Blockchain Use-case: Internet Of Things

IoT or Internet of Things is an interconnected network of smart devices that include everything from our phones, baby monitors, fridges, front door keys etc. Increasingly, these devices are becoming integrated into our lives. According to Wikipedia, “The number of IoT devices increased 31% year-over-year to 8.4 billion in 2017 and it is estimated that there will be 30 billion devices by 2020. The global market value of IoT is projected to reach $7.1 trillion by 2020”. There are already lots of examples of IoT networks in use today. One welcomed example of an IoT smart device is the Petnet Smart Pet Feeder. This device allows us to automate the feeding of our pets. It is able to determine which is the best type of food for your dog or cat and order it via online stores.

The feeder will then automate the amount and times when your pet can eat according to what is best for it. This device can be controlled via any smartphone so owners can ensure that their pet is being fed even if they are halfway around the world on holiday.

Now that we have a clear understanding of what IoT and blockchain are all about, we can take a closer look at how these two technologies can be used in parallel to create exciting new software solutions.

Since the main selling point of blockchain is security, I will start by looking at how using blockchain to secure the internet of things will make many of the apps we use in the future safer and more secure from cyber-attacks.

Security

Using blockchain with IoT stands to benefit applications enormously. Current applications rely on the client-server model in order to function. In essence, this means that all devices are connected to one central authority that controls the network and data.

Time and time again, this central flaw to this model has allowed hackers to gain control of networks and steal data and even access webcams and speakerphones in people‘s homes.

The blockchain model would prevent such attacks from happening. Since a decentralized database would remove any one point of weakness attackers would have to target individual nodes on the network instead.

Any attack on an individual node on the network would also be futile as all the other nodes would resist any attempt to alter the data. Since data is held in a blockchain is secured by cryptography it is much safer than with a traditional client-server database.

Increased Speed of Transactions

Another advantage of employing blockchain solutions to IoT networks is the potential to increase the speed of transactions. This advantage is very specific to the use case to which it is applied. Bitcoin transactions, for example, takes longer than VISA because of limited network speeds. Since each participant on the network is required to validate transactions rather than one single entity, these kinds of straightforward transactions are faster with the client-server model.

It is when the transactions become more complex than an IoT application using blockchain technology can really shine. The implementation of smart contracts will allow multiple resulting actions to occur automatically.

A future version of the Petnet Smart Pet Feeder will be far more independent. The entire process of automating every aspect of feeding your pet could be done by the feeder.

While the current model can reorder food, a future version would be able to employ smart contracts to initiate payments to the online store without the need to involve the owner. Once the goods were received, the feeder could be refilled at which time the entire process would begin again.

Automation would allow more complex transactions to take place instantaneously. This has enormous benefits for IoT users.

Reduced Costs

While there is still much debate regarding the true cost of blockchain databases (in several countries the cost of mining a single Bitcoin currently exceeds $10,000), the overall consensus is that IoT networks costs would be reduced significantly.

The biggest reduction in costs will come from removing intermediaries and automating more complex transactions. Smart contracts only require relatively small “gas” fees to automate many of the processes that currently take time-consuming human intervention.

Public Sector: Blockchain Use-Cases

Today there are tens of thousands of pilots trying blockchain technology in numerous features of society. The public sector, specifically government, has also shown significant interest in blockchain technology. Currently governments on all landmasses except Antarctica are engaged in blockchain pilot projects.

The public sector is responsible for many areas of trust and services so there are a large number of use cases across countries including: the European Union (EU — anti-counterfeiting), Estonia (Digital Government), US (FDA, DHS, HHS, GSA — security, anti-counterfeiting), China (Payments), India (Payments, Land Registry), Switzerland (Identity), Denmark (Voting), Dubai (Digital Government), Georgia (Land Registry), Gibraltar (Stock Exchange), and many more.

