BLOCKCHAIN
Arranged to fulfill the final exam of Digital Business course
Lecturer: Erie Awalil Fakhri SE., MBA
By:
Lintang Putri Estiarto 185020307141009
ACCOUNTING DEPARTMENT
FACULTY OF ECONOMICS AND BUSINESS
UNIVERSITY OF BRAWIJAYA
MALANG
2021
What is Blockchain?
Blockchain is a game changer in digital era. All industries, both financial and non-
financial, can use and apply blockchain technology to record all their company data into a
secure system without the need for a centralized server. Technically, a blockchain is a series
of blocks of digital information that are linked via cryptography. Each of these blocks has a
component called a hash. A hash is a character set that composes various pieces of
information in a block. Blockchain technology has great potential to change the operating
model of a business in the long term. The use of blockchain also promises significant
efficiencies for global supply chains, financial transactions, asset ledgers and decentralized
social networks.
Blockchain is a decentralized, distributed and public digital ledger that is used to
record transactions on multiple computers so that the records cannot be changed retroactively
without changing all subsequent blocks and the consensus in the network. Thus enabling
participants to easily verify and audit transactions. The blockchain database is independently
managed using a P2P network and distributed timestamping servers. They are authenticated
by mass collaboration supported by collective interests. The result is a robust workflow
where uncertainty about data security is marginal. Utilization of blockchain can eliminate the
infinite reproducibility characteristic of a digital asset. This confirms that each unit value is
transferred only once, overcoming the problem of double spending. Blockchain is also
described as a value exchange protocol. These blockchain-based value exchanges can be
completed faster, safer and cheaper than traditional systems. Blockchain can determine
ownership rights if properly prepared to detail the agreement, blockchain also provides
records that force offer and acceptance.
History of Blockchain
Blockchain technology is indeed starting to stick out to the public because Bitcoin.
Many people then perceive, the two things are the same. When in fact the potential generated
from blockchain is much wider than just digital currency. The blockchain was first
conceptualized by a person (or group of people) known as Satoshi Nakamoto in 2008. Then
implemented the following year by Nakamoto as a bitcoin core component, where the
blockchain functions as a public ledger for all transactions that occur on the network. By
leveraging blockchain, bitcoin became the first digital currency to be able to overcome
double-spending without the need for a trusted authority and has been the inspiration for
many other applications.
The words "block" and "chain" were used separately in Satoshi Nakamoto's original
paper, but were eventually popularized as one word, "blockchain," in 2016. The term
blockchain 2.0 refers to the application of a new version of the distributed blockchain
database that first appeared in 2014. The Economist described this second-generation
programmable blockchain implementation as "a programming language that allows users to
write more sophisticated smart contracts, create invoices that can pay themselves when an
order arrives or share certificates that automatically send dividends to the owner if profit
reaches a certain level." Blockchain 2.0 technology is more than just transactions and enables
"exchange of value without a strong intermediary acting as a middleman." This technology
allows anyone to enter the global economy, protects the privacy of participants, allows people
to "monetize their own information," and provides the ability for creators to be compensated
for their intellectual property. This second generation blockchain technology makes it
possible to store a person's "persistent digital ID and persona" and helps address the problem
of social inequality by "changing how wealth is distributed". As of 2016, blockchain 2.0
implementations still require an off-chain oracle engine to access "outside data or events
based on time and market conditions [required] to interact with the blockchain.
Impact of Blockchain
Blockchain technology can have a positive impact on many things, especially for the
progress of the Indonesian economy. Access to connected and open data will be very
important for decision making, so as to increase efficiency for the business sector and support
the government to determine targeted policies. In terms of utilization, blockchain has good
accountability. Blockchain technology can revolutionize the financial sector and many
industries and businesses in Indonesia are becoming more transparent.
The blockchain protocol facilitates businesses in using new methods to process all
digital transactions. Examples include payment systems and digital currencies, facilitating
crowdfunding, or implementing predictive markets and generic governance instruments.
