Sir Arthur C. Clarke said that: “any sufficiently advanced technology is equivalent to magic”. Well, I thought that transferring money from a country to another without paying any fees could only happen in a magical world, but since I have started travelling around the world of technology on my journey with Serviceteam IT, I would totally agree with Arthur.
Like me, you might get confused every time you hear words like bitcoin, blockchain, cryptocurrencies and cryptography. It sounds complicated to understand, but I will attempt to explain what the different words encapsulate through a little story.
A couple of years ago, Satoshi Nakamoto, an unknown programmer created the so called “bitcoin”, a digital currency also called crypto-currency. It is the first decentralised digital currency saved in “blockchain”, a decentralised data base using “cryptography”, a technique that protects messages.
Blockchain: Democratisation of Data?
Blockchain has increasingly been used and became at the forefront of the world of technology. Not only this! Blockchain is the first-ever solution to the problem of double-spending. It has the ability to make things democratic, transparent, decentralised and secure. Some studies showed that Blockchain will eventually be one of the most suitable platforms for applications requiring transparency. It has the potential to disrupt several industries in the coming few years including the banking and financial sectors, cyber security, insurance and research and forecasting.
Banks are increasingly adopting blockchain which seems to revolutionise the banking industry because it is not only considered as an innovative technique far less expensive but also because the transactions are significantly faster.
The banking sector is today using blockchain for different purposes, such as clearing and settlement, payments, trade finance and others. However, while the adoption of blockchain in the insurance sector is still far behind compared to the banking system, the implementation of this technology-based technique might be the new way of managing trust within this industry.
Blockchain: Insurance Sector
More broadly, the insurance sector has a significant contribution to the UK economy. The important role of this industry in the UK is one of the major reasons behind our choice of including this sector in our survey. In summer 2017, Serviceteam IT conducted research to reveal the challenges facing UK business and the trends in the use of technology-related ways such, as cloud for a better data management. Insurance companies significantly contributed to the outcomes of our research. Therefore, it is important to study more the interconnectedness between insurance industries and the adoption of IT-related techniques.
The McKinsey & Company report on blockchain in insurance outlines the advantages of the use of Blockchain for insurers ranging from growth and effectiveness to cost-saving benefits. Blockchain is argued to be an innovative technique for insurance companies that facilitates eventually their growth through three major ways: improving customer engagement, enabling cost-efficient product offerings for emerging markets, and enabling the development of insurance products related to the Internet of Things.
Additionally, while the global insurance market is based on trust management, blockchain is considered as a new way to manage trust. Blockchain could also disrupt insurance through automated claims and self-executed contracts represented by smart contracts, the increase of backend efficiency, and the improvement of risk assessment and pricing. It also introduces new types of insurance and help reach the underserved.
Blockchain: Legal Sector
However, on the other side of the coin, the potential impact of blockchain on the legal industry remains unknown. An article published by Fordham Journal of Corporate and Financial Law on Blockchain and the legal industry argues that the potential impact of Blockchain on legal industry can both be positive and negative.
On one hand, the use of smart contracts hosted on a blockchain can negatively affect the legal industry. In other words, smart contracts are contracts automatically established between two parties without any legal intermediary such as a lawyer or solicitor. That said, if smart contracts become the new way of doing arrangements between two or more parties, there will be no need for legal parties to interfere and the legal industry could experience a crisis.
On the other hand, one potential impact on the legal industry is the need of industries disrupted by blockchain of a legal party in order to resolve regulatory challenges arising from this newly developed technique. In other words, these companies, in particular, those planning an ICO or Initial Coin Offerings will need specialised attorneys. Through an ICO, a company uses a tradable token in order to raise capital directly from the public and since the security of this technique remains unsure, the engagement of the legal industry is inevitable.
Finally, the increasing use of blockchain will obviously change our way of doing things and will eventually make our life even easier. From a person who has never been a technology fan, I can say that it is tempting to follow the flow of technology and consider adopting such innovative solutions.