilised to boost efficiency and productivity
against cumbersome and fragmented processes currently being used.
InsurTech companies utilizing blockchain technology can substitute
manual business processes of insurance claims for handling,
payment, subrogation and assessment (using smart contracts) and
ensure that data cannot be altered, manifested or manipulated by
recording it on the blockchain.

Food and Beverage Provenance

To enhance supplier reliability to consumers and give answers to
questions such as “where does my food really come from”
blockchain can be used in the food and beverage provenance
industry. The underlying technology of blockchain can assist
producers and suppliers alike to achieve end-to-end near real-time
transparent tracking of goods, ensure food authentication and
information from all stages in the supply chain and have a trusted
audit trail from production to the end-consumers. Utilisation of
blockchain can further assist with the ongoing monitoring
requirements of suppliers with regards to food safety by regulators
and governmental bodies.

Health Sector

In the health sector, blockchain technology is used for the
setting up of decentralised platforms which enable secure, fast and
transparent exchange and use of medical data. Such platforms create
a user-focused electronic health record and maintain a single true
version of that patient’s data. Blockchain companies are also
developing health data marketplaces through which users can
negotiate commercial terms with third parties for alternative uses
or applications of their health data (i.e. allowing their data to
be used in medical research and being financially rewarded for
it).

Legal Registries

Legal registries that can be “codified” on the
blockchain may include land registries, corporate, commercial,
patent or trademark, listed entity registers and in general all
types of registries that document status, identity or rights of a
person/legal entity. Due to the immutability characteristic of
blockchain technology, having the register entry being verified on
the blockchain can allow for an impenetrable and fully transparent
audit trail throughout the history of the said entry. This will
optimize tracing efforts in identifying legal ownership of assets
as well as provide security and comfort that the entries are the
true and accurate positions, as well as speed-up transaction
tracing time and procedures.

Social Impact

Other than its abovementioned uses, blockchain can be applied or
developed to fulfil purposes with a social impact. In a move
towards smarter and more efficient governance, blockchain can be
used to record everything from birth and death certificates to
marriage licenses, travel history tracing, citizenship status or
even voting rights. For a more transparent charity and donation
ecosystem, blockchain can help with tracing charitable donations
tied to specific outcomes, ensuring that philanthropists’
contributions indeed reach their end purpose.

Overall, for some it might indeed feel daunting that blockchain
is revolutionizing almost every industry we have known so far. The
potential of this technology is enormous, and it depends on the
innovator to put this technology to good use and create unique
solutions. In fact, blockchain can have a tremendous impact on
societies and it can be used to solve problems that have troubled
countries and governments for years.

The legal effects of implementing such solutions in our everyday
society are numerous and implementing changes to existing systems
may in fact require lengthy legislative procedures. Furthermore, it
will have to be ensured that all information stored on blockchains
meet the requirements of secrecy, privacy and data protection, as
well as modifiability and erasability, going in fact against one of
the main characteristics of blockchain. Nonetheless, it cannot be
ignored that blockchain is disrupting the way we are doing things
going forward, from today to tomorrow.

In EY Cyprus we recognise the potentials of emerging
technologies in the implementation of our client’s day-to-day
business operations. As a member firm of the EY global network,
which was ranked first among the Big Four for blockchain services
in the Top 10 Enterprise Blockchain Services Report, EY Cyprus has
strong capabilities to assist clients in implementing their vision
and strategy on the digitization of their offerings through
blockchain.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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