Five Main Principles Behind Blockchain Technology Part 11

Examples.

 

With blockchains, all the information could be stored on a blockchain network, be it about real estate, cargo or designer clothing. This means that the processes could be automated in a way that was unthinkable before blockchains, in a way that is more efficient, fast and inexpensive in the long run. Imagine not having to hire an attorney to look for records about a property or not having to collect a ton of paperwork to submit with an insurance claim and having all the records whenever you need them on a blockchain, stored in a secure and immutable way.

 

A real estate example

For example, with real estate a property could have a unique identifier on a blockchain similar to a profile of a user on a regular social network. Then, this profile would either have data about the property linked to it or have entries about the existence of records. This way, when buying a property, a person or an organization would at least know how many records about the property are out there and the search and discovery process could be much more efficient than it is today. Another option would be to store all the information on a blockchain and just like today you can enter a bitcoin address and see all the transaction for the address in real time, you’d be able to enter an identifier of a property and see all the records about the property on a blockchain network.

 

A supply chain example

It could work in a similar way with cargo and supply chains. Whenever cargo changes hands, be it getting from the point of origin onto a ship or a truck, the blockchain could receive an update. Today, companies such as FedEx and UPS do have update systems that are very efficient. However, these systems are internal FedEx and UPS systems and the companies have full control over them. With blockchains, companies could monitor the movement of cargo even when they do not trust each other because with a blockchain network the records would be immutable and would have timestamps that all parties would trust. This trust would a part of the design of the network and would work in the similar way to peer-to-peer transactions on cryptocurrency networks.

 

The real accomplishment of the blockchain technology: solving the issue of trust

For instance, the Bitcoin network is decentralized and secures the blocks of the blockchain, but what ultimately matters is that people trust that the Bitcoin network would not suddenly change the history of transactions or add several million coins into circulation. This is why they choose to engage in transactions on the network and keep their money in Bitcoin and other cryptocurrencies.

 

Smart contracts with token deposits

A smart contract on a blockchain network can contain tokens that both parties deposit to increase the level of trust in case the parties do not trust each other. Typically, when you pay for storage today, be it storage of electronic files or storage of property, you pre-pay and then you get access to the storage you wanted. If something happens to your property and there is a dispute between you and the provider of storage, you have to contract your credit card or bank and reverse the payment or file claims trying to get a payment from an insurance company.

On a blockchain network, this process could work much more efficiently. A smart contract could collect information and submit an insurance claim to an insurance company automatically. There would be no need for a person to be collecting various paperwork because the blockchain would have all the data stored on it already.

Another way would be for both the client and the provider of service to deposit funds into the contract. This way if something happens to the property in storage, be it digital property such as files or physical property, the contract could return money to the client that the client has paid and charge the provider a fine that would also go to the client. This way, providers of service would have both positive incentives and negative reinforcers that will motivate them to deliver the service that they promised. At the same time, the service will be much cheaper than a comparable service from a typical centralized provider.

 

Sia as an example of a decentralized marketplace with funded contracts

This is what is already happening on blockchain networks offering file storage, such as Sia. First, Sia recommends that clients buy storage from several providers. This way, if one of the providers goes offline or experiences hardware issues, the client would still have access to the files. Second, providers of service on the Sia network self-select the reliability of their service. The more reliable the service, the higher the fees that the providers can charge for it. It may seem that in this scenario all the providers would claim that they provide service of high reliability, but this doesn’t happen because providers have to deposit a fee and pay a fine in case something happens to the files. When providers claim that the reliability of their service is high, the penalty for not delivering the service is also high. When a provider self-identifies as a provider of low reliability service, the fines in case something goes wrong are also very low. This way, providers are motivated to honestly describe the services they provide and clients can choose from a variety of providers and go with a high reliability option and several low reliability options at the same time if they want their files to have several backups and have highly secure storage at an affordable price.