The concept of blockchain seems to draw its fame from the bitcoin but it is now rapidly implemented in quasi-all traditional business sectors. Blockchain is a decentralized and digitalized ledger accessible for the public at large. It is like a common file which everyone is able to modify in the same time, with the upstream approval of everyone.
Through information-sharing, blockchain has revolutionized our conception of organization and processes, enabling disintermediation, and consequently reaching transparency, efficiency and confidence.
Use cases for blockchain technology
Sometimes blockchain seems to be quite complicated for the common knowledge of people and is sometimes feared, but most persons wonâ€™t need to have a deep understanding of its technology; think of internet protocol, how many people know that websitesâ€™ names areÂ converted into numbers that act as addresses to servers?!. Blockchain has started to be implemented in many industries and may become omnipresent in our life.
Blockchain rests on the unanimously-agreed updating of records on a public database by any member of the network having access to this database. This process enables disintermediation, and the consequences are massive for most business sectors.
Business se>Business sector perspectiveyle="text-align: justify;">Finance: The reduced need for intermediaries will facilitate for instance, the audit of accounts. Furthermore, blockchain allows the independent verification of all accounts and figures recorded in companies. â€œBig 4â€ companiesâ€™ huge investments in blockchain delivers a clear understanding of the kind of opportunity it represents.
Apart currencies, all payment processing, fundsâ€™ operations, crowdfunding campaigns, bonds or stocks issuances, annuities or pensions payments, and even market forecasts are to be transformed. Blockchain could enable instantaneous settlement on financial markets and credit history recording.
Company perspectiveent: Blockchain applied to SCM will, through a public and holistic view of the supply chain, enable real time tracking and lifecycle vision of the product within it, instantaneity of payments, coordination of logistics efforts, automatization of the sending of invoices, increase in confidence for each stage of the supply chain, and, in fine respect of lead times, optimize overall cost of the supply chain by optimizing the costs (dematerialization of documents).
- Human resources: On a HR perspective, blockchain might be able to automatize wages and benefits allocation, to realize background controls such as identity authentication, work experience certification, and prevent any type of employment fraud.
- Marketing: Applied to marketing department, blockchain will help the company to communicate directly with the customer, thus reduce considerably advertising costs, and facilitate loyalty scheme adaptability through real-time tracking. Blockchain will facilitate too copyrights enforcement. Another modification is to be waited in the field of decentralized marketing, since blockchain could record â€œproof of viewsâ€, Facebook likes, Twitter retweets etc.
- Security: On a security-based analysis, a decentralized and consensus-based network will enable cybersecurity improvement, guarantee data integrity and ledger consistency for accounting purposes. Furthermore, compared to nowadays internet protocol, blockchain will be able to eliminate the double spending risk. Indeed, all transactions recorded on the blockchain are non-reversible and submitted to confirmation procedure. Thus, they cannot be recorded twice, which contributes to establish security and increase trust in dematerialized transactions.
Contracts and properties perspective
- Physical assets: The automatic registration on a decentralized medium will ascertain both companiesâ€™ assets and private belongings (equipment, electronic devices, infrastructure and facilities ownership).
- Intangible assets: Automatic registration on a decentralized medium also applies to intangible assets, and blockchain will soon be able to establish the veracity of patent licensing, trademarks, copyrights protecting procedure, domain name registration, and assert data ownership.
- Private and public records: Both individuals and governments could benefit from blockchain implementation. Indeed, it will register and guarantee data integrity, such as for example vehicle registrations, acknowledgement of debts, loans and mortgage agreement, contracts concluding and certificates of all types, land registration, wills and inheritance declarations).
Downsides to be taken into account
On the >Downsides to be taken into accountto be taken into account when considering the implementation of blockchain.
First of all, there is the issue of centralization of the mining power. Mining power could be roughly defined as a kind of mechanism that guarantees blockchain security through decentralized computing power. Stunning figures highlight the fact that on June 2018, bitcoin mining power was concentrated for at least 70% in ChinaTuwiner, J (2018). â€œBitcoin Mining Poolsâ€. Buy Bitcoin Worldwide, [online]. Available at: https://www.buybitcoinworldwide.com/mining/pools [Accessed 4 Jul. 2018]. Tan, W (2017) … Continue reading, with big pools like BTC.com, Antpool, ViaBTC, F2poolâ€¦ This could easily be explained through the cheap electricity price in China. But this is to be balanced: if 70% of the mining power is concentrated in China, not all the miners are Chinese. Even if, on those 70%, not all miners are Chinese, they sell their computing powers to those Chinese platforms, in order to syndicate it and maximize the likelihood to find blocks and make money, this concentration can still be seen as a threat.
