Are you ready for the Fourth Industrial Revolution? It is upon us and things are about to get very interesting. Blockchain technology is just one aspect of this new technological revolution. A revolution that is about to disrupt the way we do things and potentially affect technological unemployment.
If you have never heard of the Fourth Industrial Revolution, let us explain with a brief (we promise!) history lesson. We’ve all heard of the First Industrial Revolution which started in Great Britain in 1760. As you might recall, this began with the invention of the steam engine, mechanized cotton spinning, and railroads. It completely transformed how things were manufactured, as production methods transitioned from manual methods to machines.
Following the first Industrial Revolution came the Second Industrial Revolution. This revolution started in the late 1800s. It was in this era that mass production with the invention of assembly lines and electrification was introduced. As a result of these revolutions, we have seen an improved standard of living and a more urbanized population.
Now jump ahead to the second half of the 20th century. This brought with it the Third Industrial Revolution, marked by the digital age. With it came the introduction of mainframe computers, personal computing, and the internet.
Fourth Industrial Revolution
These advances have led up to what we now know as the Fourth Industrial Revolution. This phrase was introduced by Klassen Schwartz at the World Economic Forum in 2016. It is described as a “technological revolution that is blurring the lines between the physical, digital, and biological sphere.” So in this Fourth Industrial Revolution, we see a fusion of technology that is merging more and more with human lives.
With the advent of the internet and access to mobile devices, we are more connected globally than ever before. We have access to unprecedented processing power, storage capacity, and knowledge. This is in addition to new emerging technology. Some of these technologies include artificial intelligence, cloud computing, robotics, 3D printing, the Internet of Things, and of course, blockchain technology. With all these technological advancements, the possibilities are endless.
As with previous industrial revolutions which resulted in a radical change in society, this one promises to be no different. In fact, with the advent of digital technology, we can expect change at a speed and scale as we’ve never experienced before.
All previous industrial revolutions have brought with it both benefits and disadvantages to society. One benefit has been that nations as a whole are wealthier thanks to these advances. But along with it, though, comes the challenge of fairly distributing these benefits. One disadvantage that has since presented itself has been technological unemployment as a result of the adaptation of new technology.
Technological unemployment is the loss of jobs resulting from technological change. Why does it result in unemployment? Because technological change is usually accompanied by the introduction of labor-saving machines or more efficient “mechanical mind” processes. For example, the use of robots in manufacturing increases productivity, reducing the number of workers required to meet demand. Or the use of artificial intelligence in self-driving vehicles may replace the need for drivers.
Oftentimes the result has been that these changes cause the job skills of many workers to become obsolete. It creates a mismatch between the skills required by employers and those offered by workers. Some believe that this leads to higher unemployment.
Back in the 19th century there was a group of English textile workers called the Luddites. The Luddites were known for destroying the textile machinery. Why did they do this? They believed that these machines were taking away their jobs. We continue to use the term Luddite even today. However, now it refers to a person who is hostile to new technology, especially in the workplace. You might also call such a person a technophobe because they dislike new technology and don’t want to use it.
The Luddite fallacy, however, presents a different observation, and that is, that technological progress will never lead to massive, long-term unemployment. It may eliminate some jobs in the near term, but it will also create new jobs in new and different industries.
For example, creators and designers of the new technology will be needed. This mean there will also be an increase in new jobs.
High Productivity is on The Horizon
As well, the higher productivity resulting from adopting the technology will allow companies to expand. Companies will likely decide to add on new product offerings or open new locations. To keep up with this, more workers will also be required. However, this isn’t the only benefit. Consider that when the price of certain goods goes down, you will theoretically have more disposable income. The extra income workers now have can then be spent on goods and services in other areas. These other areas will result in the creation of new jobs. So rather than eliminating jobs, it just creates a different composition of jobs in the economy.
In the long term, those who have been displaced should be able to fill the new jobs which are created. Ideally, this would be the case. Unfortunately, we see that technological change can result in significant levels of unemployment among unskilled workers. New jobs created are quite often in the service sector and require more high tech skills. Those who are unable to adapt through education and retraining may indeed find themselves unemployed for a certain amount of time.
