If you ask the proponents and supporters of cryptocurrencies, the future always looks positive. Digitization is conquering all areas of society: smartphones are our daily companion, television is available on-demand and anyone who orders from an online mail order company today often already does so using digital assistants. Artificial intelligence (AI), Internet of Things (IoT), smart contracts, autonomous driving and chatbots are the innovative technologies that keep decision-makers busy, alongside blockchain applications. In the context of the cryptocurrency Bitcoin, whose price explosion in recent months has thrown the financial world into turmoil, blockchain technology is always explained on a regular basis. Even though decentralized crypto technologies were already being researched in the 90s, the necessary computing and storage power is now available to implement such concepts.
The first outlines of cryptographically secure and transparent chaining of individual pieces of information in blocks were described by Stuart Haber & W. Scott Stornetta in 1991. In 1996 Ross J. Anderson and in 1998 Bruce Schneier & John Kelsey followed with further publications in the field of cryptography. In 2000, a general theory on cryptographically secured chaining was created by Stefan Konst, from which he then derived different implementation solutions.
The blockchain as a protocol and distributed database, characterized by its decentralization, emerged in 2008 when Satoshi Nakamoto (an unknown author/group) described a whitepaper entitled "Bitcoin: A Peer-to-Peer Electronic Cash System" on Bitcoin (#BTC). In 2009, the first implementation of Bitcoin software was published by him. This was the starting signal for the blockchain technology and the access to a new financial market.
In the meantime, up to 12500 cryptocurrencies have more or less established themselves on the market and thus take a market capitalization of between 2.5 - 2.9 billion US dollars. In addition to many currency, so-called tokens (currency without its own blockchain), other currencies, such as Litecoin (#LTC) or DigiByte (#DGB) incl. their own technology, have now also established themselves in the blockchain ecosystem and are striving for a decentralized currency system.
Blockchain technology is a decentralized transaction protocol between at least two or more parties. Every change is recorded transparently and recorded in a digital log (cash book/ledger). What makes blockchain special is its decentralized nature. The protocol is not located on a single server or computer, it is distributed on countless computers. As a result, no one is the owner of the protocol. Neither individuals, nor companies or authorities can exercise power over the protocol. Instead, every protocol participant has exactly the same options and access rights.
Such a neutral protocol as blockchain is almost impossible to manipulate. The only variant to be able to manipulate it is the majority of the network sovereignty. However, if a participant in the network now owns more than 50% of the distributed data master, manipulation would be conceivable.
Blockchain does not know any administrators or stewards. The majority determines how the protocol is handled. Blockchain transactions are often known as financial transactions. However, they can also be any kind of information. Within a blockchain, every transaction is logged. A transaction can no longer be made invisible.
This transparency is based on a journal of the blockchain, which is tirelessly controlled by the so-called miners. Such a miner checks the stored information block by block and shares it with the network (nodes) of connected participants. In this way, each participant can track what actions have taken place in the blockchain.
In the financial world in particular, the use of blockchain technology is being closely monitored, as far-reaching options for a high degree of automation in financial processes are in prospect here. The topic of "Smart Contracts" is currently a very exciting topic alongside "NFTs (Non-Fungible Tokens)". Smart contracts are digital contracts that have the same security and transparency as classic paper contracts, but are incomparably more efficient and scalable. Smart assets are another great application of blockchains.
If all transactions could be tracked in real time, it would only be a small step to the Internet of Things (IoT) and the mapping of all processes in a blockchain. This could include, for example, goods that a company sends through its supply chain.
A German project that deals with the topic of IoT and networking of supply chain participants is run by the IOTA Foundation. The networking of participants, including exact location, current owner and owner, origin and destination, this opens up whole new insights into the supply chain - with enormous consequences for quality assurance and working capital management.
Digital Identities take the idea one step further. A blockchain could give you a digital identity that virtually links you to your driver's license, social security, etc., making an analog ID unnecessary. In theory, all things that represent a certain value can be recorded as their own units (NFTs) in a blockchain. These value units are thereby given a digital identity and can independently enter into transactions with each other. If you combine these different use cases of a blockchain, it offers far-reaching new possibilities.
If this network of companies, suppliers and customers were to be digitized, where every transaction between the parties could be traced in a forgery-proof manner at any time, then in the long term invoices would no longer be needed. Every transaction would be immediately "notarized" by the entire blockchain network, including verification and validation of the facts. Receiving information two to three months late, e.g. in the insurance sector, would then seem unimaginable.
In summary, it can be said that anyone who starts to deal with the topic even after ten years is still called an "early adopter" today. In addition to the many advantages, such as decentralization and reliability, which are almost mantra-like preached by the supporters, there are currently still weaknesses (energy consumption or limited scalability), which must be addressed promptly in order to increase acceptance. But it is clear that the companies from industry and business have recognized the advantages of the blockchain and are using it for increased efficiency, greater transparency and as a cost saving in their processes.
But blockchain also has the potential to provide access to finance in poor regions and to undermine corruption in various processes. Because there are so many different applications for blockchain, the future of the technology seems assured, which comes with a steady evolution. Looking at the technology as an adolescent, the next ten years will be crucial for its development and its future.
More information on the topic of blockchain can be found in a lecture at Heilbronn University, which is available as a video here.