Some of the spaces in the Public sector that Blockchain can fit in to-

Identity Management/Attestation

Blockchain technology provides three special capabilities that enable it to provide a better foundation for identity than current systems. First, all data is recorded on the ledger via a consensus mechanism which enlists multiple parties to verify that the data is correct before it is written. Second, all transactions in the ledger are immutable and digitally signed, which means the records are unchangeable and those who wrote the records are accountable for any issues. Third, the digital, immutable record can be linked to a biometric or set of biometrics (i.e. thumb print, facial scan, etc.) which means that it is unique, easily verifiable, and nearly indestructible.

Blockchain has the potential to solve the challenges section above — fake documents, corrupt officials, and destroyed records, as described below:

· Fake documents — identity would be verified via a biometric scan which would access official records found in a blockchain ledger which virtually eliminates the need for documents

· Corrupt officials — the data about one’s birth is immutable and cannot be modified once made so corrupt officials become powerless to make changes

· Destroyed records — as the data is digital and stored in decentralized storage it can be considered virtually indestructible

Regarding the challenges faced by those with no identity papers or destroyed records, there are various initiatives currently underway using the power of blockchain to provide solutions to governments. For example, the ID2020 initiative is an alliance of governments, NGOs, and the private sector to provide a blockchain-based framework for digital identity that will be personal, persistent, portable, and private. In essence, each individual will be able to own and control access to their personal identity information and be able to access it at all times from any location (decentralized cloud).

Government Records (Personal records, Land registration, Corporate registration)

The major challenge in all of the cases listed above is that a paper-based document is used to transmit some kind of information and identity to the bearer. Because these documents are easy to forge or can be based on real, but stolen documents, they convey significant privileges to the bearer with only a small risk of exposure.

In a blockchain-based system, paper-based documents are replaced with digital documents on an immutable ledger. The immutable nature of the blockchain means that these digital documents are impossible to duplicate or forge because there is only a unique, single record. Additionally, the digital documents can be made accessible only by a biometric scan, for example a face scan, a full hand fingerprint scan, a retinal scan, or potentially a combination thereof.

Governments have begun to implement blockchain-based systems for key record types. For example, in Andhra Pradesh in India, in Fintech Valley Vizag, blockchain systems are being used for land registration records and for vehicle registration. Fintech Valley Vizag is in the process of building up a large portfolio of blockchain use cases to improve the efficiency of government and private sector operations.

Land registration was selected first because 66% of civil disputes revolve around property disputes which creates a significant drag on the economy. The primary issue was that due to paper documents, much of the populace could not prove its ownership of property and records could be easily modified for a price. Blockchain’s immutable records and audit trail have already secured over 100,000 land records, providing certainty to owners. This same system has now also been applied to vehicle registration, to provide certainty and security around vehicle registration records.

Entitlements/Citizen Services Management (Healthcare, Consent)

Blockchain technology provides a single solution to all three challenges noted above. First, it can provide a secure digital identity; next it digitizes all new data transaction data automatically and securely; and finally, it creates an interoperable platform across departments and agencies. This is not a theoretical exercise as blockchain-based e-government systems do already exist.

Estonia is home to the most famous blockchain-based digital government and e-residency program. This portal enables anyone to become an e-resident of the country in 30–60 minutes and at a cost of 100 Euros. Estonian e-residents can use the portal to create a digital identity, establish a business, setup banking relationships, and execute business documents. Famous e-residents of Estonia include Tim Draper, the famous Silicon Valley VC, Pope Francis, Angela Merkel, Chancellor of Germany, and Shinzo Abe, Prime Minister of Japan. Estonia is also planning to launch its own digital currency called Estcoin.

Dubai is another leader in blockchain-based e-government. Dubai plans to have all of its government documents on a blockchain by 2020 and 50% of its services operating on a blockchain platform by 2021. These systems will streamline all government activities and are forecast to save 10’s of millions of hours of work and billions of dollars annually. Dubai is also planning to issue a digital currency to enable cross-border payments and track all real-estate transactions on an immutable blockchain ledger.

Other countries would be wise to follow a similar path because of significant cost savings, efficiency gains, and the ability for countries to compete for businesses and citizens.

