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Blockchain was created for Bitcoin
and it is used as the underlying technology for all cryptocurrencies, enabling peer-to-peer transactions with their protection against hacking, all transactions are recorded in a distributed ledger. The Blocchain technology works through a combination of information blocks, algorithms and cryptography, due to which a consensus is achieved.
How blockchain technology works
The advantage of blockchain lies in the decentralization of the network, the security, and confidentiality of data, which cannot be changed. The technology is transparent and has minimal transaction fees. Among the disadvantages are strong power consumption for PoW consensuses, as well as poor speed when the size of the network increases. It is the scalability that is the main problem that applies to Bitcoin.
Popular areas for blockchain development
In 2018, spending on various blockchain solutions was $1.5 billion. For 4 years (until 2022), the growth rate was expected to be 76% on average for each year. As a result, the market volume for 2022 was about $12 billion and by 2023 could increase to $23.3 billion.
By the end of 2025 the industry's market will be above $21 billion
Cryptocurrency assets aside, the most popular direction for blockchain technology in 2023 will be is industry and IoT.
The main sources of growth of Blockchain technology in the future will be:
- Increase of investment volumes and venture financing.
- Reducing operating costs which any business needs to simplify work processes.
- Increased demand for blockchain in logistics and commerce.
Experts explained that big capital has been actively investing in new projects since 2020 that allow businesses to work with blockchain. Major leaders in specific industries have already opened their blockchain labs.
The main problem that gets in the way of blockchain development
is the uncertainty of the regulatory framework as well as the lack of experience, information, and knowledge of employees working with blockchain.
The Reportlinker analytics group identified several countries that use blockchain technology more actively than others.
Among them are:
- North America - the highest volume of usage.
- Asia-Pacific is the largest area of blockchain development.
Investments in innovation come mostly from the United States followed by Europe according to IDC calculations.
There is no public data on investments in blockchain development
in the Russian Federation. Many people refuse to work with innovation because there is no regulator in the market.
Technology and standards development
The first development of blockchain as well as DLT
was capable of showing the efficiency of programs among them clearing, trading of digital assets and fast calculations. However, along with the effectiveness, there was a shortage of speed and energy intensity and weak scalability.
Initially, there were many protocols and platforms in this sector but there were no standards. For this reason, companies could not achieve compatibility across platforms at the same time. The main challenge was the usual transfer of data from one user to another without the ability to negotiate the terms. An additional problem was the Proof-of-Work consensus mechanism. The computation processes were complex, took a lot of time, energy, and were expensive per transaction. The duration of transactions was on the order of 10 minutes. These are the problems of early blockchains.
By 2022, blockchain technology has improved significantly with new standards and delivery models, which has sparked interest from businesses:
- Private networks - allow only verified participants to take part in transactions.
- Trusted networks - allow any verified individuals to connect and all activities are controlled by separate technologies.
- Technological improvements - modern blockchain networks allow you to make self-executing contracts, protecting against unforeseen circumstances. New methods of cryptography to verify transactions use less energy than PoW consensus, speeding up data transfer, reducing fees. For example, blockchain running on Proof of Authority uses a large number of trusted and private networks in business.
- Compatibility - successfully demonstrated projects for enterprise use, DLT platforms. Polkadot, Cosmos, Wanchain and other protocols provide fast connectivity of different blockchains with trouble-free interaction.
- New ecosystems - innovations that have been evolving along with the increase in DLT resources, creating separate ecosystems. Within it, developers make decentralized type applications with identity management functions.
Blockchain life cycle based on market volume
Blockchain is a modern, rapidly developing technology with a wide range of opportunities but due to legal issues, individual projects need a personal approach to development and adoption.
Blockchain usage, trends and prospects in 2023
Thanks to blockchain's ability to be used in almost any field, the trend will continue for years to come. At the moment, finance, payment systems and retail are actively using the technology. However, the main blockchain trends in 2023 should be highlighted.
Areas in which blockchain is often used
Today, blockchain can be compared to the Internet in its emergence and initial expectations. The technology is in its infancy and there can be many ideas about the future trends of the technology
and the products that will be available.
Future Blockchain Trends for Industries
Cryptocurrencies and online payment systems
The most widespread method of using blockchain is the creation of new digital assets and online payment systems with instant transfers, minimal commissions and protection of transactions from banks and other mediators.
In addition to the familiar cryptocurrencies, this list includes utility tokens, digital shares, natural asset tokens, stabelcoins, etc. At the end of 2020, there were about 1,000 different cryptocurrencies. In 2022 the number is more than 20,000.
Decentralized finance and banking
This sector falls into the category of rapid development with the help of innovative developments. Decentralized finance can include blockchain-based instruments that work with smart contracts.
