Cryptocurrencies and blockchain technology have often been used synonymously over the last years. As businesses discover more blockchain applications, the focus has shifted from cryptocurrencies to blockchain technology. Rightly so, but that doesn’t mean cryptocurrencies have become irrelevant.
According to Google search data, “blockchain” is now more popular than “crypto”.
The first time “blockchain” briefly overtook “cryptocurrency” was in July 2018. And it has consistently attracted more searches than “cryptocurrency” since September 2018.
The renewed industry mantra is: Forget about Bitcoin, blockchain is what really matters.
That’s not entirely wrong. The real innovation of Satoshi Nakamoto was a decentralized and distributed ledger. Cryptocurrencies are just one of many use cases.
For the last decades, companies have been using databases to store and manage data. That works well, but databases have one major disadvantage compared to blockchain technology: They are centrally managed by one single authority. Thus, this central entity has power over all of the data and the datacenter is more prone to cyber-attacks.
Satoshi’s brilliance was to design a distributed p2p network that is based on a consensus principle and thus forms a trustless network. This means the network could govern itself, without the need for a third party.
By eliminating the need for a middle-man, this technology can give more power to the user. It can reduce transaction costs and increase revenues. It can enhance transparency, improve data security and data privacy.
There are various use cases for blockchain technology in business, government and the non-profit sector.
Banks could apply blockchain technology to digitalize securities trading. This in turn could reduce transaction costs and increase transaction speed.
Blockchain technology could increase supply chain provenance and efficiency. All data such as the origin of goods and raw materials could be stored directly on a blockchain and made available to end users.
Parties in real estate transactions could store documents on trustless blockchains and hold the transaction funds in an escrow account. Blockchain-based smart contracts could ensure the transaction gets executed once certain contract criteria have been met. Thus, there is no need to pay agency commissions or expensive lawyers anymore.
Digital identities could store professional credentials, financial transaction histories and even medical histories.
Governments could use blockchain to fight corruption by increasing transparency and even introduce blockchain-based voting.
Blockchain is no all-around solution
Blockchain is still relatively new and untested. And as everything, it comes at a price.
Currently, the biggest drawback to using blockchain, especially public blockchains, are high transaction costs. Public blockchains like Bitcoin mostly use POW protocols and are slow by design.
But POW or not, any permission-less blockchain will have to deal with scalability and performance issues. In order to maintain the distributed state, all nodes need to communicate with each other. That consumes an enormous amount of power. For now.
So, with all of that said, the question whether it’s blockchain or Bitcoin that matters, is formulated in the wrong way. Both matter. But there is no Bitcoin without blockchain. Cryptos are just one of many use cases of the technology.