Since their launch, supporters of cryptocurrencies have debated their use as an investment versus their potential as a means of payment. Recently, in fact, they have been discussed as the new safe-haven asset for investors, a position historically occupied by gold. Despite this, some authorities have already warned investors about the multiple risks of these products. However, the versatility of cryptocurrencies has been of great help to many sectors, not just the financial one.
The development of the underlying technology (decentralized networks or DLT) has brought forth a large number of use cases in multiple industries. Furthermore, their ease of integration with new technologies like the metaverse opens up many more possibilities for use. This suggests that these assets can have great utility for society beyond their validity as investments. In this article, we will showcase some of these applications, mainly related to:
- Financial services
- Public sector
- IoT (Internet of Things)
- Legal services
When we talk about DLT networks in the financial services industry, we are not only referring to the creation and trading of cryptocurrencies. Clearly, this use case has had the greatest impact in terms of dissemination. However, this technology allows for much more. Let’s consider its characteristics: decentralization, speed, privacy, and security. The entire financial industry has processes in which some or all of these features are necessary in the value production chain.
From the issuance of remote transfers and payments to the complete digitization of issuing, contracting, and settlement of operations involving almost any type of financial asset, we find many examples of this type today. In this regard, companies such as ASX (Australian Securities Exchange) or Visa have strongly embraced the incorporation of DLT into their businesses. In the case of Visa, with Visa B2B Connect, they have promoted the creation of international corporate payment platforms.
If we enumerate some specific use cases, we can see the enormous impact cryptocurrencies have had on this industry:
- Creation of new financial products associated with cryptocurrencies (ETFs, options, futures, etc.).
- Emergence of new business models (cryptocurrency mining, cryptocurrency exchange platforms, wallet design, etc.).
- Substitution of cash with cryptocurrencies for micropayments, remittances, or even as an official means of payment.
- Use of DLT for the creation of digital currencies by major central banks worldwide.
For all these reasons, the financial sector is undoubtedly the industry most benefited by the advent of cryptocurrencies. However, not all companies have adapted to the change at the same pace. Doubts about the regulatory framework, among other things, have made banks, in particular, be especially cautious.
Another very clear use case is focused on the public sector. The enormous amount of data managed by public administrations needs an efficient data management system. In this sense, having a blockchain managed by the public sector may contradict the initial idea of cryptocurrencies, but it can undoubtedly be a fast and secure way to manage our data.
Imagine if every citizen had a registered identifier on the blockchain that could be used to initiate any administrative procedure. This identifier would allow anonymity for each person while identifying them to the government. Payments for fees could be made on the blockchain, all necessary documents could be uploaded, audits could be conducted, and so on. Everything would be recorded and easily integrated across different administrations. The advantages for citizens are endless.
However, reaching such a scenario is not straightforward. The technological level of administrations worldwide is far from being able to achieve this situation. First, it is necessary to provide the technology with an appropriate legal framework, and then a secure, robust, and efficient system needs to be developed. Additionally, the entire current system would have to be migrated, which is not an easy task. Therefore, it is unlikely that we will see this type of development on a large scale in the short term. It will take several years to reach such a situation, although the scenario is undoubtedly promising.
IoT (Internet of Things)
So far, we have not mentioned one of the great achievements of DLT systems, namely Smart Contracts. In fact, they arguably represent the most differentiating factor of this technology. Smart Contracts are “self-executing” when certain events occur. This allows, for example, when a car passes through a toll, an implicit “contract” in the system is activated, and the corresponding amount is instantly paid without tickets or cashiers (similar to Via-T services). This blockchain-based electronic toll collection service is already being explored by companies like Bip&Drive.
For this to happen, the car needs to be integrated into the network, and that’s where the Internet of Things (IoT) comes into play. We already have devices connected to the internet, from mobile phones and televisions to appliances and vehicles, among others. When that connection becomes more universal, integration with DLT networks will be much simpler. In this regard, there are already several projects, some of them significant, such as Siemens’ open IoT system called Mindsphere, which uses this technology for the traceability of products throughout their lifecycle.
With the combination of IoT and oracles, it is possible for Smart Contracts to receive information from outside the blockchain. Therefore, their execution can be linked to the information received by these oracles. These Smart Contracts already exist on multiple platforms and have been developed in various cryptocurrencies. However, their presence in the business world is still limited.
Another sector affected by cryptocurrencies, and also related to Smart Contracts, is the legal services sector. Let’s remember that DLT networks were originally intended to provide validity to transactions in the absence of a trusted third party. This is actually one of the basic functions that lawyers and notaries often perform. By utilizing decentralized systems, automation in certain types of contracts can streamline many processes, reduce costs, and provide similar legal validity.
Furthermore, the immutability of stored records can serve as evidence afterward, which is extremely useful in this sector. Interesting projects have been developed in this field by multiple law firms in Spain (such as Cuatrecasas or Pons IP) and worldwide (such as Ernst & Young) that offer solutions related to patent registration, intellectual property rights, trade secret registration, and more.
However, arguably the biggest challenge for the legal sector is precisely the treatment of this technology. Countries worldwide are analyzing how to handle smart contracts and determine their validity. If we add to this the debates on the creation of official digital currencies like the euro or the dollar, then the legal risks multiply. Before this sector can truly benefit from this technology, it must help define its boundaries. In this regard, regulations like MiCA are the first step of many that still need to be taken.
Entertainment is undoubtedly another major beneficiary of the arrival of cryptocurrencies and blockchain technology. On one hand, this technology allows for the development of the entire NFT industry. Non-fungible tokens function as collectibles that can be used in virtual games. Additionally, many of these games even allow for redeeming rewards in certain cryptocurrencies. In fact, there are multiple games that enable earning money based on the use of this technology.
On the other hand, we have the relationship between cryptocurrencies and the metaverse. The metaverse represents a new creation that promises to transform multiple sectors of society, much like blockchain does. If the metaverse can be understood as a digital universe, there is nothing that fits better than a virtual currency. The synergies between both inventions are yet to be fully exploited, but it is clear that the potential is very high.
Last but not least, we have the healthcare sector. This sector, depending on the countries, almost always involves both public and private institutions. Additionally, due to the nature of the information it handles, data privacy is a fundamental requirement. Not all technologies are equally valid in this regard.
Blockchain in the healthcare sector In this sense, blockchain can be a very interesting alternative. Similar to the public sector, this sector needs efficiency and privacy in information management. Furthermore, interoperability is required so that pharmacies, hospitals, and any related institution can access data quickly and securely. Therefore, some of the advantages that blockchain can offer in this sector are:
- Creation of a unique medical history for each patient
- Greater interoperability among medical institutions
- Improved traceability of medications from production to final sale
- Enhanced security of medical data
- Improved access to research and clinical trials
Despite the multiple advantages, the use of blockchain in this sector is still limited. However, multiple companies are developing applications to bring the technology to the sector. Here are some examples.
To sum up, there are many areas where DLT networks and cryptocurrencies can be useful for society. The growing number of solutions aimed at facilitating and reducing costs while maintaining efficiency is the best evidence of this.
This also means that we are facing a new scenario in which many traditional systems will need to adapt. Some processes will be replaced by new ones, as is always the case when a new technology disrupts an industry.
It is clear that not all of these solutions will have the same success or be equally accepted. Similarly, the potential of this technology may be lower than expected. However, if blockchain technology ultimately achieves the predicted success, the pioneering companies in each sector will undoubtedly be the most benefited.