Customers have shown trust in such development, investing large sums of money in smart contracts every month which indicates the acceptance of such a financial system by ordinary people.
At the beginning of 2021, more than $11 billion was invested in the development of the innovation and 94% of the investment was coming from the United States.
The biggest blockchain users are banks. In theory, blockchain technology makes it possible for two parties to work without intermediaries. They may not know each other. Banks are the trusted environment, willing to make transactions, to work with agreements without 3 persons. In the future, no one will investigate credit history because the information will be shown by the registry in the blockchain.
Immediately after the decision on the status of digital assets, many banking institutions will switch to blockchain, a measure that will be forced. The prospect of a transition is about 10-15 years away but some global companies are already beginning the process. Today there are many who are testing the use of blockchain for financial transactions and central bank digital assets.
In this industry working with smart contracts makes it possible to simplify the issuance of customs invoices, licenses, certificates and other documents. All this is achieved through the speed of transactions, automation of processes. The development of this trend
will reduce overall costs, time for cargo clearance and reduce corruption.
Many companies, countries and states are creating separate alliances by adopting blockchain. The shipping business is already using the developments improving efficiency. Leading companies as well as the maritime industry are successfully trying the electronic bill of lading.
Blockchain gives additional visibility and any transaction can be traced back to the data chains, ensuring reliability. This creates the global value chains of goods. Improvements in technology in the future will lead to transformations from reducing costs to increasing efficiency by using new operating models.
There are two prospective directions:
- Control of goods from the beginning of their production to the moment of delivery which gives control of authenticity and the quality of goods.
- Automation of control of all regulations and requirements related to trade and freight.
Walmart uses blockchain based on IBM Hyperledger Fabric. This implementation has helped to reduce the time to identify fruit shipments from 7 days to 2.2 seconds.
IHS Markit forecasts financial sector revenues from blockchain introduction
Using blockchain outside finance
Financial industry is a leader in the field of blockchain platforms creation
and other developments because any transactions are complemented by security and efficiency. This is not the only area where the technology is used, especially in the case of company solutions where several organizations have access to the same data and need to obtain data about the history of transactions.
Among the possible environments for blockchain adoption could be:
From 2021 the popularity of using technology moves into such niches:
- telecommunications and media;
- health care;
- trade in retail goods and consumer goods;
- public administration.
- Information exchange. Very often getting information, further exchange is limited by different technologies and privacy principles. Blockchain and DLT programs enable companies to work with information, exchange it with guarantees that it will not reach third parties but only trusted individuals. At the expense of privacy, companies can perform information exchanges outside the organization, building interaction and trust with other customers across the ecosystem. This kind of direction is handy in healthcare, as providers can obtain information about specific patients to simplify their work. Blockchain in 2023 would be useful for intelligence organizations to quickly transmit threat intelligence or other information to specific agencies.
- Personal information and digital identity. Blockchain technology helps to securely store and manage different data and the users themselves are the real owners of this or other information. Customers have the ability to create and control digital identities. With blockchain technology, there is a high degree of protection and safety of data storage with the ability to identify identities, eliminating fake or stolen information. Such applications can track contacts, medical cards, accounts.
- Grant funding. By using blockchain technology in 2023, the burden of control and reporting on financial results and other reports will be reduced. Studies have shown that working with the new technology for efficient grant payments has increased the quality and transparency of all transactions, increasing the efficiency of payments.
- Operational accounting. An especially important parameter for large companies which include different tools for planning, tables and other processes. Blockchain in 2023 will allow better control of transactions, gives transparency and the ability to audit all transfers within the company.
- Transparent supply chains. In logistics, blockchain allows you to monitor the movement of goods, minimizing counterfeit shipments, illegal activities or handling of low quality products. The blockchain technology in 2023 will help verify the origin of meat products, jewelry, beverages, etc. By implementing the development, the government will be able to comply with trade rules, tariffs, and will make it easier to monitor shipments.
- Working with the customer base. With the help of non-exchangeable tokens (NFT) in the form of collection items, people and large companies have the opportunity to create a community to attract new customers, fans, thereby promoting services or products. NFT is a modern method of protection, income diversification, eliminating the fact of speculation or fraud.
- Monetization of content, creativity. Any kind of art, from creating paintings, poems, songs to serious scientific inventions, can be easily monetized using blockchain. Users would not need to prove ownership, create patents or obtain other documents for their products. Smart contracts embedded with intellectual property automatically confirm copyrights and monetizing such a product in a digital world would become much easier, worth more.
The decentralized focus of blockchain is not a perfect solution at the moment. The technology has a way to go in 2023 and the future. Among the disadvantages compared to centralized information bases are insufficient performance and the need for large amounts of memory to work effectively. The information in the network cannot be changed which is considered a plus but in some cases can be a disadvantage, causing difficulties in data processing.