Every so often a new technology comes along that has the potential to completely transform the way we interact and do business with each other and organisations. Try to explain life before the internet or the mobile phone to a millennial and you might as well be talking about the dark ages. Blockchain is one of these revolutionary innovations that is already being widely lauded as the next big transformative technology.
Blockchain is a cryptographically secure, decentralised ledger – a dynamic database that securely keeps records called ‘blocks’. Each ‘block’ containing a timestamp and a link to the previous block. Information on these blocks is irrefutable and updates to the ledger (i.e. records of transactions) are achieved through consensus mechanisms between participants in the chain.
But is the hype around blockchain justified? The simple answer is ‘yes’. Blockchain comes with several innovative inherent capabilities that combine to make it transformational, such as the ability to exchange digital assets and data anonymously and the removal of the need for a central authority.
It has enormous potential to transform entire value chains. Let’s look at the auto manufacturing value chain as an example.
Each new vehicle is assigned a unique identifier upon production. The ID is logged to a blockchain at the factory, which propagates globally to all ledgers which could be distributed worldwide. As the vehicle is shipped to resellers, distributors and sold to the owner, the vehicle’s change of ownership is logged in the blockchain. Events such as scheduled servicing, repairs and insurance records are updated throughout use and at the time of resale the vehicle history can be traced back to the point of production with a timeline of all events throughout its life.
From a payments perspective the technology enables new business models and alternate payment solutions that can not only reduce payment errors through automatic, real-time settlement and credit but also reduce infrastructure and transaction costs.
You can find out more about how Blockchain’s disrupting the payments value chain by watching this film.
How is blockchain being used today?
There is a great deal of activity right now around implementation of Blockchain technology and use cases continue to be developed across many business verticals and industry sectors. We have seen numerous discussions over the past few years. Now that conversation and ideation have begun moving from the drawing board to production pilots and commercial applications.
Everledger, for example, is using blockchain to combat diamond theft and fraudulent claims by creating a tamper-proof ledger to track the chronological history of diamonds and fine art as well as associated integrity markers. Here blockchain has brought new levels of accuracy to charting the provenance of the world’s most precious gemstones and pieces of art.
The financial and payments sector has arguably seen the most innovation and experimentation to date of the technology. For example, SWIFT has recently announced its blockchain proof of concept utilising the Eris Tendermint consensus engine and smart contracts written in Solidity. Barclays has partnered with Wave to launch the first solution to execute a global trade transaction using blockchain technology. And Visa has also recently unveiled its International B2B Payment Solution Built on Chain’s Core Platform.
Ripple is another interesting company using distributed financial technology, based on the Interledger Protocol (ILP), to create a new payments ecosystem, facilitating near real time transfer of money, including messaging with associated compliance information in an atomic transaction. Accenture has recently announced an investment in this technology and has been instrumental in helping our clients complete the first live demo of a blockchain cross-continent implementation, resulting in money moving between Europe and North America.
What does the future hold for blockchain?
Consortia, such as R3 and The Hyperledger Project are emerging to drive new technologies around blockchain and concurrently, new use cases are emerging by the day. Blockchain has potential application across a wide range of business needs and processes across multiple industries:
Cross border and domestic payments
There is still a lot of greenfield in the blockchain space, as well as a great deal of white noise. Blockchain isn’t always the miracle Band-Aid that will fix all issues and drastically improve all processes and ledgers in any given situation, so understanding when it is the right fit and how to implement is key. Additionally, as use cases emerge, differing models of blockchain implementation are being created, resulting in hybrid applications and solutions such as Zero Proof Knowledge to meet customer, business and sometimes regulatory requirements around things like data privacy.
That said we are witnessing an important evolution in the blockchain story, particularly in the payments sphere, as we move from conversations and questions around what the technology is and how it is different to Bitcoin, to understanding how the technology is applicable to your organisation and how you can enable and integrate solutions for commercial application.
Anywhere a near real time, secure ledger of identity, history and transactions can bring efficiencies and additional security, blockchain can play a role. There is no doubt that the story is still near the beginning and the plot will thicken as new players, use cases and solutions develop. In the end, the impact of blockchain might prove to be every bit as disruptive as the internet and the mobile phone.