Blockchains minimize the need for trust service providers and are expected to require less
capital in the event of a dispute. Blockchain has the potential to reduce systemic risk and
financial fraud. This technology automates processes that were previously time-consuming
and manually performed, such as business incorporation. In theory, tax collection, directing
and providing risk management with blockchain is possible. As a distributed ledger,
blockchain reduces costs for transaction verification, and eliminates the need for trusted
"third parties" such as banks to complete transactions, this technology also lowers network
costs.
How Blockchain Will Change the World
• Banking and Payments: Not only does blockchain allow anyone to exchange money
faster, more efficiently and more securely (see bitcoin currency), but many banks are already
working on adopting blockchain technology to improve their transactions.
• Cybersecurity: All data is verified and encrypted in blockchain using advanced
cryptography, making it resistant to unauthorized changes and hacks. Centralized servers can
be very susceptible to data loss, corruption, human error and hacking. Just look at the many
hacks we’ve seen in the past few years with Target, Verizon, Deloitte and Equifax. Using a
blockchain decentralized, distributed system would allow data storage in the cloud to be more
robust and protected against attacks.
• Internet of Things: Today the Internet of Things (IoT) includes cars, buildings, doorbells
and even refrigerators that are embedded with software, network connectivity and sensors.
However, because these devices operate from a central location that handles communications,
hackers can gain access to the car you’re driving or to your home. According to Kamil
Przeorski, an expert in Bitcoin and Ethereum capabilities, Blockchain has the potential to
address these critical security concerns because it decentralizes all of the information and
data. This is increasingly more important as IoT capabilities increase.
• Unified Communications: Blockchains can enable faster, safer and more reliable
automated communication. Automated or digital communication based on pre-built
algorithms is already occurring at scale in some industries. Examples of this include emails,
system alerts and call notifications. Matt Peterson, co-founder of Jive Communications and
an early adopter and miner of Bitcoin told me that while a lot of communication is currently
automated, this type of communication is generally non-critical and asynchronous. He said
that “Blockchains can shift the playing field to allow authorized, bi-directional
communications and transactions that occur more freely in an automated environment and
produce an immutable record of communication.” This will greatly enhance the safety and
reliability of our communications.
• Government: If corrupt politicians and long lines at the DMV give you a headache, you’re
not alone. With blockchain, we could reduce bureaucracy and increase security, efficiency
and transparency. Welfare and unemployment benefits could also be more easily verified and
distributed and votes could be counted and verified for legitimacy.
• Crowdfunding and Donating to Charities: Donating to a worthy cause is never a bad
idea. But what percentage of your donation is actually being given to those it’s meant for?
Blockchains can help ensure that your money gets exactly where you need it to go. Bitcoin-
based charities are already creating trust through smart contracts and online reputation
systems and allowing donors to see where their donations go through a secure and transparent
ledger. The United Nations’ World Food Programme is currently implementing blockchain
technology to allow refugees to purchase food by using Iris scans instead of vouchers, cash or
credit cards.
• Healthcare: Wouldn’t it be great if doctors did not have to "fax over referrals” anymore?
Why can't all of our medical information be stored in a central database? The centralization
of such sensitive information makes it very vulnerable. With all of the private patient data
that hospitals collect, a secure platform is necessary. With the advent of blockchain, hospitals
and other healthcare organizations could create a centralized and secure database, store
medical records and share them strictly with authorized doctors and patients.
• Rentals and Ride-sharing: Uber and Airbnb may seem like decentralized networks, but
the platform owners are in complete control of the network and naturally take a fee for their
service. Blockchain can create decentralized peer-to-peer ride-sharing apps and can allow car
owners to auto pay for things like parking, tolls and fuel.
