Despite the hype, blockchains do **solve many real-world problems**, either through complete disruption of the existing status quo ("radical innovation") or through incremental changes. This article discusses 5 real-world problems that have **already been solved by blockchain technology**.

## Remittance and cross-border money transfers

Remittance activities involve the transfer of money by an individual working in one country to another country. For instance, a foreign worker in America wants to transfer money to the Philippines. Remittance is a colossal industry: the [World Bank estimated that in 2018 $689 billion](https://www.worldbank.org/en/news/press-release/2019/04/08/record-high-remittances-sent-globally-in-2018#:~:text=Global%20remittances%2C%20which%20include%20flows,from%20%24633%20billion%20in%202017.) were transferred for this sole purpose.

Before the invention of blockchain, remittance was constrained to banks and other money transmission operators (e.g., Western Union), operating with large margins. For instance, according to the World Bank, banks were charging their customers an **average fee of 11% for remittance activities in 2019**.

Blockchain technology allows individuals to transfer assets, such as stablecoins and other virtual currencies, from one party to another, irrespective of their location or income level. On average, a single transfer between two individuals is estimated to **cost less than $0.15 on the Ethereum public blockchain** and is **not a function** of the total amount transferred. In addition to the apparent cost benefits, speed has also been a significant improvement factor. A transaction on Ethereum (and other similar networks) often **takes** **less than a few minutes to be considered final**.

However, constraints and risks remain, such as the ability to (1) spend the asset locally (2) sell the received asset to the domestic/preferred currency. Yet, ambitious projects like Libra could contribute to improvement regarding both of these aspects.

## Immutable data record and ownership management

Thanks to its characteristic of immutability, blockchain technology allows individuals to store any piece of data forever in a distributed ledger. Furthermore, non-fungible token standards (e.g., "NFT") enables the **enforcement of ownership of any digital assets**.

Besides, the concept of immutability has substantial implications in regards to property rights and other applications. For instance, [Ethereum Name Services ("ENS")](https://ens.domains/) are domain names used to register an address on the [Ethereum blockchain](https://www.flyingblock.com/article/what-is-ethereum) through a human-readable equivalent (e.g., "diamonds.eth"). This kind of protocol allows users to record information on the blockchain, leveraging the impossibility to modify it at a later stage without the domain name owner's approval. In comparison, there have been cases where traditional internet domain names ("DNS") were re-assigned without the authorization of individuals in a process often controlled by a single entity.

However, **immutability is not a synonym of truth**: the quality of any data point stored in a distributed ledger only remains as good as its source's reputation. Simply stating, a wrong entry into a blockchain remains wrong. Hence, the quality of the party appending new information into the ledger remains a critical component in a similar vein to other databases.

## Global fundraising and charity

Initial Coin Offerings ("ICO"), which have been mostly conducted on the [Ethereum blockchain](https://www.flyingblock.com/article/what-is-ethereum) , have enabled companies and projects to raise funds worth billions of dollars through token sales.

ICOs have radically **changed how companies can raise capital across borders** and **how fast it was possible to do so**, further reducing the delay between an idea and the implementation of a business solution.

Similarly, charity organizations have started to incorporate blockchain payments to foster faster money flows and the distribution of revenue in the event of a crisis. For instance, UNICEF recently launched its [Cryptocurrency Fund](https://www.unicef.org/press-releases/unicef-launches-cryptocurrency-fund), accepting payment in ether and bitcoin.

However, despite a definite improvement in how money can be re-distributed, ICOs and other processes attempting to raise money have also built a lot of concerns regarding regulations (e.g., do some ICO consist of unregistered security offerings?). As a result, this led to the growth of sophisticated scams by malicious individuals. Since transactions on blockchains are immutable, some of these **scams stripped away millions of dollars worth of cryptocurrencies**.

## Transparent voting system and distributed governance

Governance and transparent voting systems are other real-world problems that blockchains solve. While applications for voting remains a niche segment, there have been on-chain experiments of platforms that have incorporated a thorough **voting system for distributed governance**.

For instance, platforms like [Compound](https://compound.finance/) and [MakerDAO](https://makerdao.com/en/), two of the most significant DeFi projects, have pivoted to **community-driven governance**. Anyone can write a proposal submitted for an on-chain voting process. Both protocols have their dedicated tokens unlocking voting power, based on the respective share of the total supply they own.

While some of these applications pioneers in establishing transparent voting mechanisms, several challenges remain to solve regarding how to protect voters' identity and how to prevent the creation of vote-buying markets.

