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What Is Blockchain 2.0, And What Does It Mean For You?
Tuesday, 24 August 2021
Since the blockchain was launched in 2008, no other technology has been subject to much debate, criticism, and enthusiasm. Even if you fall into the critical category, blockchain and cryptocurrencies’ impressive rise and adoption cannot be disregarded. In 2021, a growing number of small, medium, and international businesses accept cryptocurrency payments for goods and services. Microsoft, Whole Foods, Starbucks, and a significant number of airlines accept bitcoin and other cryptos as a form of payment.
Blockchain has also been presented as a solution to many business issues, including preventing fraud, authentication, supply chain management, and the automatization of processes. While uptake is mainly limited to more prominent companies, figures show that many are considering blockchain solutions and are ready to invest.
We are transitioning between Blockchain 1.0 and Blockchain 2.0. This will see further development of the technology and the prominence of business applications built on the blockchain. Potentially, these technologies could knock blockchain-based payment apps off their perch. We will also see tech companies expanding their offerings up the technology chain, creating more blockchain-based tools and platforms. This will result in the deployment of technologies becoming less expensive or complex, thus encouraging more companies to get involved.
So, what is Blockchain 1.0?
It’s no surprise that most associate blockchain with cryptocurrency. After all, it was created to power bitcoin. Up until around 2014, blockchain was just used for crypto transactions, but after then, private companies have been looking at other use cases. Some are still in the development or pilot stage and have not quite made it to Blockchain 2.0.
In 2009, Bitcoin was launched, and it was first used commercially one year later. People were initially sceptical of it, but over the years, acceptance has increased. New cryptocurrencies have emerged, and users have been buying, selling, trading, and transacting with various coins. As of the end of 2020, there were more than 1,500 other cryptocurrencies available.
To put it simply, Blockchain 1.0 is about crypto, payments, and transactions. It is also about cryptocurrency miners and token offerings. It represents the use of blockchain for its initial purpose- transacting units of value, and considers other applications as ancillary. While this use case will continue and remain, it is likely to be eclipsed shortly.
Uncertainties about crypto will remain, but adoption will increase. The launch of several central bank-backed currencies like a USD coin and a digital Yuan will further alleviate concerns. There will always be a place for crypto and the blockchain that powers it, but Blockchain 2.0 is about expanding the scope.
What is Blockchain 2.0?
The era of Blockchain 2.0 will bring with it many changes. The virtual currency sector will continue to expand as the value of Bitcoin increases. Furthermore, there will be interest in other coins aside from bitcoin, depending on the transaction being made. The sensitization to cryptocurrency will likely see more usage and transactions amongst the general public. But 2.0 will mainly be about other use cases. Business applications will come to the fore as the demand for such software and solutions rises. Once Blockchain 2.0 is established, we will see it surpass the needs that cryptocurrency miners once had.
A good indicator of the things to come is the sheer amount invested in blockchain by venture capitalists. During the first half of this year, investments in blockchain have surpassed the whole of 2020. Almost 500 deals took place in just six months, with nearly $17 billion pumped into the sector.
These figures are impressive and demonstrate growing confidence in the blockchain. The majority of these deals have been with companies providing blockchain services. Whether it’s personal finance and banking, transaction facilitation, wallets, or other innovative technologies, it appears this is where the future lies.
We also expect to see a proliferation of blockchain in use cases like managing medical records, insurance, research and education, and even voting. The integration of blockchain removes the need for intermediaries and decreases the financial burden of administration. In the long term, blockchain will be rolled out in fraud management, onboarding, AML/CFT compliance, and even the protection of copyrights. It’s already widely used in logistics and supply chains, saving millions if not billions every year.
Another element of blockchain technology expected to flourish in Blockchain 2.0 is the use of smart contracts. Pre-programmable self-executing contracts can significantly reduce administrative burdens and workforce hours for many companies in numerous sectors.
The emergence of blockchain business apps will also result in lower costs and easier integration. For example, The Linux Foundation has created an open-source blockchain project called Hyperledger, which makes solutions for various vertices. The process has been further simplified by using BaaS, which simplifies creating a blockchain, doing away with the complex five-layer stack. This makes developing blockchain solutions much more affordable for enterprises.
Why should Blockchain 2.0 interest me?
Blockchain 2.0 is fast, cloud-based and friendly. It’s also practical, efficient, and SaaS-based. It provides increased trust and is built around a shared ledger with transparency at the core. It also has considerations for compliance and emerging regulatory frameworks. Blockchain wants to work alongside regulators, not against them. As such, the blockchain is being used to enhance compliance across a variety of sectors.
The opportunities provided by this space right now are akin but vaster than when the internet first launched. Yes, there are kinks and issues to be worked out. Yes, as the technology develops, it will become more accessible. And yes, there is still work to be done. But it’s possible to integrate blockchain technology to optimize your business processes or create a company that offers blockchain-related services.