Much like the internet, the rise of blockchain gives individuals and organizations the chance to achieve vast improvements in productivity. In my experience, blockchain can improve transactional processes among individuals, companies, suppliers and legislators to create more scalable, efficient solutions.
Blockchain is valuable because it can provide security to the underlying data, allowing companies to significantly reduce the cost of trust and collaboration, things that are often expensive for businesses.
In a Harvard Business Review article, experts discussed how blockchain offers a distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. It is designed to be immutable, meaning that once a piece of information goes in, it can’t be changed. With the database being stored in numerous locations, if a hacker or a bad actor were to modify one of the databases, the tampering would be detected through cryptography.
Beyond the attention-grabbing headlines, blockchain technology is increasingly sparking research and development among enterprises. Across numerous sectors, new opportunities are surfacing to reduce costs, streamline processes, improve data tracking and security, increase safety and mitigate fraud.
In supply chain management, companies are already using blockchain to track items through complex supply chains. Everledger, a London-based startup, is using blockchain systems to help eradicate “blood diamonds” that are mined through child labor and operations funding drug lords. The company has developed a platform that tracks origin and ownership changes along the supply chain and recently secured $20 million in funding.
Reducing counterfeit products is a major concern for many large brands, especially within the fashion world. The global market for counterfeit clothing amounts to an incredible $450 billion, and blockchain offers a clear solution. If items are registered on the system, manufacturers and suppliers can provide data about the products’ origins, records and chain of ownership. Tagging assets on a blockchain can give buyers confidence, knowing that their item is authentic.
Companies are also considering blockchain and other technologies to streamline and innovate within the auto industry. Solutions are emerging to address issues with vehicle-to-vehicle communication, cashless payments at highway tolls and automotive insurance. A specific case within the industry highlights the need to objectively measure vehicle value. Beijing Mercedes-Benz Sales Service recently partnered with a blockchain-based used car value management platform to help understand the value depreciation of its cars and automate the process in real time.
Within the financial services sector, blockchain activity has been advancing for a number of years. RBC, JP Morgan, Citibank, American Express, Visa and MasterCard are among the long list of enterprises conducting multiple blockchain-related efforts. Central banks are also following suit: A recent white paper from the World Economic Forum describes several use cases and how central banks are using blockchain technology to address long-standing issues within the industry, such as financial inclusion and payment efficiency.
Weighing Your Options
In spite of these exciting applications, blockchain isn’t necessarily the answer for everyone. Blockchain and decentralized technologies enable data robustness and integrity and eliminate the need for intermediaries. However, they can also have certain disadvantages when compared to more centralized databases and systems.
In some cases, security vulnerabilities have given certain blockchain applications, such as smart contracts, a bad reputation and slowed enterprise adoption. In order to unleash its potential, security issues need to be addressed. Additionally, some technologies are unready and untested for large-scale enterprise implementation.
So how can companies test the waters and determine if a blockchain solution is right for them? I suggest conducting small, low-risk experiments to understand the full potential of blockchain for your organization.
Pilots are a great place to start. They are often less complex to implement and provide a starting point for companies to assess and expand once more information is known. Explore, hypothesize, make mistakes, observe and, if a pilot proves successful, be prepared to scale.
The examples above highlight just a few of the industries being impacted by blockchain solutions. From pharmaceuticals to food safety, there is enormous potential for enterprises to reinvent the way they operate and get ahead of the competition. We can create efficiencies and solve problems that we haven’t been able to solve previously with other technology, leading to substantial competitive advantages.
Even with all these existing use cases, we’re still at an early stage in this industry. As blockchain technology becomes more mainstream, I expect further investment in blockchain education and R&D. I believe that this will, in turn, create unprecedented opportunities for growth.