There’s zero doubt that blockchain is one of the hottest tech buzzwords in the last few years. It’s likely the next big disruptive innovation and the sector’s seen tremendous growth in recent capital inflow. However, that entire space is far from homogenous in terms of what’s happening inside and what’s driving this growth. With all its promises, blockchain is still in its infancy and people are diligently searching for the perfect use case. 

Decentralized finance (DeFi) has taken the lead and seems to be on the right track to create lasting tangible value. Let’s see how decentralized finance works and what to expect in the cryptocurrency and blockchain playgrounds in the near future.

What is Decentralized Finance (DeFi)?

There is no one true textbook definition that can summarize decentralized finance without opening the floor for additional debate. Regardless of that, the principle behind DeFi is quite familiar and not too complex. Decentralized finance is actually an umbrella term that covers many  projects exploring new applications and mechanisms in borrowing and lending.

Ages ago, we invented currency to help us exchange goods and services more efficiently. The infrastructure for issuing various types of currencies has converged relatively recently into what we call central banking. However, central monetary authorities and commercial banks have displayed a stubborn tendency to periodically break public trust. They can also sometimes operate against public interest and wield massive influence in the allocation of financial resources in suboptimal ways. Moreover, when people invest through the current financial infrastructure, their assets go through various intermediaries. This increases both the final transaction cost and the associated risk, leading to lower overall yields and high rigidity.

DeFi aims to disrupt traditional finance and create compelling value for its users by cutting out the middleman. It also strives to create new types of unconventional financial and insurance derivatives which would give people increased financial liberty. Make no mistake – for the time being, DeFi is certainly reliant on standard everyday fiat currency (primarily the USD). However, the surge in crypto and blockchain activity is expanding the field of interaction for new financial pioneers. Additionally, one of the biggest promises behind DeFi is its wide accessibility, which will democratize access to capital for individuals. The only technical requirement for conducting a transaction would be a device with internet access, which is already standard practice. 

How Does Decentralized Finance Work?

Practical implementation of decentralized finance is heavily reliant on smart contracts, whose nature and mechanisms we’ve mentioned before. The fundamental goal behind it is cutting out the middleman, and DeFi accomplishes this through smart automation. Self-executing contracts with clear triggers represent the primary tool which DeFi utilizes to conduct, verify and record transactions. When two sides engage in any contractual obligation (e.g., the lender-borrower relation), smart contracts can validate mutual fulfillment infrastructure where all of this happens runs on blockchain technology and is leveraging cryptocurrencies to facilitate transactions. 

The basic token and blockchain of preference for most DeFi projects is Ethereum, the second largest cryptocurrency by market capitalization. Ethereum itself has become rather well-known in the general discourse even outside the world of crypto-enthusiasts. If Bitcoin is digital gold, Ethereum is digital silver. It is a Layer 1 blockchain (i.e. main blockchain), which stores data in an immutable and cryptographically secured manner. However, the rise in Ethereum’s price has made transactions on the main blockchain quite expensive (the so-called price of “gas”). To solve this, developers have created additional protocols and called them “Layer 2“. Layer 2 represents an “off-chain” solution whose main role is to reduce the burden on the primary layer. This, in turn, allows for a much higher volume of transactions per second and reduces costs. 

DeFi also uses tokens known as stablecoins, whose value is fixed to more stable fiat currencies. Their purpose is to integrate security, transparency and rapid execution of cryptocurrencies, while simultaneously reducing everyday price volatility. Combining this should allow people to borrow against cryptocurrencies and enjoy better rates compared to traditional microfinance loans, for example.

DeFi Projects and Trailblazers

A year ago, the estimated sum of all decentralized finance projects was $1 billion. If you compare it to the state of affairs today, you’ll see a 60x growth. Over $60 billion is now dedicated to the development and deployment of a host of Ethereum-based DeFi products. Keep in mind that Ethereum is not the only public blockchain that supports this effort – there’s activity in other realms as well.

Several solutions have rapidly moved to the top of the wave, leading in tech and business use case applications alike. The names you should watch out for are:

• Polygon (formerly MATIC) – decentralized finance apps on this platform have skyrocketed, attracting 75000 new users in just a matter of days. This chain has also seen a huge rise in developers and the trend is ticking upwards.

• Polkadot – enables transfers of any data or asset type between blockchains, effectively taking on the issue of interoperability, which is very relevant for widespread adoption.