Government Activities (Voting, Taxation, Customs)

blockchain-based systems can create a unified and secure digital identity. Data and transactions are then stored by default in a highly encrypted format to a decentralized network where each transaction is digitally signed. A robust consensus algorithm can ensure the validity of all transactions while the immutability of the ledger ensures the data cannot be modified from its original form.

Pilots of blockchain-based voting solutions now exist in Switzerland, Denmark, Russia, and the US. In Switzerland the city of Zug has used blockchain-based voting in combination with an Ethereum-based digital identity solution. The pilot was successful and the results are now being evaluated to ensure that the results are both immutable and auditable while protecting voter privacy. In West Virginia an e-voting pilot will be launched in November 2018 that will enable overseas military to vote in the mid-term elections. The pilot will be based on smartphones and will use streaming video, facial recognition and a military ID to confirm the identity of voters.

Online tax bills can now be paid by e-residents in Estonia via the blockchain-based solution outlined in the prior section. At the World Economic Forum in Davos in 2016, 800 attendees took part in a poll on blockchain-based taxes. 73% of respondents indicated they expected blockchain-based tax systems to be in place in most developed countries between 2023–2025.

US Customs and Border Protection (CBP) in collaboration with the Department of Homeland Security (DHS) are working on two separate blockchain customs projects. One project is focused on validating certificates of authenticity for products that cross into the US. The joint goals are to enable customs officials to intercept counterfeit products while the second is to allow consumers to quickly verify the authenticity of products prior to purchase. The second is designed to secure the sharing and storage of data from security cameras and sensors and via an immutable record to prevent the manipulation and hacking of data.

Across these use cases, blockchain enables greater efficiency, less fraud, and lower costs. The holy grail is fully paperless, digital government with minimal corruption.

Coin Burning: A Guide

Coin burning is a concept exclusive to the cryptocurrency marketplaces, having been adopted by a wide range of coins and tokens. Though it may sound hard core, but coin burning is a central mechanism that could prove to be a popular feature for cryptocurrency projects down the road. In fact, many Initial Coin Offerings (ICOs) have integrated a coin burning mechanism for unsold tokens at the end of their token sale. Not only that, but major exchanges with their own native tokens – like Binance – also adopt a periodic token burning mechanism to add value for those who hold Binance Coin (BNB).

There are of course, many motivations for projects to consider a coin burn structure. This guide will delve lengthily into the mechanics of coin burning to provide a new outlook on what the future holds for the cryptocurrency marketplace.

Coin burning – as the name suggest – is a process of intentionally ‘burning’ or eliminating the coins by rendering it unusable. This is done by sending a portion of the coins to an ‘eater address’, which is often referred to as a ‘black hole’ since the private keys to that address are not obtainable by anyone. Therefore, any coins sent to an eater address are unrecoverable and cannot be used again, forever! These coins are effectively taken out of circulation and is publicly recorded and verifiable on the blockchain.

Reasons for Coin Burning

1) MORE EFFECTIVE CONSENSUS MECHANISM

This applies to coins that adopt Proof-of-Burn (POB) as their consensus mechanism. POB is a unique way of achieving consensus in a distributed network, requiring participants – miners and users – to burn a portion of coins. There are many variations of POB which will be discussed in the next section.

2) INCREASE VALUE OF COINS

In order to understand this, we need to understand the basic economic laws of demand and supply. Scarcity is a central economic concept that gives value to a particular asset and in this case, cryptocurrency. Unlike fiat currencies, cryptocurrencies are deflationary in nature. This means that the coin supply for most cryptocurrencies are fixed, with no additional coins created once it has reached its total supply count. The best example is Bitcoin, which has a fixed supply of only 21 million; if demand increases, prices would increase since there is a limited number of Bitcoin in circulation. Likewise, if the supply of Bitcoin further decreases – due to burning, lost private keys or forgotten Bitcoins – then prices would similarly increase since there is now a lesser number of Bitcoins to satisfy people’s demands.

Coin burning reduces the total supply in circulation since the coin is intentionally destroyed. It is an effective method of increasing and stabilizing the valuation of coins and tokens. Economic principles dictate that reducing the quantity of something makes it much more valuable!

