Bitcoin popularized the concept of blockchain and decentralization. In the early years of Bitcoin, all of BTC’s early supporters thought the blockchain was a revolutionary technology. And yes, it actually is. While blockchain has its own critics, but most people agree that blockchain has a very big potential to change our world.
From supply chain to remittance, from DeFi to fundraising. The blockchain undoubtedly has integrated itself into our digital world. Do you want to know how blockchain is able to reshape our world? Well, let’s find out together.
One of the biggest use cases for blockchain is definitely remittance. Cross-border transactions have been the oldest use case of public blockchain and cryptocurrency. Since the creation of Bitcoin, many people have been using cryptocurrencies to transfer money overseas. Unlike wire transfer that needs several business days, bitcoin transaction only takes 15-45 minutes to complete. If you use a speedier altcoin, you can even expect much faster confirmation time.
One of the biggest remittance players from the crypto space is Ripple. Ripple has this platform that they call RippleNet and it’s utilizing the cryptocurrency XRP for remittance. It is trying to compete against SWIFT, the status quo in the remittance business. By utilizing XRP, RippleNet can move money across the border within seconds. It doesn’t need 1-2 business days just to see your money in the recipient’s bank account.
It is able to do so by leveraging XRP. Let’s say you want to move money from the US to Mexico. RippleNet’s banking partner will convert your fiat (USD) to XRP and then this XRP will be transferred to RippleNet’s partner in Mexico and it will be automatically converted to Mexican Peso. And because the whole process is done within a matter of seconds, the price volatility of XRP can be suppressed.
Other than XRP, there’s also Stellar (XLM). Through its cooperation with the tech giant IBM, Stellar is the base technology of new remittance platform called IBM Blockchain World Wire. And just like RippleNet, it is trying to take aim at SWIFT. IBM Blockchain World Wire leverages the Stellar blockchain to move money within seconds. They (IBM and Stellar Foundation) are confident that central banks will eventually issue their CBDCs (Central Bank Digital Currencies) on top of Stellar blockchain in the near future.
DeFi (Decentralized Finance)
Another strong use case of blockchain technology is DeFi (decentralized finance). Since the inception of Ethereum in 2015, the blockchain use case has expanded from a simple value transfer machine to more variable use cases, thanks to the addition of smart contracts.
Smart contracts basically are the automaton of contract rules through hard codes. Once they are deployed, the rules can’t be changed anymore. The good thing about smart contracts is that they are publicly auditable. Everybody can check the rules inside each deployed smart contract. You know what you are getting yourself into once you interact with a specific smart contract.
Smart contracts enable the blockchain to tap into different niches, such as decentralized gaming, decentralized gambling platform, and, more importantly, decentralized finance or DeFi. Without doubt, DeFi is the biggest thing in crypto space right now, with billions of dollars worth of crypto assets being locked into major DeFi protocols.
DeFi basically works just like traditional finance but everything is automatically executed through smart contracts. Just like traditional finance where you can lend or borrow, you can also do the same with DeFi. But because DeFi uses smart contracts, there’s no third party (banks or middle-men) that would approve or take care of your collaterals, loans, or lending process. Everything is done instantly and automatically once you choose to interact with smart contracts.
These DeFi protocols became very popular in 2020 due to their liquidity mining ability. Liquidity mining allows lenders and borrowers to earn rewards in the form of DeFi tokens proportional to the amount of money they borrow or lend into the same protocol.
Apart from DeFi and remittance, blockchain technology is also transforming our supply chain and fundraising industries. We will get into them in our part 2 article.