• Uniswap – allows automated exchange of decentralized tokens and has gained a name by fixing the liquidity problems for decentralized exchanges.

• EQIFi – a pilot hybrid of the world’s first digital bank (EQIBank) embracing crypto tech, and looking to fuse scalability, trust and security.

If any of these projects succeed in making good on their promises, we’ll undoubtedly see an even bigger subsequent surge. Additionally, the first solution to fully address the issue of volatility in a widely marketable and scalable way will reap massive benefits, but also pave the way for others to explore and compete in this domain.

Pros and Cons of Decentralized Finance

DeFi offers several major benefits – the three main ones being cost, speed and security. Lower costs are a direct result of lower fees compared to banks. The ability to make transactions nearly instantaneously with just a few clicks yields a huge speed boost. You can also see interest rates almost in real time. The cryptographic protection and immutability of the blockchain itself guarantee that your transactions will be securely processed and recorded. 

In terms of cons, the fluctuation of market prices takes the cake. Price swings of 20% in a single day are not a rare sight in the crypto world. Also, the Ethereum network still uses a proof-of-work approach. This gives the blockchain limited scalability and represents one of the drivers behind transaction cost spikes. The current trend indicates a shift towards a proof-of-stake, which would contribute to much greater efficiency. However, until that happens, fee volatility and overall scalability will likely remain an issue. Finally, there’s also the issue of how governments process this in terms of taxation and regulation in certain cases. 

With all this in mind, decentralized finance will definitely bring many more exciting things in the blockchain world in the near future. We’ll be sure to keep a close eye on how these efforts develop and bring you the latest news.

We’ve written extensively on the potential use cases for blockchain as perhaps the most dominant and promising technology today. Moreover, professionals and laymen alike have been increasingly using the word “blockchain” in everyday communication. It seems like the concept is suddenly everywhere around us. However, if we dig deeper, it seems not many people can name examples of actual blockchain use. To remedy this, we’ve decided to cover one of the most prominent real-life blockchain applications – smart contracts. This blockchain application is already active in several different areas (arts, music, real estate) with quality results. Additionally, due to Ethereum’s massive upward swing, smart contracts are likely the first blockchain product to go fully mainstream.

What are smart contracts?

In analog contracts, there are two contractual parties and a trusted third party which often represents a guarantor of execution. Smart contracts aim to simplify this process to its bare essentials. Smart contracts rely on the Ethereum blockchain infrastructure to function and are usually written in Solidity and Serpent programming languages. 

Perhaps the best analogy for understanding smart contracts is through something which we’ve all used for decades – a vending machine. The machine takes the buyer’s money, holds it, and waits for the buyer to select the goods they want. After the buyer pushes the desired item button, the machine’s mechanism releases the wares. Efficient and direct exchange, with no middleman.

Smart contracts represent a model of self-executing contracts where the contracting parties have agreed on predefined terms and conditions. These terms and conditions are hard-written into the code and can be verified by independent peers on the blockchain. Essentially, it’s a function based on “if (or when)/then” – something we’re all quite familiar with. Once these conditions are met, the contractual obligations are executed and fulfilled, thus shielding both sides from any potential misbehavior. As with any typical contract, these smart contracts can include the exchange of funds, property titles, various assets, and more.

After a transaction completes, the blockchain updates to reflect this event. The fact that the transaction was executed means it can no longer be changed due to blockchain’s immutability property. Furthermore, only authorized parties can see the results of this transaction, granting necessary privacy. 

Resource advantages of smart contracts

As with anything predicated on automation, the first benefit that comes to mind is higher efficiency – time savings. On top of that, smart contracts also yield tangible costs-savings. Here are the two main boons you can expect to see from these real life blockchain applications:

• Simplification and streamlining

We’ve mentioned automation as one of the key facilitators of efficiency. This automation process focuses on cutting out the middleman and reducing unnecessary layers in execution of contractual obligations. Through the use of smart contracts, execution of deals can take mere minutes – previously programmed conditions specifically allow this action. As soon as a condition happens, the relevant contract action will materialize without third party delays. The process of engaging in these types of contracts is also hugely simplified compared to the traditional method. Less paperwork, fewer steps, minimum waiting times and maximum intuitiveness.

