Blockchain technology has come a long way since its creation to exchange bitcoin in 2009. There appears to be a new development in the blockchain space every day, and some of these developments may be useful for your business in the future. In this article, we highlight five developments in blockchain technology that you should follow in 2022.
1. Smart Contracts
Let us start with the most popular application of blockchain technology – smart contracts. Smart contracts are computing programs built on blockchain platforms like Ethereum, which run upon satisfaction of certain predetermined conditions. They are primarily used to automate agreements between two parties without delay or intervention from third parties.
The possibility of smart contracts seems endless and stand to disrupt areas like the legal and insurance sector and financial services. The development of the Internet of Things, which can help feed data from the real world to the blockchain to execute a smart contract, has significantly aided the development of this area of contracts.
2. Decentralised Finance
Decentralised finance, or DeFi for short, is an alternative system of financial applications built on blockchain platforms. These applications allow the users to transfer, trade, borrow and lend cryptocurrency. These transactions will not require intermediaries like a bank or brokerage firm. Instead, they will be verified and approved through peer-to-peer authentication, the same way transactions on blockchain technology usually are. This means, while we will require human input during the development and deployment stage of decentralised finance, these systems will eventually operate without human interference. If bitcoin is the decentralisation of money, decentralised finance may disrupt the whole financial system.
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3. Tokenisation
Everything is being tokenised now. Tokenisation entered the mainstream through the popularity of non-fungible tokens or NFTs. GIFs, memes and digital artwork are all traded as NFTs, and they are increasingly becoming an asset class of their own right. Another area of tokenisation to watch in 2022 is real estate. Real estate tokenisation divides real estate ownership into small pieces through a process called security token offering. These small pieces or tokens are then traded, similarly to how shares in a company are bought and sold. Tokenisation of real estate has the potential to make entry into the real estate market a lot easier.
4. Remittance
International money transfer, or remittance, is expensive, and the cost often falls onto those who have the least financial resources. After all, those who work overseas often must transfer money to families back home. According to the World Bank, the countries that receive the most remittance are India, China, Mexico, the Philippines, and Egypt. However, the transfer fees to send money can be up to 9% of the total amount. This, coupled with the fact that family members send money regularly, means that the migrant workers spend a significant amount on fees over the years.
The underlying issue here is the charge levied by the middleman who facilitates the transfers. One key feature of blockchain technology is removing the middlemen and enabling peer-to-peer authentication and money transfer. Therefore, we can leverage blockchain technology to facilitate money transfer without involving the intermediaries that charge hefty fees. Many start-ups are using blockchain to provide a better remittance service, which could be an area to follow in 2022.
5. Regulation
Regulation is arguably the most significant development to follow in 2022. While the business sector has embraced blockchain technology and its potential, regulators worldwide have struggled to provide a robust regulatory framework for blockchain technology. The lack of clarity on how the law will regulate blockchain technology applications has delayed adopting blockchain technology, especially at an institutional level. It has also prevented the full realisation of many of the applications of blockchain technology. The regulators are starting to get active in setting up the required legal framework, and it will be interesting to see the approach regulators take to governing blockchain technology.
Key Takeaways
Blockchain technology is one of the most exciting creations of the 21st century, and its potential seems endless. Five developments in the blockchain technology space to watch in 2022 are smart contracts, decentralised finance, tokenisation, remittance and regulation. If you have any questions about blockchain technology or how you can implement it within your business, contact LegalVision’s Legal Transformation lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Question
Blockchain is a distributed ledger technology. It creates an online database where peer-to-peer authentication approves and verifies transactions. Each approved transaction is recorded on a digital and distributed ledger.
Blockchain technology has been developing quickly into many areas that can help your business. For example, smart contracts can increase efficiency in your business. Regulators are creating the legal framework for this technology so that your business can take advantage of it in the future.
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