Key Features of Blockchain Technology
In 2009, bitcoin came into existence, and along with it, came the technology that bitcoin was built on, blockchain. However, blockchain technology has some unique features that make it useful in applications other than cryptocurrency. Some key features of the blockchain which makes it disruptive are as follows:
Information is stored across a decentralized network of computers as blocks of transactions. The computers are linked together like a chain. Hence the name, blockchain. The blocks with all past and current transactions are time-stamped, updated, and reconciled cryptographically and stored without the need for a central authority. Storing data in this way allows for peer-to-peer transactions. It also cuts out the middleman and reduces the risk of corruption of data.
The distributed ledger allows the sharing of data between multiple parties. Since the ledger is distributed among all parties on the network, it is updated and validated simultaneously. This results in trust and transparency among all users. It prevents a single point of failure and makes it extremely difficult to tamper with the data without being noticed.
The blockchain design of linking together blocks of data makes it immutable to modifications to the data. After a block of data has been validated and linked, it cannot be altered. This is because altering one block will result in the altering of all subsequent blocks which would require approval from the network majority.
Blockchain’s Effect on Technological Unemployment
So now let’s talk specifically about how blockchain technology will disrupt the way corporations operate. Additionally, we should consider the resulting impact on the job market. According to LinkedIn, blockchain is the top skill employers are looking for. This is especially true in the U.S., U.K., France, Germany, and Australia. Industries seeking this skill include sectors outside of the financial sector, such as retail, shipping, healthcare, farming, and gaming.
The thing that makes blockchain so disruptive is that it has the potential to be used to streamline processes in many areas. It also makes these processes more secure and transparent. In the process, it will eliminate jobs currently done by intermediaries that perform those kinds of functions.
You see, blockchain will fundamentally change how we exchange value. As humans, in order to exchange value, we need to establish a certain amount of trust between us. Usually we rely on institutions to perform these functions, for instance, banks, governments, and corporations such as credit card companies. Blockchain allows us to do this for the first time only through technology. You might have noticed this to be true in areas including:
The first area is in identity management. Through blockchain, we will have full control over personal information about our identity. We will even be able to select which of our attributes are revealed in order to transact a trade. For instance, currently, purchases we make with our credit card reveals information about us, such as our name, what we’ve purchased, etc. Through blockchain, we can create a virtual black box about our identity because the proof about our identity and attributes about us (such as our age) can be stored cryptographically. Don’t let this cause you alarm. All that will really be known about us is our digital ID. Blockchain enables us to recapture our identity, allowing us to own and monetize our own data.
A second area where blockchain can find application is in areas that require transparency. Blockchain will allow people everywhere to trust each other and engage in peer-to-peer transactions. This might fulfill a need in companies that engage in complex trade over long distances. For instance, it might be a company that must manage many different vendors in their supply chain. With blockchain, a decentralized database can be created. This will allow companies to interact with each other without needing to know or trust each other. Each will have the ability to validate the chain for themselves. This means users will also have the ability to track assets to their source.
The Making of Deals
A third area that blockchain would find application is in the making of deals, as in an escrow situation. With blockchain, we can write binding contracts and guarantee these contracts will be fulfilled without the need for a third party, such as a lawyer. Through the use of smart contracts, we can ensure that funds will only be released if certain conditions are met. Smart contracts are self-executable and can handle all the functions of agreements between people such as enforcement, management, performance, and payment.
An example of real-world use of smart contracts is that of a U.K. recording artist, Imogen Heap. Imogen uses a blockchain platform called Mycelia to maintain control over her music. Rather than allowing an intermediary such as iTunes or Spotify, to take a lion’s share of her profits. She also has control over how her music is used, and how she will be compensated for its use. By extension, blockchain can be used to protect the intellectual property of any type, whether it be art, trade secrets, patents, etc., and ensure that the owner of the property is the direct beneficiary of his hard work.
Applications of Blockchain Technology in the Real World
Enough of that. Now we are on to the real world.