• Time and cost savings

As a direct function of the simplification described above, contracting parties generate substantial savings in terms of time. On top of that, removing the middlemen results in actual and quantifiable cost savings. Since smart contracts don’t employ intermediaries, the only transaction costs originate from the blockchain’s own infrastructure related to contract execution.

Safe, Trustworthy and Auditable

Besides increased intuitiveness and lower costs, smart contracts bring several other notable benefits. One shared thing about them all is very high scalability. Here are two more important areas in which smart contracts shine and bring tremendous value to the market:

• Improved Security Standards

The more intermediaries in a process, the higher the chance of security breaches and privacy violations. Every step of the process is a potential vulnerability. Since blockchain uses cryptography with public and private keys when handling smart contracts, the data is virtually untouchable. The decentralized nature of the system alongside digital signatures means only the directly involved parties can decode the data.

• Trust, Transparency and Accuracy

With smart contracts, all the terms and conditions are clear and embedded in the form from the get-go. After a condition materializes, it acts as a direct trigger for a remittance to occur and is subsequently recorded. Very high security standards bring increased comfort regarding trust and transparency, and the accuracy of blockchain data is nearly unparalleled. Blockchain transactions can easily be audited and are constantly available. Essentially, there’s an ever-present digital trail that is almost impossible to forge.

Smart Contracts in the Real World

Since blockchain is a platform technology, its applications can permeate various industries, creative uses and specific niches. Given the fact that every business interaction is fundamentally a contractual relationship, smart contracts can cover basically every domain. The financial world is also pursuing this idea, with names like Barclays looking to leverage smart contracts.

There’s a host of companies handling development of new solutions and business cases in this playground. In the world of music, InMusik is using smart contracts to distribute royalty revenues towards recipients and creators. Similarly, Ascribe is a digital arts platform which helps combat fraud and enables publication fees. Smart contracts are also finding their way into traditionally deluxe industries such as diamonds. De Beers Group has launched Tracr to ensure traceability, authenticity and supply chain robustness when it comes to these precious objects. Way back in 2017, a real estate startup named Propy successfully facilitated a blockchain transaction of house ownership in Ukraine. 

All of these examples utilize the smart contract principle and prove that the market’s only going to get busier. Real-life blockchain applications of smart contracts are finding their way into everyday interactions and the development efforts are following closely. Going forward, we can expect to see new use cases in decentralized finance, real estate, and the health industry. As always, we’ll keep you up to date with the latest breakthroughs in this area.

One of the most talked-about technologies in the past few years is “blockchain”.  The latest trending news about the technology broke yesterday with the IPO of Coinbase, which is based on blockchain.  Essentially, the technology is an ever-growing list of records kept on peer-to-peer networks. Blockchains have high resistance to rogue modifications, and they offer data encryption and immutability which translates into unparalleled integrity of its records.  The concept behind blockchain draws its roots from basic cryptology, but its execution brings numerous new applications into play. Blockchain use cases are expanding by the minute and some companies have decided to invest heavily into reshaping entire industries and processes using this tech. Here’s where we see the most mature results so far and where we expect the biggest push in the future:

Financial services

Keeping accurate and verifiable records in the financial industry has always been a problematic task prone to malfeasance. Blockchain solves this by allowing us to easily build tamper-proof logs which document every single transactional instance. Moreover, blockchain helps reduce the number of intermediaries and thus reduces costs while simultaneously saving time. This is extremely valuable for international payments and money transfers, both of which are typically slow and inefficient today. Banking giants such as JP Morgan Chase and Citi are already intensively embracing blockchain, alongside 21% of other banks. Trade finance platforms represent another area where blockchain-based smart contracts are taking hold, alongside clearing and settlements. This makes the processes faster, cheaper, and more transparent.

Additionally, digital identity verification is claiming its ground – banks using blockchain identification can significantly hasten their client verification process. Encrypted blockchain also offers much stronger data privacy compared to conventional server infrastructure. This is super-useful when it comes to delicate things such as credit reports, where leaks can lead to massive damages.

Government Domain and Public Data

The public sector will also reap benefits from using blockchain technology in its efforts to increase transparency and clarity. The two spheres that probably stand out the most are conducting annual budgeting and the management and execution of the voting process. Both issues are focused on increasing public confidence, but the former is directly connected to the issue of providing greater transparency to eliminate concerns of corruption due to wastefulness and secrecy.  Moving the budget onto a widely accessible blockchain model is a key component in achieving greater public trust and accountability.  This would also apply seamlessly to public procurement and land title registries, where there’s currently ample space for manipulation.