Challenges of Implementing Blockchain Technology
Like the previous trend of using cloud computing when it was just introduced to the
public or conventional companies who still find it difficult to migrate existing systems to the
cloud. But over time, this trend became a necessity. Just like the cloud computing trend,
public awareness and understanding of technological developments is a major challenge in
implementing blockchain technology. This leads to a lack of qualified talent in the
application of blockchain technology. Despite tremendous achievements, Blockchain is seen
as a developing field by most of the crowd. Though Blockchain developers are high in
demand, an acute shortage of blockchain experts and developers is a significant concern for
all organizations. The lack of professionally trained and skilled developers for managing and
solving the complexity of peer-to-peer networks further leads to a sluggish rate of
development. Other challenges in implementing blockchain technology are listed below:
Scalability
The ability to manage a large number of users at a single time is still a challenge for the
blockchain industry. Blockchain technology involves several complex algorithms to process
a single transaction. As of October 2017, the total number of coinbase users is recorded to be
11.7 million. As more and more people are getting used to it, the average transactions have
also increased dramatically. It severely hit the processing speed of the transactions as a
higher number of people implies more computers writing and accessing the network creating
an overall cumbersome system.
Interoperability
Interoperability is one of the core reasons why organizations are still not adopting this
technology. Most of the blockchains work in silos and do not communicate with other peer
networks as they are incapable of sending and receiving information from another
blockchain-based system.
Energy Consumption
The technology works on the Proof-of-Work mechanism to validate transactions and to
ensure trust to add them to the network. This mechanism requires a lot of computational
power to solve complex mathematical puzzles to process, verify, and, most importantly, to
secure the entire network.
Lack of standardization
What standardization does Blockchain follow is a question that is still unanswered? Despite a
wide variety of networks that exist, there is no universal standard yet. The lack of
standardization arises issues such as interoperability, increased costs, and difficult
mechanisms, making mass adoption an impossible task. As blockchain technology follows no
standard version, it is acting as a barrier for the entry of new developers and investors as well.
Hackers and shadow dealing
The one thing that the blockchain industry lacks is a set of regulatory oversight making it a
volatile environment and an easy target for market manipulation. For instance, the infamous
one coin scam where a lot of investors lost money thinking it to be the next revolutionary
digital currency was revealed to be a Ponzi scheme scam. No matter how good you are with
your cryptocurrency understanding, there is always a chance that the online wallet you are
using may get hacked or be blocked by the government due to some shadowy practices.
Complex to understand and adopt
Blockchain technology and the complexities it involves makes it hard for a layperson to
understand and comprehend its benefits. Before diving into this revolutionary application,
one needs to read it through and understand the principles of encryption and distributed
ledger. Another point that makes blockchain hard to adopt is that financial institutions are
adequate to provide secure payment gateways and other services at affordable prices
compared to the costs incurred with blockchain.
Privacy
Blockchain is an open ledger which is visible for everyone to view. It is an essential aspect in
many cases, but it becomes a liability if used in a sensitive environment. Blockchain
technology still has to go a long way to be adopted on a broad scale. The ledger needs to be
remodeled in a way that allows restricted access and is accessible only to people who are
authorized to view it.
Costs
Blockchain is implemented usually for eliminating the expenses related to the third parties
and intermediaries involved in the process of transferring values. Though, the blockchain
technology is quite beneficial it is still in the nascent stages of innovation making it tough to
integrate into the legacy systems. It makes it an expensive affair overall preventing its
adoption by the government as well as private firms.
Blockchain is still a distant dream
The market pundits are going gaga over the blockchain technology, its benefits and how it is
re-shaping the infrastructure of emerging technologies like InsurTech and others. But, the
truth is that the challenges mentioned above are still hard to conquer, and it will take some
good time before blockchain becomes an integral part of all the industries.
Advantages
Disadvantages
What Kind of Company?
Example in Financial Industry
SOURCES
https://www.beritasatu.com/fokus/mengenal-blockchain
https://www.ekrut.com/media/blockchain-adalah
https://id.wikipedia.org/wiki/Rantai_blok
https://www.paper.id/blog/bisnis/pengaruh-blockhain-pada-ekonomi/#:~:text=Dari%20segi
%20pemanfaatan%2C%20blockchain%20memiliki,lapisan%20masyarakat%20sampai
%20pelaku%20UMKM.
https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/Innovation/deloitte-uk-
blockchain-key-challenges.pdf
https://www.mantralabsglobal.com/blog/challenges-of-blockchain/
https://www.forbes.com/sites/theyec/2018/03/09/eight-ways-blockchain-will-impact-the-
world-beyond-cryptocurrency/?sh=38d1765d1883