3) PROTECTION AGAINST SPAM

Coin burning acts as natural mechanism to safeguard against Distributed Denial of Service Attack (DDOS) and prevent spam transactions from clogging the network. The same way how users pay a small fee for sending Bitcoin (BTC) or pay gas for smart contract computations in the Ethereum blockchain, coin burning creates a cost for executing a transaction. Instead of paying fees to miners to validate transactions, some projects have integrated a burning mechanism where a portion of the amount sent is automatically burnt. Ripple (XRP) is a project that utilizes this burning model.

4) SIGN OF LONG-TERM COMMITMENT

Coin burning is an effective tool to signal a firm commitment by a cryptocurrency project. The goal of any project is to add significant value to coin holders, who will probably be the core users and supporters of their service. Employing a coin burning mechanism to burn excess ICO tokens or provide periodic burning schedules (by buying back tokens from the open market using generated profits and thereafter burning them) would go a long way in reinforcing the project’s growth prospect.

Atomic Swap Explained

An atomic swap is a smart contract technology that empowers the exchange of one cryptocurrency for an alternative cryptocurrency without using central intermediaries, such as exchanges.

Atomic swaps can take place unswervingly amid blockchains of different cryptocurrencies, or they can be conducted off-chain, away from the foremost blockchain. They first came into prominence in September 2017, when an atomic swap between Decreed and Litecoin was conducted.

Since then, other start-ups and decentralized exchanges have allowed users the same facility. For example, Lightning Labs, a start-up that uses bitcoin’s lightning network for transactions, has conducted off-chain swaps using the technology. Cryptocurrencies and decentralized exchanges, such as 0x and Altcoin.io, have also incorporated the technology.

Atomic Swaps Break Down

As it occurs today, the process for switching cryptocurrencies is time-consuming and complex. This is due to several reasons. For example, the disjointed nature of today’s cryptocurrency ecosystem presents several challenges to average traders.

Not all cryptocurrency exchanges support all coins. As such, a trader wishing to exchange her coin for another one that is not supported on the current exchange may need to migrate accounts or make several conversions between intermediate coins to accomplish her goal. There is also an associated counterparty risk if the trader wishes to exchange her coins with another trader.

Atomic swaps solve this problem through the use of Hash Time- lock Contracts (HTLC). As its name denotes, HTLC is a time-bound smart contract between parties that involves the generation of a cryptographic hash function, which can be verified between them.

Atomic swaps necessitate both parties to admit receipt of funds within a specified timeframe using a cryptographic hash function. If one of the involved parties fails to authorize the contract within the timeframe, then the entire transaction is voided, and funds are not exchanged. The latter action helps remove counterparty risk.

Blockchain Nodes Explained

A node is a device on a blockchain network, that is in the crux the underpinning of the technology, allowing it to function and survive. Nodes are disseminated across a widespread network and carry out a variety of tasks. In this blog we will try to understand what blockchain nodes are.

A node can be any active electronic device, including a computer, phone or even a printer, as long as it is connected to the internet and as such has an IP address. The role of a node is to support the network by maintaining a copy of a blockchain and, in some cases, to process transactions. Nodes are often arranged in the structure of trees, known as binary trees. Each cryptocurrency has its own nodes, maintaining the transaction records of that particular token.

Nodes are the individual parts of the larger data structure that is a blockchain. As the owners of nodes willingly contribute their computing resources to store and validate transact ions, they have the chance to collect the transaction fees and earn a reward in the underlying cryptocurrency for doing so. This is known as mining or forging.

Processing these transactions can require large amounts of computing and processing power, meaning that the average computer’s capabilities are inadequate. Generally, professional miners tend to invest in extremely powerful computing devices known as CPUs (central processing units) or GPUs (graphics processing units) in order to keep up with the demand for processing power that is required for them to validate transactions and as such earn the rewards that comes with doing so.

A node can either be a communiqué endpoint or a point of communiqué redistribution, connecting to other nodes. Every node on the network is considered equal, however certain nodes have different roles in the manner in which they support the network. For example, not all nodes will store a full copy of a blockchain or validate transactions.

