Blockchain enthusiast Matt Swan tested BitBay, a decentralized marketplace, by deciding to sell something valuable, a five-acre parcel of land in Southern California on its platform. The process of listing his property took a few minutes. BitBay has a double escrow, where both buyer and seller deposit a set amount of money into an encrypted account. If either party cheats, deposits are destroyed and both lose their money. The careful process for listing all details on the escrow took Swan several hours. A few days later, Swan found that someone bought his land. More than that, the buyer was located on the other side of the planet - in Norway!
The longest part of the deal was done off the ledger - where Swan mailed the paperwork to the Norwegian for his signature, and the buyer mailed it back for recording.
BitBay is one of the thousands of p2p businesses that run on a decentralized ledger. I chose Snow’s story because it perfectly illustrates how the blockchain technology can be seen as “one of the world’s most important developments,” according to Leon Luow, Nobel Peace prize nominee.
Here’s What the Blockchain Gives You
The BitBay ledger worked on a smart contract system where Swan detailed property and escrow features. The seller paid the money, he received the land. Had Swan or seller reneged on the deal, the smart contract technology would have destroyed their deposits.
In the real world, Person A would be reluctant to purchase or sell high-value items from or to Person B, particularly if Person B were unknown. The blockchain makes such transactions possible through its programmed smart contracts that only release the money once the contract is fulfilled.
The blockchain also guarantees trust by permanently locking data on its ledger and replicating these records between its hundreds, if not thousands, of participants.
“Smart contracts,” said Vitalik Buterin, co-founder of Ethereum, “solve the problem of intermediary trust between parties to an agreement, whether that is between people transferring assets like gold, or executing decisions between two parties in a betting contract.”
It normally takes months for a real estate transaction to close. The process takes more than 20 steps and more than 100 middlemen with different skills and expertise to make sure the buying and selling process goes smoothly. You’d have to fill out heaps of papers that include a Preliminary Title Report, a Seller’s Net Sheet, the Proposed Marketing Plan, Mandatory Disclosures and the Listing Agreement, among other legal documents. Here, the trust quality of the ledger eliminated all those needs, despite the parties living almost 5,000 miles apart!
As said, the mailing process was the longest, since Norway required a “wet signature”. One day, countries could further shorten the procedure by integrating their records on the blockchain. Some are already looking into this.
To take another example of the rapidity of the blockchain, more than 16 million NRIs send remittance home to families and friends, according to the UN department of economic and social affairs (DESA). A mailed check to countries like Iraq or Afghanistan usually takes as long as 14 to 20 days, according to the US Postal Services. Western Union takes one to two days, depending on your receiver's country.
Use the blockchain, and your money arrives in as little as 30 minutes, depending on the transaction fee paid by the sender.
Regardless of whether you do or don't have your own business, smart contracts help you save time when it comes to contractual or legal responsibilities.
Both parties save money by having the platform negotiate their process rather than having to hire middlemen like banks, real estate agents, title companies, escrow agents, notary, attorneys and so forth. In Swan’s case, the process would have been inordinately more expensive and complex given that the other party lived halfway across the world, in a different time zone, with different communication styles and language.
As IBM points out, the blockchain slashes time commitment costs, too.
Some platforms like Jincor make the service even cheaper by providing free arbitration services and free legal help.
If you have a business, blockchain could save you at least $50 billion in B2B transactions by 2021, according to a recent McKinsey report .
Returning to the NRI example, these people leave homeland and families and work hours in foreign lands to send money home, so their wives could buy food and clothing, afford hospital bills, and send their kids to school. Remittance companies deduct 5-7 percent off the NRI's money, Western Union hacks 10% for “ordinary” countries, while it may deduct a huge 15-30% for more remote regions, So, say, you send $50,000 to the isolated island of Tristan da Cunha, your family only gets $1,500.
In contrast, blockchain transactions cost anywhere between four to $42 dollars, depending on your core client. All you need is a mobile phone with internet access and the money arrives in minutes.
Other Blockchain Use Cases
BitBay is one of thousands of decentralized businesses. There are those that deal with digital identity and store your will or birth certificate, among other important documents. Slock rents you bikes once you agree on the contract terms. Blockverify identifies counterfeit goods, stolen merchandise and fraudulent transactions.
Concerned about voter corruption? Votes could be securely transmitted over the blockchain without anyone knowing your identity.
Want to make the world a better place? At least 85% of all humans live in desperate state-controlled economies, where corruption is so powerful that they seem stuck in their poverty forever. Blockchain gives these masses access to the global marketplace.
How about healthcare? Electronic medical records have to be strictly protected under the Health Insurance Portability and Accountability Act. Unfortunately, they are often hacked, so blockchain is a safer choice.
Accounting? Blockchain security makes the platform perfect for record management, cash management, credit risk management among other financial services, in that it prevents duplicates, fraudulent entries, and the like.
And business? According to Nick Ayton, CEO and founder of Chainstarter, the ICO platform for entrepreneurs, “Blockchain technologies can, if used correctly and in the right way, reduce processing costs by at least 40%.”
These savings sound magical for anyone. For those born into poverty, the blockchain may be one way out of their hopelessness.
Small reason, then, that William Mougayar, General Partner at Virtual Capital Ventures, an early stage tech fund, calls the blockchain not “just a revolution. It is a tsunami-like phenomenon, slowly advancing and gradually enveloping everything along its way by the force of its progression.”
We’re living in thrilling times, friend, and blockchain sets you squat on the threshold of a new future.