Blockchain Technology is here to Stay; Scope and Application

Blockchain technology is here to stay. Contrary to what many thought when they started talking about their relationship with cryptocurrencies, we see how today, their approach is totally different and is being implemented in many companies in any sector of activity and in many products and services.

The rise of blockchain technology has been making waves in the media with headlines such as “Blockchain technology slows jewelry counterfeiters,” “Blockchain to detect illegal or suspicious drugs,” & “Create a system with blockchain to control the parts of the automotive industry.” These headlines are not just a fleeting trend, but a sign that the business landscape is changing.

Despite its intimidating name, blockchain technology is accessible to small & medium enterprises (SMEs). However, it is vital that companies seek expert advice before diving into the implementation of this novel technology. Before investing resources in blockchain technology, businesses must consider several factors, including how it works, its potential benefits for their products and services, its impact on the industry, how it can be financed & the potential for the development of new products and services.

Proper guidance & understanding of its workings are vital to its successful adoption & implementation in the business sphere.

It is necessary to establish in advance a phase of analysis that allows offering an adequate answer to the questions that arise when proposing solutions of this nature, before going to the next phase, because, without correct information, it is very difficult to reach a solution fully satisfactory.

In addition, as a starting point, it is really important that companies are immersed in the culture of change. They must be open to the evolution and benefits that it can bring and they must be aware that the implementation of blockchain technology is a before and after in processes and services and that directly affects the professionals who work on it.

All organizational structures, without exception, are affected, so you must work with them, first, through training and awareness and then through the analysis of the results.

It should be clear that any organization can create its own blockchain network and apply it to its production processes, and that we want to see from LAB SEC Blockchain, the first blockchain solutions and services laboratory in our country, with which we seek to raise awareness among companies of the need to work in cybersecurity environments, in addition to bringing to light new tools and disseminating their new uses and advantages.

From our laboratory we align the transformation of process reliability and cyber-vigilance, the core of any technological deployment, hence we clearly bet on the own securing of blockchain environments as well. We must not forget that blockchain provides reliability, while cybersecurity services provide surveillance of the entire deployment of the blockchain, so they both form the perfect match.

We talk about a technology that is boiling and that attracts the attention and investment of governments, companies, startups, and universities.

Scope of Blockchain

But what does blockchain have to offer and thus explain these phenomena? We can say that it is based on three principles:

• Decentralization of value: any person or entity could carry out a transaction of value (money, a good, an asset, a service, etc.) to another person without the need for central or intermediary authority.
• The immutability: the confidence that a transaction or a record that cannot be altered or deleted once written.
• Transparency: not only is it not possible to modify, but also the transactions are visible and verifiable by all the participants that make up the network without the need of a third party, generating a context of trust.

The potential for applying this technology lies not only in the field of economics, but also in politics, with decentralized participation and decision systems, or in legal-administrative ones, facilitating the relationship between citizens and public administration.

Another evolution that incorporates blockchain is that of “smart-contracts”, that is, the use of smart contracts that allow the parties to directly establish self-executed rules and agreements. For example, two people reach an agreement, write the conditions, enter it into Blockchain and automatically the contract is executed in a decentralized manner, in a fully auditable and reliable manner.

Application of Blockchain

Undoubtedly, the application of disruptive technologies, such as blockchain, artificial intelligence or Big Data, opens up a unique opportunity to transform fiscal and tax management. Blockchain has the ability to revolutionize the way information is analyzed, exchanged and stored in tax agencies. It can help reduce costs, increase security, increase access speed and review of taxpayer data.

In addition, through Blockchain, certain current shortcomings suffered by Latin American tax administrations could be improved, such as high levels of non-compliance (evasion and delinquency), low levels of the collection system and lower revenue collection compared to countries that belong to the Organization for Economic Cooperation and Development (OECD).

For governments that seek to adopt modernization measures to reduce the fiscal gap, increase fraud detection and make the operation more efficient, the blockchain potential opens the game to disruptive changes. Some possible application cases are: a digital accounting book platform for real-time access by the collection and auditing bodies to the information of individuals and companies; use of smart contracts for the payment of royalties from real-time records of the extraction of natural resources such as oil or gas; in the payment of taxes on salaries where companies would stop acting as intermediaries in the calculation and withholding of taxes, change the way of collecting VAT with a traceability of transactions that allows reducing fraud.