## Supply chain management

Blockchain technology can also be used for supply chain and other operational management processes. In supply chain management, some of the existing problems are the lack of transparency, lack of trust between parties, and different information recording standards.

Most of these find roots in use by each party in the supply chain of their distinct data management system; it results in each company *de facto* owning their own version of the actual supply chain.

These problems often lead to multiple errors that translate into high costs and lead to lasting reputational damages and safety risks from the perspective of customers. For instance, supply chain scandals in the food industry have negatively impacted several brand images from consumers.

Existing companies experimenting with blockchains include:

* **Maersk**, the world's largest container ship company, with IBM for a solution for cross-border transactions between multiple parties (with Hyperledger Fabric).
* **BHP Billiton**, one of the largest mining firms, to record movements of rock and fluid samples from its vendors (using BlockApps' STRATO), providing real-time data for all stakeholders, internally and externally.

For them, blockchains can **synchronize information among multiple parties along the supply chain**. For example, parties can record each product's origin, the tracking status, and other relevant information, which are available for any party involved in the supply chain process.

Blockchains beyond the hype: there are real-world problems that have (already) been solved by blockchain technology.

5 Real-World Problems Already Solved by Blockchains

## Raising capital with Initial Coin Offerings (ICO)

One of the most popular use cases of [Ethereum](https://flyingblock.com/article/what-is-ethereum) has been to raise capital. Initial Coin Offerings, commonly referred to as ICOs, have allowed projects to raise money by selling newly issued tokens against ETH (or other tokens like stablecoins).

Projects like Cardano, Tezos, or EOS have conducted some of the world’s largest ICOs, with each worth $ hundreds of millions.

Despite concerns about whether some of the ICOs could be considered unregistered security sales by regulators, the ability of any team to raise capital directly from investors has been a significant use case of Ethereum, which has even led to an ICO bubble in mid-2017.

## The issuance of utility tokens

The launch of the [ERC-20 token standard](https://github.com/ethereum/EIPs/blob/master/EIPS/eip-20.md) in November 2015 has unleashed new opportunities for anyone to virtually issue a token that is interoperable with other third-party applications on the network.

Some tokens were created to represent units of values from real-world assets (e.g., stablecoin), others were used for unique niche use-cases (e.g., governance utility tokens, app discounts), and some exist simply for fun & other testing purposes.

One of the first utility tokens was created by [Augur](https://www.augur.net/), whose team conducted an ICO in 2015 for its utility token ("REP"). This token is used within the Augur prediction market platform for several unique functions such as incentives for reporting the validity of a real-world event.

## The growth of the stablecoin industry

Stablecoins are utility tokens whose value is backed by collateral and pegged to a fixed unit. There are two primary types of stablecoins: **collateralized stablecoins** like USD Tether ("USDT") and USD Coin ("USDC") and **crypto-backed stablecoins** like DAI (from MakerDAO). These assets can be used to trade on exchanges, for individuals to pay for transactions, and for parties to transfer capital worldwide at a meager cost.

Collateralized stablecoins are backed by fiat that is stored in bank accounts in the real-world. For instance, USDC is pegged 1:1 with the US dollar, and funds are held in a bank account that is audited by a third party.

Crypto-backed stablecoins are backed by assets that are overcollateralized to the peg, often with a set of complex mechanisms to prevent the collateral from dropping below the face value of the supply.

**Collateralized stablecoins dominate the stablecoin industry** (more than 97% of the total stablecoin industry), and Ethereum is the leading platform for stablecoin, with more than **$10 billion worth of stablecoins** issued as of June 2020.

## Decentralized Finance (DeFi) for everyone

Decentralized Finance, referred to as DeFi, is a growing use case of Ethereum, relying on principles of decentralization and self-custody of assets. DeFi is built on the promise that (1) any individual should be granted access to essential financial services (2) that code is the law, (3) composability allows platforms to integrate each other, and (4) users should own their funds.

The leading DeFi platforms are **MakerDAO**, the crypto-backed stablecoin issuer, **Compound**, an algorithmic money market protocol, and **Aave Protocol**, another decentralized lending service (with both over-collateralized and under-collateralized services).

Despite some recent incidents leading to dramatic loss of funds (mostly due to smart contract issues), DeFi has been growing and has become a billion-dollar industry within its first year. New applications have been increasingly being developed, such as trustless exchanges for derivatives and automatic asset management solutions.

