How to prepare for blockchain’s disruptive technology impact
Blockchain’s disruptive technology impact was a hot topic at Mobile World Congress 2017 in Barcelona, and it’s spreading throughout industries ranging from finance to government. What advantages does it offer, and how are businesses exploring them?
The rise of blockchain
Blockchain technology revolutionized money when bitcoin appeared in 2009. It enabled people to transact without banks, cutting out the financial middleman. Banks are important because they hold the ledger — the record of truth — that decides all disputes. Blockchain introduced a distributed ledger held by everyone. The ledger is always updated and all participants can read its transactions. Cryptography “sealed” all transactions in the ledger so that no one could tamper with them.
Businesses soon realized this disruptive technology’s ability to streamline transactions. Financial services companies embraced it and are already innovating with it. Blockchain’s disruptive technology is modernizing many outdated financial systems. One example is in private equity. Many shares, such as those in private companies, are not traded on public exchanges. Lawyers manage them using manual and even paper-based systems. In late 2015, NASDAQ launched Linq, a blockchain-based system for managing this process.
Banks have quantified the potential return on investment from blockchain deployments. In a Finextra report, Santander InnoVentures suggested that banks could save $20 billion each year by streamlining processes with the technology. It’s little wonder, then, that banks are investing in blockchains. Half of all banks interviewed for an Infosys survey have already invested in it or will do so this year. One-third plan commercial adoption by 2018, and the majority expect deployments by 2020. Their average investment totals $1 million.
Financial deployments have evolved in line with new usage models, reinventing blockchains exclusively for authorized parties such as financial traders. These permissioned blockchains are more efficient because they don’t use bitcoin’s computing-hungry cryptography.
Technology shows growth
Innovations continue to morph this disruptive technology into something new. For example, Accenture has now patented an editable blockchain, breaking one of the original concept’s basic principles.
Finance is not the only application for blockchain technology. According to IBM’s Institute for Business Value, 90 percent of government agencies plan to invest in it by next year. Applications will range from asset and contract management to regulatory compliance.
The IoT presents another opportunity for blockchain. Its billions of connected devices must coordinate to serve global applications en masse. Together, these two disruptive technology trends will focus on applications such as logistics. For instance, IoT sensors could measure a fruit container’s location, along with its internal temperature and humidity. Then, blockchain technology could send it to a retailer further down the supply chain to prove that the shipping firm had met its contract terms.
Blockchain’s value remains in its ability to cut out central players in the equation. Some experts expect this to threaten existing business models. At the Mobile World Congress session on this disruptive technology’s impact, panelists suggested that it would edge out companies that add little value to the supply chain, citing ticket brokers in the event industry as an example.
Blockchain technology won’t change the economy overnight, but it will offer more value as companies explore its potential. It promises not only to make existing business models more efficient, but to enable new ones in the future. The technology is today where the modern-day web was in 1993: at the beginning of what promises to be a long and spectacular journey.