Another disruptive blockchain use case would be digital voting. Modern voting infrastructure is extremely vulnerable to manipulation. Blockchain can decentralize this process and increase the system’s robustness in many ways. Synchronizing the voter list data would translate into easily matched final tallies, yielding maximum accountability. In addition, the verification process would create a system with no ability of any party to manipulate the results. This system would best synergize with digital IDs, ensuring full compliance and practically zero room for voter fraud or identity theft.

Medical Industry and Healthcare Reimagined

Blockchain is well suited for safe big data processing, which makes it a great choice for storing highly sensitive personal information. Smart contracts running on blockchain can selectively and securely transfer one’s medical information between doctors and patients. This way, we would be able to store all of our medical data behind private keys with maximum control. Simultaneously, this tech would allow for excellent insight into aggregated general patient data which is useful for assessing public health. Additionally, this information would be invaluable to researchers for large-scale clinical trials without jeopardizing patient privacy.

On the side of medical insurance, the patients would be able to easily share their data with other providers. This would be done via private shareable keys, and would also offer fully accurate medical event histories to prevent fraud. Remote patient monitoring would also function much more efficiently and would combine excellently with 5G IoT solutions for maximum results. In the field of genomics which is currently skyrocketing, blockchain applications would facilitate safe and private genomic information, eliminating the middlemen.

Insurance

We’ve already mentioned smart contracts as one form of blockchain-based products. When it comes to insurance, these contracts would allow both customers and insurance companies to effectively exchange information regarding incidents. When combined with digital IDs, this would be a very robust system with the ability to easily recognize invalid claims. Also, it would allow insurance companies to create new products with automatic execution. In case of a certain event, the clauses of a smart contract could trigger the next phase of the process. The insurance business generally includes middlemen or multi-layered communication and sensitive data exchange. Optimizing this process brings a host of benefits and is likely to transform the industry within a few years.

IBM is at the forefront of these efforts with its openIDL, collaborating with the American Association of Insurance Services. This also translates afterward into much easier reinsuring and stimulates clients to engage in the process due to increased intuitiveness.

Real Estate and Media

The residential real estate market is very dynamic as properties are changing hands quite often. The high frequency of movement in this space, especially cross-state, brings additional complexity to all participants in this field. Blockchain has a few obvious benefits to optimize these processes. Firstly, it can easily improve property search and facilitate better matchmaking. Furthermore, it can serve as the basis for pre-lease or pre-sale due diligence on both ends, contributing to higher trust. Transparency and fraud prevention are always good add-ons, and so is the ability to ease leasing and payment later on. Tokenization can also promote fractional ownership or even daily trading in the real estate sphere.

In the media world, we’re already seeing companies adopting blockchain to combat fraud and intellectual property rights violations. On top of that, new forms of distribution are being developed to help decentralize certain market segments. A great practical example is Eluvio, which enables content producers to directly distribute videos to their audience without middlemen. This problem of overly aggressive middlemen is inherently embedded in some industries, and music is definitely one of them. Blockchain has a number of use cases there, such as micropayments and usage-determined consumption models, allowing for fairer profit distribution. Ultimately, there’s the domain of royalty payments, where blockchain allows artists to have direct and accurate insight into their performance.

New blockchain use cases and innovative solutions are emerging at a rapid pace. We expect this space to keep expanding as both processes and business models continue to offer new layers of value.

There are many drivers impacting and shaping the philosophy of constant change, and the velocity of change typically depends on the domain undergoing the transformation. When analysing 2021 cybersecurity trends for the changes they cause, there are two major factors that standout in the cybersecurity threat space: one chronic, and one acute. The former is the general trend of digitalization which has been rapidly accelerating in the last two decades. It is one of the clearest examples of change.  Business is moving to the cloud and increasing how interconnected we are now. This is also making our everyday processes infinitely more interdependent. The latter trend, which emerged in the public domain but did not stay there, is the coronavirus pandemic.  It has demonstrated the importance of adaptation and pushed millions of jobs into a work from home format.  These trends bring new challenges we need to identify and prepare for to thrive.