A full node downloads a complete copy of a blockchain and checks any new transactions coming in based on the consensus protocol utilized by that particular cryptocurrency or utility token. All nodes use the same consensus protocol to remain compatible with each other. It is the nodes on the network that confirm and validate transactions, putting them into blocks. Nodes always come to their own conclusion on whether a transaction is valid and should be added to a block with other transactions, irrespective of how other nodes act.

Cryptocurrency Mining Explained

Cryptocurrency mining is one of the most regularly used approaches of validating transactions that have been executed over a blockchain network. Not only does blockchain work to protect transaction data through encryption, as well as store this data in a decentralized manner (i.e., on hard drives and servers all over the world) so as to keep a single entity from gaining control of a network, but also the primary goal is to ensure that the same crypto token isn’t spent twice. In effect, “mining” is one means of making sure that cryptocurrency transactions are accurate and true, such that they can never be compromised in the future.

Cryptocurrency mining itself refers to a type of validation model known as “proof-of-work” (PoW). There are two common validation types, and we’ll look at the other, known as proof-of-stake, in a moment.

In the PoW model — which bitcoin, Ethereum, Bitcoin Cash, and Litecoin use, to name a few — individuals, groups, or businesses compete with one another with high-powered computers to be the first to solve complex mathematical equations that are essentially part of the encryption mechanism. These equations correspond to a group of transactions, which is known as a block. The first individual, group, or business that solves these transactions, and in the process validates the accuracy of these transactions within a block, receives a “block reward.” A block reward is paid out as digital tokens of the currency that’s being validated.

As an example, the current block reward for bitcoin is 12.5 tokens. That means whoever is the first to correctly solve equations for a block is paid 12.5 tokens. With bitcoin near $9,500 per coin, that works out to a nearly $119,000 haul.

There are two major concerns attached to the PoW model. First, it’s an extremely electricity-intensive practice. To mine virtual currencies, massive mining centres with graphics processing units and/or ASIC (application-specific integrated circuit) chips are set up to handle this validation and processing. The electricity costs, depending on where an operation is located, can be enormous. It could also, in theory, be a drain on local or national electric grids, depending on how large digital networks and mining farms become.

The other issue is that the PoW model has a security vulnerability, at least for smaller digital currencies. Any individual or group that can gain control of 51% of a network computing power could essentially hold that network and digital currency hostage. Networks the size of bitcoin, Ethereum, and Litecoin have next to nothing to worry about. However, newly issued coins with fewer participants could be susceptible.

Though cryptocurrency mining might often be lumped in as one big free-for-all, there are differences in the equipment being used to validate transactions. For bitcoin, miners need to use highly specialized and expensive ASIC chips because of the difficulty in validating bitcoin transactions. Meanwhile, most other virtual currencies allow miners to use some variation of graphics processing units from the likes of NVIDIA or Advanced Micro Devices to proof transactions. However, the difficulty in this mining can still vary from one cryptocurrency to the next.

Blockchain and Supply Chain Management

The life cycle of a merchandise is a fascinating one. The next time you’re purchasing something in the supermarket, think of what all it had to go through to get in your hands. Think about where all the raw constituents came from, who all transported the raw material to manufacturing plant where it was fashioned, and how it ultimately got packed and ended up in the very shop where you are purchasing it right now. Supply chains are absolutely critical for the overall well-being of your business. The current system of supply chains is outdated and requires a significant reboot. This is where the blockchain comes in.

A blockchain is, in the simplest of terms, a time-stamped series of immutable record of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) are secured and bound to each other using cryptographic principles (i.e. chain). The 3 properties of the blockchain technology that is going to help disrupt the supply chain management system are: Decentralization, Immutable and Transparency.

So, from what we have known so far, the blockchain technology has properties of decentralization, transparency, and immutability. As such, it is the perfect tool to use for the disruption of the supply chain management industry. Every time a product changes hands, the transaction could be documented in the blockchain, creating a permanent history of a product, from manufacture to sale. What this does, is that it reduces:

Time Delays
Human Error
Added Costs

Blockchain can definitely improve the following properties:

Recording the quantity of the products and its transfer through different parties.
Tracking all the purchase orders, change orders, receipts, trade-related details
Verifying the validity of the certification of the products. Eg. this can be used to track whether a particular item meets certain quality standards or not

It can link various physical items to serial numbers, barcodes, and tags like RFID etc.
Helps in the sharing all the information about the manufacturing process, assembly, delivery, and maintenance of products with the different parties in the supply chain.

