What Is Blockchain? How the Technology Transforms Daily Life – Bloomberg

The technology’s reliability and automation benefits make it ideal for digital health passports, banking, and gaming. 
When Maria-Eugenia Valle needed to show proof of vaccination to attend a folk-pop concert in Bogotá in September, she pulled out her phone and opened her VitalPass app, which uses blockchain technology to generate a QR code that allows a venue to verify a user’s status. The digital passport is more reliable than a paper vaccination card, which could easily be faked, the 22-year-old says. “You can trust it more, because it’s got a thing with blockchain behind it.” 
Blockchain is best known for supporting cryptocurrencies such as Bitcoin, but versions of the technology are fast making their way into many facets of daily life, from vaccine passports to finance, gaming, and cross-border payments. The market for blockchain technology and services is projected to grow to $67.4 billion by 2026, from $4.9 billion this year, according to researcher MarketsandMarkets.
At its simplest, blockchain is a shared database where digital information is recorded and stored in “blocks” that are effectively immutable, making the data on the chain secure and verifiable. Software code called smart contracts allows the blockchain to take on some functionalities of a bank or a game without any human involvement. “The best way to think of blockchain is as a computer, with capabilities we didn’t have before,” says Ali Yahya, a general partner at venture capital firm Andreessen Horowitz. Once a developer writes a program, “the code will continue to operate and run indefinitely.”
Many of these new apps reside on decentralized public blockchains, which are open to all and not controlled by any one person or group. VitalPass data live on an open digital ledger called Algorand. On public blockchains, anyone can help verify network transactions, and many of them have proven to be resilient and secure. App developers who use public blockchain architecture don’t have to pay to build or maintain it, though they usually have to pony up transaction fees.
Here are some key areas where blockchain is making inroads:
About 1.7 billion people in the world are shut out of traditional financial institutions, according to the World Bank, for reasons including lack of a nearby provider or prohibitively high service fees. DeFi apps run via software living on blockchains are open to anyone with an internet connection. These banking alternatives offer accounts that earn interest for digital coins. Consumers can also take out loans or lend their coins to others. Users have pumped more than $110 billion into these products, up from about $21 billion a year ago, according to tracker DeFi Pulse. That said, participating in DeFi carries many risks: There’s no bank to hold your hand, there’s no Federal Deposit Insurance Corp. insurance, and scammers abound. That could change as federal regulators tighten oversight to weed out money laundering and fraud.
Even large financial institutions are starting to eye DeFi. Société Générale SA is planning to facilitate a loan of about $28.6 million via such a service early next year. “Today if you take 20 largest clients of the bank, there’s not one single one of them that’s not looking seriously into these solutions,” says Jean-Marc Stenger, chief executive officer of Société Générale Forge, a blockchain-focused subsidiary, referring to blockchain solutions for capital markets. Discussions are now centered on how big blockchain will get, and how quickly that’ll happen, Stenger says. 
A frustration among gamers is that they can’t take their swords or characters from one game to another, and sometimes they can’t easily sell the weapons they win or buy. Blockchain gives players the chance to profit from their skills. Axie Infinity is played by more than 1 million daily active users—most of whom pay to play—who earn digital coins by defeating rivals and who breed cute monsters as nonfungible tokens, or NFTs, assets tracked via blockchain that they can sell on crypto exchanges. Some people in developing countries say such play-to-earn games have already become their main source of income. “This is a completely different engagement model that’s closer to work,” says Yat Sui, executive chairman of Animoca Brands, a Hong Kong maker of and investor in blockchain games.
Traditional video game companies are entering the arena. Ubisoft Entertainment SA, the French maker of titles such as Assassin’s Creed, has invested in Animoca, and Ubisoft CEO Yves Guillemot says he wants the company to be a key player in blockchain gaming, which he sees as a growth driver for the industry. Still, with the risk of scams and regulatory uncertainty looming, some in the gaming sector are taking a cautious approach. Valve Corp., which runs the popular Steam game store, recently prohibited developers on its platform from publishing blockchain-based games that issue or allow the exchange of cryptocurrencies or NFTs.
People sending funds from the U.S. to relatives overseas have grown accustomed to giving huge cuts to intermediaries such as Western Union Co. That’s changing. In October, Facebook parent Meta Platforms Inc. started a pilot program to let consumers in the U.S. and Guatemala send money internationally for free. Underpinning the service is startup Paxos Trust Co., whose so-called stablecoin runs on the Ethereum blockchain and whose value doesn’t change much from day to day. Blockchain infrastructure is also expected to make settlement of commercial payments and transactions faster and cheaper. While conventional settlement of stock sales takes two days, Paxos earlier this year tested same-day settlements of stock sales with Credit Suisse, Instinet, and Bank of America. The company is hoping to commercialize the capability next year, says Paxos CEO Charles Cascarilla. “We are on the cusp of that happening,” he says. “The next use of blockchain is less about crypto as an asset class but crypto being used for real-life services.”