Home Is Where the Risk Is

For several professions, the work-from-home shift came as a blessing in disguise. More time to spend with family, less time spent commuting, reduced travel costs and less pollution. Some companies realized they were generating substantial savings by cutting back on office space given the fact some jobs could be easily performed from the comfort of home without a loss in output quality.  However, there are some high-tech jobs in the digital domain where security matters are extremely important. 

Moving development operations from office to home means higher worker dependency on digital collaboration tools. Slack, Zoom, Microsoft Teams and Skype have redefined the way IT professionals communicate and cooperate. 2021 cybersecurity trends will further expand the need and tendency to exchange delicate data between home and office networks. This, in turn, leads to a much higher risk exposure to hackers compromising sensitive information or causing significant financial harm. You can expect direct phishing attacks among other types of attacks to intensify in attempts to exploit the fast-growing attack surface supporting remote workers.  Keeping a strong focus on your home cybersecurity measures is paramount. Popular collaboration platforms have already shown a host of vulnerabilities and security weaknesses, so we all must be mindful of this and be extra careful. Invest in prevention and avoid taking cybersecurity shortcuts for convenience to minimize your risk of compromise.

Inbox Under Siege

Endpoint security can be considered an evergreen topic – it’s here to stay and it’s all around us. The easiest and most fruitful vector of attack for cybercriminals is the unassuming inbox. People still approach digital security as something abstract and, in most cases, something that isn’t their direct personal responsibility. For this reason, hackers tend to attack inboxes en masse via ransomware, malware and other spear phishing software.

Keep in mind that these attacks cost the hackers very little to deploy on a large scale. This allows for aggressive campaigns where a mere 1% success rate can yield excellent gains for data ransom. Scores of people working from home and using lax security opens additional space for hackers to exploit. What makes this trend even more threatening is the fact that cybercrime is becoming increasingly automated. Tools that automate these campaigns will further intensify the level of risk associated with the cybersecurity trends we expect to see in 2021. Conversely, these campaigns will likely be less sophisticated and easier to spot, but their massive scale will create noticeable problems.

Above the Clouds

We’ve written extensively about cloud storage and its benefits. The convenience, elasticity and scalability cloud providers offer are extremely enticing and represent a trend that will continue to grow quickly. The need to bridge the physical separation caused by the work-from-home imperative has underlined another major advantage of the cloud. Even micro companies are looking to accelerate their migration in this direction. Therefore, cloud usage will certainly face new challenges. The increased volume of data associated with greater demand and focus on distributed cloud will require new cybersecurity policies.

Data breaches due to misconfigurations following cloud migrations, unsecured APIs and insider threats will also play major roles in the area of cloud security challenges. To counter this, we expect to see heavy deployment of innovations in cloud computing with a special emphasis on blockchain. Enhancing and protecting privacy will be the key driver for millions of new cloud users, which requires fast adaptational thinking.

Automation Nation

Automation in every possible domain is certainly one of the top 2021 cybersecurity trends. The process of automation is intrinsically tied to human ingenuity – we strive to save time and ease our work. Now, we’ve already mentioned how hackers plan to rely on automation for malicious purposes. Conversely, we’re looking at a defensive campaign on the other side – professionals developing automated protection apps based on advanced AI.

Heavy investment in machine learning, robotic process automation and decision-support tools is only going to intensify even further. The amount of security alerts is poised to grow and will require a human-machine combination to provide an effective response. This will be especially relevant to smart factories operating on industry 4.0, where every second of downtime creates huge costs. Couple this with strong forays into the 5G and IoT technologies and it becomes clear why automation expansion is certain.

Blockchain Rising

As a technology, blockchain is still in its infancy and its uses in the real world are very limited at the present time. However, the growth trend from 2020 is expected to continue in 2021 and the general “blockchain rush” brings exciting opportunities. It is likely that blockchain will find its first major action in cybersecurity, due to its strong focus on privacy and monitoring of the supply chain. Additionally, its trust-based approach and high integrity and data availability make it a powerful contender in this field. The fact that blockchain also offers high customizability makes it attractive for developers and end users alike. You can adjust security levels for the system, but also for individual class users.

Additionally, the ability to create private, public and hybrid blockchains covers various domains of use. Combine this with dispute resolution and transaction processing mechanisms, blockchain offers a well-rounded ecosystem to address cybersecurity concerns. The potentially lucrative nature of this technology should give it an even more favorable impact on 2021 cybersecurity trends.