An intense legal and regulatory debate is pending. This is fundamental because the legitimacy through regulation is what will enable greater investments, the evolution of technology and, consequently, real applications in the private and public sphere. So, we can say that based on the potential of technology, there are many areas of application that would reduce bureaucracy, collection costs and help reduce the fiscal gap. This does not mean that blockchain is the cure for all evils and neither is the solution for all the problems of modern tax systems, but that it is innovative technology in maturation. For instance, bitcoin as the largest blockchain network is capable of processing only a portion of the number of transactions per second of a private system such as VISA.

Governments need to be able to respond to the new challenges and demands of society quickly, efficiently and effectively, as well as accompany legislation and transform their way of providing services by incorporating technological innovation into their operation.

Creation of cryptocurrencies

The case of Bitcoin 3 is paradigmatic as proof of the Blockchain concept. It was created with the publication in 2008 by Satoshi Nakamoto, pseudonym of the author or authors of the seminal paper ” Bitcoin: A Peer-to-Peer Electronic Cash System “, in which the question of the verification of independent transactions between two was resolved entities through a cryptographic system.

The smallest unit of Bitcoin is Satoshi, with a value of 10 ^ -8 bitcoins, notwithstanding that in a context of payments transactions of greater granularity are made using spikes and rounding.

In the creation of Bitcoin, a limit to the number of bitcoins, specifically 21 million, as defined in the Genesis block, which makes it a deflationary currency. The extraction or mining of bitcoins is an algorithmic resolution process that provides the main characteristics of the system (consensus and inalterability). This process is of diminishing return since, as the chain grows, more computing capacity is required to obtain the same amount of bitcoins. For this reason, in addition, we could consider it a crypto-raw material, more assimilable to an exhaustible natural resource. It is estimated that by 2036 99% of bitcoins will have been mined.

Although Bitcoin is the paradigm of criptomonedas, other as ethereum, even greater potential range, and a wide variety of criptomonedas lower. A phenomenon of maximum interest that has arisen around the creation of cryptocurrencies is the ICO ( Initial Coin Offering ) in which newly created companies offer the public the purchase of their own cryptocurrencies (called tokens in this context) to finance the project. These tokens act in practice as equity, without the majority of their rights, so the phenomenon is subject to severe scrutiny by regulatory bodies and has been banned in some countries.

Smart contracts

Technically, Bitcoin in a very particular and simple case of a smart contract: a set of rules organized in a specific system to carry out currency transactions between two or more entities, reliably and pseudo-anonymously. The smart contract is the generalization of this concept to program any kind of logic using blockchain features and procedures.

In practice, a materialization of smart contracts are the versions of commercial contracts -or other types- traditional converted to codified systems, based on blockchain, and where all the conditions related to the contract are checked against external online services. Contracts have the possibility of launching events when a transaction reaches a certain place. These normally constitute the exit, registration or termination of the contract or of the goods or services related to it.

With smart contracts, any asset or value found in a blockchain system can be guarded and transferred according to a series of objective rules. All those terms of a traditional contract that can be reflected through logic (objectification) can be executed autonomously and independently.

The implications of smart contracts over traditional contracts are extraordinary: the elements of subjectivity and subsequent litigation are eliminated to replace them with logic and security pre-built in the contract. They are independent of jurisdictions and languages and are executed without recourse. In return, they are more rigid and inflexible and require more work for their construction.

For example, smart insurance contracts are currently being used, for example, that is capable of recognizing the location of a claim and the time it occurs and determining whether payment is due, how much, and releasing and transferring the funds instantly. Likewise, smart letters of credit have been built that release escrow funds after a shipment reaches or leaves a given jurisdiction, automatically converting to currency and updating the states of other associated smart contracts.

Our Blockchain app development company is here to help., if you are going to implement blockchain technology to enjoy its huge benefits, give us a try. We will guide you through the whole process in the most efficient way.

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