What’s behind blockchain technology? How do cryptocurrencies and the blockchain interact? What are the benefits of combining Artificial Intelligence (AI) and the Blockchain in the business world? In this blog post, you’ll get an overview of the Blockchain and learn why fiduciary companies should look into the trending technology.
Dubious, insecure and too often abused by criminals? Blockchain and its use cases still enjoy a dubious reputation among the general public. This is also noticeable in the trust industry. While more and more fiduciary companies are recognizing the value of artificial intelligence (AI) and fiduciary software and using them in their day-to-day work, blockchain technology is met with rejection by a large proportion of fiduciaries. Blockchain is too strongly associated with faltering cryptocurrencies and shady deals. What is blockchain and what is it used for?
There are several definitions of blockchain accepted by technology and network experts. These definitions have in common that the blockchain is a use case of distributed ledger technology (DLT) and is characterized by decentralization and the network idea. All DLT subtypes – including the blockchain – function in a decentralized manner, continuously synchronize transactions and entries, and offer a high level of protection against unauthorized third-party access.
What does the blockchain have to do with cryptocurrencies like Bitcoin?
With the blockchain, it is possible for the first time to verify transactions in a trustworthy and transparent manner without a central authority. This makes the technology so popular among developers and traders of cryptocurrencies such as Bitcoin, Tether, Binance Coin or Dogecoin. According to the German Federal Office for Information Security, a cryptocurrency is “a digital means of payment based on a blockchain system.” With cryptocurrencies, participant:s transfer funds in the form of computer code. These transfers are documented by a cryptographically signed transaction in the blockchain.
The blockchain thus lays the technical foundation for cryptocurrency trading. Crypto transactions via the blockchain take place quickly, transparently and without intermediaries such as banks or credit card companies. The verification of crypto transactions is carried out by the computers in the blockchain. Only those who have the appropriate signature key can carry out a valid transaction. An abstract address or account number represents the recipient:s of transactions, allowing cryptocurrencies to be used under a pseudonym. The transactions are monitored and recorded by so-called miners, who buy the right to create new blocks and extend the blockchain with large computing power.
Blockchain technology has these advantages
Cryptocurrencies are arguably the best-known blockchain use case today and have contributed to the decentralized technology’s controversial reputation. However, the potential of blockchain is far from limited to digital currencies. To better understand Blockchain’s areas of application, we need to highlight its key features. In summary, the blockchain is characterized by the following:
- practically unchangeable data
- transparent and traceable transactions for all users
- decentralized and consensual data storage
- faster and less complicated transaction processing
- increased security through strict verification processes
- fewer errors due to the automation of processes
Healthcare, logistics and education: How companies use blockchain in everyday work
Successful blockchain case studies outside cryptocurrencies are already known from numerous industries or are currently being planned. In healthcare, for example, blockchain can be used to securely store sensitive data. Patients with a blockchain account number can use signature keys to provide their doctors with an insight into their decentrally stored medical records, which are protected by algorithms.
In logistics, supply chains can be documented transparently and efficiently using the blockchain. All parties with a signature key can track shipping data, the current status of approvals, information on shipping documents, and sensor data on containers such as weight or temperature in real time. Decentralized storage prevents tampering and helps prevent smuggling.
In education, the blockchain opens up new opportunities for universities and colleges to issue forgery-proof diplomas and certificates. The educational institutions store the documents decentrally on the blockchain and provide their graduates with signature keys. In the application process, the alumni can share the signature keys with potential employers who, thanks to the forgery-proof storage of the diplomas, can be certain that the applicants have successfully completed the relevant university or college. This eliminates the need for printers and paper, official certification, and the often time-consuming and costly mailing of original documents.
Blockchain can also open up new opportunities and possibilities for fiduciary companies to make their business model fit for the future, to make work processes more efficient, to bring more transparency to collaboration with customers and to meet changing customer expectations. Want to find out what potential new technologies like blockchain hold for your fiduciary business? Get in touch with our technology experts specializing in the fiduciary industry.
This is what the combination of blockchain and artificial intelligence (AI) brings
Artificial intelligence (AI) is another important technology trend that fiduciaries should no longer ignore. AI uses computers, data and sometimes machines to replicate the problem-solving and decision-making capabilities of the human mind. Among other things, the technology makes it possible to automate repetitive tasks. Modern fiduciary software is usually based on AI and can thus relieve fiduciaries:in of as many tasks as possible. For example, AI can search for and extract all data relevant to an accounting record from invoices or contracts.
The targeted combination of AI and the blockchain supports process optimizations and lets financial companies work both more effectively and more efficiently. “Blockchain and AI are transforming the financial services industry by enabling trust, removing friction in multi-party transactions, and accelerating transaction processing speeds,” concludes IBM’s blockchain and AI dossier. For example, AI models can use smart contracts executed over the blockchain to trigger transactions such as reorders, product recalls or payments based on set parameters, and resolve disputes.
In the next blog post in the blockchain series, we will highlight specific examples of blockchain use in the trust industry.