So, if we were to look into all the benefits that the blockchain can bring into the system:

Blockchain’s transparency helps in the careful documentation of a product’s journey from its point of origin to all its suppliers. This increases the trust among the various parties in the supply chain because all the data is visible for everyone to see.
The blockchain network can take in any and all participants of the supply chain network. Plus, regardless of their geographical location, everybody will be able to connect with the blockchain.
Blockchain’s immutability will make sure that all the records in the chain are honest and free from corruption. Plus, the strong security from its innate cryptography will eliminate unnecessary audits, saving copious amounts of time and money.
The utilization of blockchain also opens up the doors to future innovation.

It seems like the blockchain technology and supply chain management systems were built for each other. In fact, all the flaws of the current supply chains can be easily mitigated by using the blockchain technology. We believe that this is one of the foremost industries that the blockchain can disrupt and change for the better. Hopefully, blockchain-based supply chain management systems can be the norm in the future.

Lightning Network Explained

The Bitcoin Lightning Network is an autonomous solution that’s signaled as the key to all problems keeping Bitcoin from mainstream implementation. It claims to solve the bleak scaling problem, make instant transactions, keep transaction fees minuscule, and take your transactions off the blockchain.

In this article, we’ll discover what the Bitcoin Lightning Network really is, how it can make the guarantees it provides, and its current state. Bitcoin has a scaling problem. Bitcoin is designed to store all transactions in a data structure called a block. A block contains information about the previous block, miscellaneous data about mining rewards, and most of the block is just transaction data. Blocks are also fixed at a maximum of 1 MB in size. This last bit is where the trouble is.

Because blocks are 1 MB in size, and a block is created every 10 minutes, assuming the transactions are not SegWit (coming up later) the network can process a maximum of between 3.3 and 7 transactions per second. For a currency designed for mass use by billions of humans and their machines, 7 transactions a second just isn’t up to par. Visa, on the other hand, claims to be able to process 24,000 transactions per second.

As the number of transactions starts to increase, your individual transaction competes with every other for inclusion inside a limited block space, and so, the likelihood of having yours included in the block starts to decrease. Since miners can arbitrarily decide which transactions to include in a block, on these occasions, the only way to incentivize the miners to include your transaction is by increasing your transaction fee. However, this starts to make transactions prohibitively expensive—such as this 192 byte transaction for $92.98 where the transaction fee was $14.86.

The Bitcoin Lightning Network

The Lightning Network is a second-layer network that transmits signed, but un-broadcast, transactions among peers and relies on the Bitcoin blockchain only for final settlement of funds. This means that transactions aren’t limited to the block size at all, confirmation times are irrelevant, and the Bitcoin blockchain doesn’t need to store every transaction that ever happens.

Who developed the Bitcoin Lightning Network? It was first described in a white paper authored by Joseph Poon and Thaddeus Dryja but has since evolved into a community effort with third-party individuals and even companies contributing to specifications and implementations.

A Lightning node runs much like and unlike a Bitcoin node in that it operates in a networked fashion, validates transactions, and communicates with other nodes, but it does things that Bitcoin nodes historically do not: it holds funds, act as an automated financial intermediary, actively monitors Lightning “channels” for malicious behaviour and reacts defensively (this is explained in detail later), etc.

History of Blockchain

Blockchain technology has to be one of the principal innovations of the 21^stcentury assumed the ripple effect it is having on various sectors, from financial to manufacturing as well as education. Unknown to many, is that Blockchain history dates back to the early 1990’s. Since its popularity started increasing a few years back, a number of requests have cropped up all but underlining the kind of impact it is destined to have as the race for digital economies heat up.

How blockchain emerged?