First and foremost, it will have a significant impact on the financial industry. The obvious benefit of using cryptocurrencies like bitcoin is that it eliminates the need for intermediaries like financial institutions when making transactions. It would particularly benefit those transferring money and assets globally as it would simplify the process, reduce transaction times, and reduce transaction costs.
Where this would prove especially beneficial is for foreign workers who send money home to their families. Remittances actually make up the biggest flow of funds from developed countries to developing countries. Currently money transfer agencies charge significant fees for this service, and the settlement process can take days to accomplish. With blockchain, the transfer would take minutes and incur a minimal cost. And furthermore, it would be accessible to the billions of people who currently do not have access to a bank.
In the future we might even see countries adopting cryptocurrency as their national currency. If this is the case, there would be no need for a central bank to print fiat, or transfer money as this could be done by the citizens themselves. This may especially be true in countries such as Venezuela where citizens no longer have faith in their own currency.
Adoption by Financial Institutions
Interestingly, financial institutions themselves are looking at ways to incorporate blockchain technology into their operations to help them stay relevant. By increasing efficiencies, cutting costs, and reducing service fees, they will add value to customers and increase customer satisfaction. Blockchain is particularly useful in streamlining processes such as settlements and reconciliations, and this will eliminate the number of people required to do those kinds of jobs. The increased transparency of blockchain transactions will also reduce the regulatory burden of this industry.
Blockchain may also find use in the buying and selling of stocks since share trading involves many third parties such as brokers and exchanges. Blockchain will speed up the settlement process and allow for greater trade accuracy.
These aren’t the only areas in the financial sector that will benefit. Consider how the use of blockchain can be improved in trade finance, syndicated lending, and accounting data reconciliation. While the financial sector will see benefits from adopting blockchain technology, which will give them a “second life” in the blockchain world, they will also see increased competition from new players in the game such as fintech startups and non-bank financial services.
Another area of application would be in digital identity verification. Online transactions require a number of steps including face-to-face checking, authentication, authorization, etc., with each of these steps required for each service provider. With blockchain, users can choose how and with whom they will share their identity, and with their digital ID, they would not need to repeat these steps with each service provider powered by blockchain.
Another industry that could benefit from the use of blockchain in the insurance industry. Some common problems that blockchain is able to tackle in this area include inefficiency, fraud, human error, and of course, cyberattacks. The use of blockchain’s distributed ledger will help to streamline the processing of insurance claims, increase security, and even speed up payment times. It would eliminate inefficiencies that stem from countless forms, human error, and poor communication.
Blockchain’s ability to safeguard sensitive information through decentralized ledgers will ensure that data cannot be corrupted or manipulated by any one authority. The chronological, time-stamping feature of blockchain ensures a clear recording of events with encrypted data. At the same time it is also completely transparent to all members on the chain, who can quickly detect any problems.
Another area where blockchain could have an impact is in the area of real estate escrow and title companies. Currently, the buying and selling of property require some sort of third-party verification in the form of escrow, title company, or lawyer. With blockchain, a trustworthy ledger can be set up with digital IDs as the property. These ID’s will contain verifiable, immutable records of ownership.
Are you looking for a job?
If all this talk about blockchain has you wondering if you should be looking for a new job, blockchain may be a part of this process as well. Blockchain could fundamentally change the entire process of job seeking, including everything from recruiting to subcontracting through to payments. With blockchain, prospective employers could have access to your CV which has been continually updated by past employers and educational institutions. Through it, they can have confidence that the information contained is accurate and trustworthy. You, as the job seeker, can ensure that through blockchain, you will have complete control over your own data, and not some third party like LinkedIn. And when it comes to being paid, a smart contract can speed up the process.
Prepare for the Future
While we have seen that blockchain technology can have a widespread application in many areas, the technology is still in its infancy. We are still years away from seeing its adoption into the mainstream. It will take time to build confidence in this new technology, and overcome potential hurdles such as speed and scalability, governance issues, increased security, and widespread acceptance by the masses. While blockchain technology may eliminate some roles in the short term and create technological unemployment, it will also create new roles in the process. Yes, there is still time to prepare and adjust to life in the blockchain world.
This might mean getting comfortable to the idea of using blockchain in our everyday lives and even trying to learn a new skill or two over quarantine.