Indeed, one of the most important issue that this acknowledgement raises is the risk of curbing or cutting supplies of electricity and thus shutdown the vast majority of the mining pools and the bitcoin production. Should we take the risk of losing everything?
The second alarming problem remains the electricity consumption. As a matter of fact, the electricity consumption required by the mining power is getting more and more disproportionate, and reached country scaled electricity consumptions on an annual basis. For example, in November, the whole bitcoin network consumed more electricity than the Republic of Ireland.Hern, A (2018). â€œBitcoinâ€™s energy usage is hugeâ€, The Guardian, [online]. Available at: … Continue reading As it is growing exponentially, it is expected to overtake Austrian power consumption by the end of 2018.Maloney, C (2018). â€œ0.5% Of Worldâ€™s Electricity By Yearâ€™s End: Bitcoin Mining Power Consumption Is Insaneâ€. Ethereum World News, [online]. Available at: … Continue reading It has reached in the beginning of July 2018 more than 70 TWh, which nearly twice as big as Romanian consumption of electricity for a year. To put it in a nutshell, if Bitcoin miners where considered as a fully-fledged country, it would be ranked 61st (out of 195) country in terms of energy consumption.Hebblethwaite, C (2017) â€œBitcoin mining electricity usage higher than 159 countries: Power Compareâ€. The Block, Blockchain Technology News, [online]. Available at: … Continue reading This is to be considered as a tremendous threat for environment since it boosts CO2 emissions in the atmosphere.
Measures are to be taken in order to get the energy required for mining through renewables and try to keep emissions and wastes of all kind down.
Blockchain in Luxembourg
Blockchain has become famous thanks to cryptocurrencies and especial>Blockchain in Luxembourg bitcoin. In the past year 2017, Luxembourg has welcomed two major actors in bitcoin trading:
- Bitstamp, one of the most important cryptocurrencies trading platform in Europe;
- And bitFlyer, leader platform in cryptocurrencies in Japan, but the procedure is quite arduous since you have to get a ministerial agreement closely monitored by the CSSF.
As blockchain utilization will not only revolutionize cryptocurrency, but also the whole traditional business world as we know it, Luxembourg positioning itself as a pioneer of this technology is a great incentive to invest in it.
How can we help?
Hoogewerf & Cie is, through its wide network of experienced finance prof>How can we help?g Luxembourg position on blockchain, establishing itself as a pioneer in supporting and the launching of blockchain-based projects by:
- Providing advisory services concerning structures to be used, project financing, project assessment and strategy.
Should you have any inquiries, please donâ€™t hesitate to contact us.
|↑1||Buntinx, JP (2016). â€œZimbabwe Should Adopt Bitcoin as The National Currencyâ€. NewsBTC, [online]. Available at: https://www.newsbtc.com/2016/11/24/tendai-biti-zimbabwe-adopt-bitcoin-national-currency [Accessed 4 Jul. 2018].|
|↑2||Tuwiner, J (2018). â€œBitcoin Mining Poolsâ€. Buy Bitcoin Worldwide, [online]. Available at: https://www.buybitcoinworldwide.com/mining/pools [Accessed 4 Jul. 2018].|
Tan, W (2017) â€œBrief overview of Chinaâ€™s Cryptocurrency Mining: Capital, Costs, Earningsâ€. CoinTelegraph, the future of money, [online]. Available at: https://www.buybitcoinworldwide.com/mining/pools [Accessed 4 Jul. 2018]. Tuwiner, J (2018).
â€œBitcoin Mining in Chinaâ€. Buy Bitcoin Worldwide, [online]. Available at: https://www.buybitcoinworldwide.com/mining/china/ [Accessed 4 Jul. 2018].
|↑3||Hern, A (2018). â€œBitcoinâ€™s energy usage is hugeâ€, The Guardian, [online]. Available at: https://www.theguardian.com/technology/2018/jan/17/bitcoin-electricity-usage-huge-climate-cryptocurrency [Accessed 4 Jul. 2018].|
|↑4||Maloney, C (2018). â€œ0.5% Of Worldâ€™s Electricity By Yearâ€™s End: Bitcoin Mining Power Consumption Is Insaneâ€. Ethereum World News, [online]. Available at: https://ethereumworldnews.com/0-5-of-worldselectricity-by-years-end-bitcoin-mining-power-consumption-is-insane/ [Accessed 4 Jul. 2018].|
|↑5||Hebblethwaite, C (2017) â€œBitcoin mining electricity usage higher than 159 countries: Power Compareâ€. The Block, Blockchain Technology News, [online]. Available at: https://www.blockchaintechnologynews.com/2017/11/24/bitcoin-mining-electricity-usage-higher-159-countries-power-compare [Accessed 4 Jul. 2018].|