Stuart Haber and W. Scott Stornetta intended what many people have come to know as blockchain, in 1991. Their first work complex working on a cryptographically secured chain of blocks whereby no one could tamper with timestamps of documents. In 1992, they upgraded their system to incorporate Merkle trees that enhanced efficiency thereby enabling the collection of more documents on a single block. However, it is in 2008 that Blockchain History starts to gain relevance, thanks to the work one person or group by the name Satoshi Nakamoto.

Satoshi Nakamoto is accredited as the brains behind blockchain technology. Very little is known about Nakamoto as people believe he could be a person or a group of people that worked on Bitcoin, the first application of the digital ledger technology. Nakamoto conceptualized the first blockchain in 2008 from where the technology has evolved and found its way into many applications beyond cryptocurrencies. Satoshi Nakamoto released the first whitepaper about the technology in 2009. In the whitepaper, he provided details of how the technology was well equipped to enhance digital trust given the decentralization aspect that meant nobody would ever be in control of anything. Ever since Satoshi Nakamoto exited the scene and handed over Bitcoin development to other core developers, the digital ledger technology has evolved resulting in new applications that make up the blockchain History.

Structure of the blockchain:

In simple terms, Blockchain is a peer-to-peer distributed ledger that is secure and used to record transactions across many computers. The ledger’s contents can only be updated by adding another block linked to the previous block. It can also be envisioned as a peer-to-peer network running on top of the internet. In layman or businesses term, blockchain is a platform where people are allowed to carry out transactions of all sorts without the need for a central or trusted arbitrator. The created database is shared among network participants in a transparent manner, whereby everyone can access its contents. Management of the database is done autonomously using peer-to-peer networks and a time stamping server. Each block in a blockchain is arranged in such a way that it references the content of the previous block. The blocks that form a blockchain hold batches of transactions approved by participants in a network. Each block comes with a cryptographic hash of a previous block in the chain. Read more about what is blockchain.

Blockchain and Remittance

Remittance is the transference of money from a migratory worker to someone back in their home country. People have always moved in search of better work forecasts in high-income (or high currency value as compared to home) countries. Based on the World Migration Report 2018, there are presently a projected 244 million international migrants living in other countries. This number has either unswervingly or indirectly contributed to the global remittance’s $689 billion-dollar industry with India being top of the pile, contributing $80 Billion or 11.6% of its entirety. The global remittance industry is expected to grow by more than 3% in 2019.

Blockchain can be the future for remittance

The most prevalent Cryptocurrency is Bitcoin. It has been labelled as the future of the global financial industry. Bitcoin positively has great potential to be the digital currency of the world but before that, one of two things needs to happen:

Bitcoin becomes less volatile
Products and Services everywhere become priced in Bitcoin rather than fiat

We are still a long way from that and therefore, let us focus our attention on not Bitcoin but on its underlying technology: the Blockchain Technology.

The key proponents of blockchain technology suggest that it can reduce the costs for remittance services. Interesting things are happening behind the scenes where blockchain technology is attempting to replace the current financial services industry’s centralized business model. Financial institutions and banks are exploring ways to implement blockchain to reduce transaction costs, increase transaction speed, reduce fraud and eliminate third-parties.

By cutting out the traditional middlemen, blockchain technology can speed up and simplify cross-border payments, making remittances more affordable. Currency fluctuations can result in a loss when transactions are being made cross borders and blockchain can provide an almost guaranteed, real-time transaction.

Distributed Ledger Technology or DLT can serve as the backbone for a new cross-border payment infrastructure that can potentially solve inefficiencies and provide a faster, secure and more affordable service.

The average transaction cost of remitting money currently is more or less 4–5% per transfer. This cost includes exchange rate margins, charges from both the sender and recipient intermediaries, agents, overheads etc in remitting USD500, USD20–25 will go into transaction fees. Online Money Transfer Platforms like TransferWise was able to reduce the cost to 1%. Blockchain can reduce the cost from 5% to a fraction of a percentage. This will drastically reduce the USD30 billion dollars in the cost of sending remittances to an absurd amount in the thousands and thus, be an effective cost-saving method.