## Non-custodial decentralized exchange (DEX) platforms

Ethereum has allowed developers to create non-custodial decentralized exchanges on the platform. These platforms, commonly called DEX, allow users not to give their assets the custody to a tier (e.g., Coinbase, Binance), while offering trading services. Through a complex set of smart contracts, these platforms allow users to trade without any intermediary.

There has been drastic improvement in how decentralized exchanges operate. Initially built with a matching engine at a block level, first-generation exchanges faced multiple issues such as front-running and high transaction fees.

Since then, two new categories of exchanges have emerged:

* **Automatic Market Making (”AMM”) exchanges** such as Kyber Network, SushiSwap, Uniswap.
* **Layer-2 and other protocol-based exchanges** such as the 0x Protocol, Deversifi, and Loopring (a zkRollup protocol).

## Standardization of non-fungible tokens and other collectibles

Like utility tokens, the growing interest in the tokenization of assets has led developers to create a native standardized method to issue Non Fungible Tokens (”NFT”), also referred to as collectibles. The primary standards on Ethereum are ERC-721 and ERC-1155.

NFT’s first commercial implementation was **CryptoKitties**, a simple blockchain game that allowed users to purchase, collect, breed, and sell virtual cats. This game became such a success in 2017 that it led to the congestion of the Ethereum blockchain.

Similar to utility tokens, Ethereum-based collectibles can be traded on centralized and decentralized exchanges like SpiderDEX. Amidst the spike in the price of CryptoKitties in late 2017, one unique CryptoKitty was sold for more than $150,000.

## Implementation of Decentralized Autonomous Organizations (DAO)

The concept of decentralized autonomous organizations (”DAO”) existed before Ethereum. A DAO refers to an organization built on a set of rules and encoded in a computer program that is (1) transparent, (2) controlled by shareholders, and (3) not influenced by any outside party.

The first and most controversial attempt of a DAO was **The DAO**: a “stateless fund” that was built in mid-2016, collecting more than 11 million ETH (approximately $50 million in 2016).

Despite the failure of The DAO due to a smart contract error (leading to funds being stolen), **DAOs have since regained both interest and popularity**. Developer best practices have also considerably improved and third-party code audits are now widely accepted.

Initiatives like [Aragon](https://aragon.org/) and other projects are popular nowadays and attempt to build a framework for DAOs to operate and govern a range of activities on the blockchain and in the real world.

## Creation of censorship-free prediction markets

Predictions markets have existed for long before the creation of Ethereum. However, [Ethereum](https://flyingblock.com/article/what-is-ethereum) properties such as **decentralization and censorship-resistance** have led to the creation of multiple prediction market platforms.

The most notables are [Gnosis](https://gnosis.io/) and [Augur](https://www.augur.net/), where anyone can create a market for any event. Through an incentive-based system to report real-world outcomes, these platforms allow the creation of a free market for individuals to bet and hedge on future events (e.g., "who will win the World Cup?").

Despite some issues due to the nascency of Ethereum, prediction markets have garnered interest from media, mostly due to some of the infamous markets on unethical outcomes, raising exciting debates about whether platforms should practice some sort of self-censorship.

## Transparent casinos and gambling services

Since Ethereum allows a wide variety of decentralized applications, blockchain-based casinos have been developed on Ethereum. For instance, platforms like [dice2.win](http://dice2.win) offer betting services for users on the outcome of dice.

Thanks to smart contracts for their probabilistic logic, casinos on blockchains often offer **greater transparency** on the probabilities for each outcome.

With the growth of other competing programmable blockchains for retail use-cases, casinos have increasingly become popular on networks like Tron or EOS. In contrast, Ethereum developers have pivoted away from gambling applications.

## Immutable data and identity record systems

Ethereum has also been used for multiple applications and services to record information. For instance, [Peepeth](https://peepeth.com/welcome) is a Twitter-like system built on Ethereum, featuring signature authentification for users to post short messages that are shared on its platform (and immutable!).

Another example is the [Ethereum Name Service (ENS)](https://ens.domains/), a human-readable lookup system, to register/transfer domain names linking to Ethereum addresses, which is by design difficult to read and to remember for humans.

Recently, the [ERC-725 standard](https://erc725alliance.org/) is a proposal for a blockchain-based identity system, composed of proxy smart contracts. It pushes users to own and manage their identity instead of letting third parties (i.e., "centralized organizations") handle the ownership of their identity.

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