The blockchain brings us advantages – but beware of fraud!

Around half of Germans have never heard the term blockchain. This is the result of a representative survey conducted by the industry association BITKOM in Berlin in May 2021, although many of those who have flown from one of Germany’s major airports since mid-2020 have already had direct contact with this new technology: the negative PCR corona test must be forgery-proof and uses the blockchain for this purpose. The application was implemented by the fintech company Ubirch in Cologne.

Advantages of the blockchain for customers, investors and citizens

The extensive protection against fraud and forgery is what makes the blockchain so special, even in the USA or England: “It is the first time in the history of mankind that people jointly maintain a database and control each other,” explains Fabian Schär. The professor of Distributed Ledger Technology at the University of Basel highlights the advantages of blockchain. “Normally, there always needs to be a central instance. So someone who runs this database alone, monopolistically.” And that is different with the blockchain, he says. “I can check every transaction thanks to the blockchain and see if everything is above board,” Schär says.

There are different blockchains

That’s true at least for the public blockchain. A distinction must be made between semi-private and private blockchains. There are access-restricted blockchains at a consortium, for example, at a group of financial institutions. Companies also use private blockchains, for example for a test or development environment. They assign permissions to users and connect their blockchain to the public blockchain to benefit from its security standard.

Consumers can rely on quality

That’s how Ubirch does it, for example. The company not only provides PCR test results at some German airports, but also produces solutions for many industries. Consumers benefit from the advantages that the blockchain provides. This is shown by the following examples:

• Nutrition and food: Thanks to sensors and the Blockchain, the cold chain can be monitored during transport. The buyer can therefore be sure, for example, that the quality of his snack has not suffered from excessive humidity.

• Insurance: American or English customers can expect faster claims processing due to smart contracts.

• Career and education: Career starters will have an easier time applying for jobs if credentials and diplomas are on the blockchain. At the same time, employers can trust that the testimonial, diploma or certificate is not fake.

Thanks to the blockchain, I can check every transaction and see if everything is above board.

Fabian Schär, Professor of Distributed Ledger Technology & Fintech, University of Basel

Advantages also in the financial industry

“Blockchain also opens up new opportunities in the financial industry,” says Tom Friess, CEO of the financial services provider Vermögenszentrum. “Through so-called tokens, investors can now buy parts of art or classic car tokens. That was not possible before.” The blockchain thus opens up new possibilities, simplifies processes and also ensures greater transparency. The latter also makes the blockchain interesting on another level: citizens can, for example, check information from companies, organizations and institutions more easily.

How citizens can verify data

Ubirch has implemented a solution for documenting quality measurements of water in the chemical industry: “Here, a measuring point is connected to the blockchain,” explains Matthias Jugel, CTO of Ubirch. Linkages of this kind are possible in the Internet of Things:

• The light bulb, for example, which can be dimmed via smartphone.
• The television, which is Internet-enabled.
• The thermostat on the heating system that can be turned up or down remotely.

It’s much the same with water quality measurement. “The measuring point has a crypto identity and signs cryptographically that it has measured,” Jugel explains further. “That puts the info on the network, but it’s not yet readable by the normal user. But the measurement creates a transaction ID. This, in turn, can be incorporated into a link that allows the user to access the stored results on the Internet.” Residents of a locality in the U.S. or England, or homeowners, can thus obtain regular information about water quality – a clear advantage thanks to the blockchain.

Fraud can occur despite blockchain

The technology is secure. But that doesn’t mean it’s protected from fraud. “Ultimately, it’s very similar to phishing: the banking infrastructure is usually very secure,” Jugel says. “But fraudsters can recreate a bank page that looks like the original page but contains false values. By no means all consumers know how to recognize such a fake page.” In this case, abuse is possible. In order for a consumer to notice this fakery, they must educate themselves before using the technology. “Just as is the case with online banking,” Jugel says.

How quickly blockchain will catch on

However, customers, buyers or committed citizens still have plenty of time to get to grips with the new technology. This is because blockchain currently still involves high transaction costs, which means that its use is not worthwhile everywhere. “But the technology will become cheaper. Discounters are likely to rely on the Blockchain to prove the quality of their products,” says Matthias Jugel.

Definition: the blockchain
The term comes from English and literally means "block chain." The blockchain is a database in which documents are stored. However, this database is decentralized. It is therefore not only located on a server, but as a copy, which is automatically updated in real time, at each user. Each document simultaneously transports its entire history in chronological order. This means that no unauthorized changes are possible. This is because as soon as a user makes a change, it is appended as a block to the original document block, "chained" so to speak. Synonymous with blockchain, the term "distributed ledger" is often used, which roughly means "distributed register".

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