Many are forecasting that 2018 will be the year blockchain makes it big. The technology may have started as the foundation of the digital currency Bitcoin, but this year we will see big players as well as ambitious upstarts use it to reduce costs, improve customer experiences, manage contracts, improve supply chains, manage ownership, enhance security, and much more.
At the most basic level, a blockchain is a computer file that is stored in a decentralized way, where many computers around the world keep a copy of it and ensure via very advanced cryptology that the changes to the file or transactions are legitimate.
Following the proof-of-concept with Bitcoin, many started to see the potential implications of the blockchain as an entity separate from Bitcoin. In theory, it can be used to store any sort of transactional information in a way that eliminates the need for a trusted middle-man.
The most obvious applications were in finance, where it has been said that blockchain technology can effectively replace several of the key functions of a bank, such as settling payments, fraud detection and many aspects of compliance.
Several projects with the backing of internationally recognized names are already going ahead or are in development.
Deutsche Bank, HSBC and Société Générale have announced that they are implementing blockchain projects, and Nasdaq and Citibank have said they are working together to develop a payment processing system based around blockchain.
Another name to watch in the financial sphere is Ripple, which has partnered with American Express and Santander to build a blockchain-based international payment transfer system.
With the current international financial system involving trillions of dollars being transferred through often antiquated systems, incurring expense and security risk, it’s clear that a trustless and distributed system like blockchain could be highly transformational. According to analysts at Accenture, blockchain related initiatives have the potential to create efficiencies in large banks worth between $8 and $12 billion annually.
This year, however, it seems likely that attention may switch to uptake of the technology outside of the financial sector:
- Retail giant Walmart is already using blockchain in its Food Safety Collaboration Centre in Beijing to track farm origination details, batch numbers, factory and processing data, expiration dates, storage temperature and shipping details for pork.
- Governments like Dubai and Estonia are using blockchain technology to process and protect citizen data including registry, health, judicial and legislative information in a public ledger.
- In recruitment, a blockchain-based CV verification and matching service has been launched, which claims it will drastically cut the time taken by employers to check candidates’ qualifications and experience.
- Another startup, Viant, has developed a platform using a distributed ledger to track whether fish stocks are being managed in a sustainable way.
- Everledger use blockchain technology to track the provenance of diamonds, helping buyers to avoid fraud and the risk of acquiring conflict diamonds.
- And photographic technology company Kodak has announced that it is creating a blockchain-driven record keeping tool to track ownership and copyright for photographers.
Should blockchain be part of your business’s future? Whether it is right for you will probably depend on your answer to these questions:
- Can you use it to reduce costs and drive efficiencies?
If you rely on centralized, cumbersome or antiquated supply chain, inventory and ledger-management platforms, it’s likely you are wasting time and money – problems that blockchain technology may help you solve. Certainly banks have been so keen on it because of its potential for automating and securing middle-man functions such as settling payments and monitoring for fraudulent activity.
- Does your business face challenges around record keeping and deploying robust reporting and recording of transactions?
These are problems which blockchain solutions are specifically designed to solve. The immutability of the record has many potential implications for improving compliance procedures. Additionally the encrypted and distributed nature of the blockchain as a data storage medium can, if deployed properly, fill requirements for top-level security.
- Will driving efficiencies in these systems fit with your business objectives and help towards hitting KPI targets?
Adopting new technology simply because it’s new and without a clear strategy for putting it to work is often a cause of wasted time and money. If you can see (and demonstrate) that blockchain’s properties solve a particular problem or fill a particular need, then it’s a sign you should investigate more deeply.
- Are there security issues around who has access to data stored by your organization, and who has the right to edit or amend records you hold?
With blockchain, the use of public and private keys means that only those with permission can get access or make changes to data, and the lack of central control means no one can simply delete everything. When there are conditions such as a certain amount of time passing, or a number of votes being cast, before data can be released or changed, then this can be hard-coded and encrypted into the chain (a process known as creating a smart contract). If you need to restrict access to sensitive information, then blockchain makes it possible to do so for the first time without using a trusted guardian or gatekeeper.
Despite the amount of hype it has generated, blockchain is still an emerging technology and like all emerging technology it is often a little rough around the edges. When adopting technology at this stage, there’s often a low ratio of successes – those who use the tech to drive positive growth – to failures – those who don’t. But for those who do manage to get their approach right, the rewards are likely to make it all worthwhile.