The time has long passed when blockchain was only mentioned in connection with Bitcoin and other cryptocurrencies. Since Bitcoin was launched in 2009, blockchain, or digital ledger technology (DLT), has found numerous business applications and continues to do so. The unique qualities of the technology enable it to enhance digital solutions and bring extra capabilities to diverse industries.
Firstly, blockchain is decentralized so there is no need for any central governing authority. This brings democratic control for situations where records need to be equally shared. Once information is written on the digital ledger it cannot be altered, except with the consensus of the entire network. This bestows it a level of security that is absolute, which is something that holds great potential for many uses.
The global blockchain market has been forecast to grow at a CAGR of 69.4 percent until 2025. Although the technology has yet to reach widespread adoption, the number of companies that are pioneering blockchain in their field is fast on the rise.
Using blockchain, assets can be converted to tokenized form, which means they can be fractionalized, traded and settled on the digital ledger. This obviates the time-consuming clearing and settlement processes that are often taken on by third-party clearing houses.
Asset tokenization means that the management of previously illiquid assets can be made accessible to more than just institutional investors. This opens up liquidity in particular markets, such as venture capital and real estate, to a wider range of investors. The technology also makes management more efficient, and it removes restrictions allowing assets to be globally traded.
Elevated Returns is a New York based asset management firm that completed a tokenized real estate deal in 2018, on the Ethereum blockchain.
In the world of art, The Art Token (TAT) offers tokens for fractional ownership in a collection of contemporary art that is securely stored by the Swiss government.
Supply chain management
The immutability of blockchain’s ledger makes it perfectly suited to the real-time tracking of goods as they move through the supply chain. One of the biggest challenges with existing processes is the lack of transparency, and there are ongoing losses caused by theft, counterfeiting and other criminal activity. As blockchain transactions cannot be altered and contain timestamps, all records are made completely definitive. Products can also be documented and tracked in real time for maximum efficiency and transparency. This represents increased productivity and reduced costs for businesses, and also greater ease for the consumer who can verify and track their products.
Since 2016, Walmart has partnered with IBM to track products in the food supply chain on a ‘farm to store’ basis. This improves transparency, but also helps to prevent expensive recalls and monitor for diseases.
DeBeers and other diamond producers are using blockchain in the diamond supply chain to combat the crime and corruption that the industry is well known for.
In the world of trade finance, blockchain has long been suggested as a viable solution, but it has yet to establish any projects past the pilot stages. There have been challenges with digitization in trade finance, as multiple sets of information on products and transactions are distributed across international borders. Blockchain could be used as a possible solution to this, as a decentralized network that operates by consensus would be appropriate for a union of participants in trade finance. Some corporations have been keen to explore the possibilities of DLT in trade finance.
Barclays bank has used a blockchain platform called Wave that enables bills of lading and other trade finance documents to be securely signed and exchanged. This helps to complete the long process of lading in just a few hours. The project was tested in 2016 when a credit transaction and documentation exchange between Ornua and the Seychelles Trading Company was completed successfully.
As blockchain is decentralized, there are no central points of vulnerability that hackers can exploit. Added to the immutability, this makes blockchain technology especially suitable for digital identity management.
For users, this means that their identity can be easily verified without needing to produce any extra documents. A single digital key can be matched with an immutable ledger for verification. In addition to ID, the ledger can also be used to store other personal information, such as medical records or social security information. Not only can this allow individuals to make secure transactions, but it also gives them control over their personal information without letting it become monetized by various companies.
One example is the decision of the Estonian government to deploy blockchain-powered digital identities for its citizens. Digitizing processes has reportedly saved the country two percent of its annual GDP in salaries and expenses, as well as improving security and efficiency.
The decentralization factor of blockchain holds potential advantages for the energy industry, which is otherwise controlled by a small number of large companies in each market. When solar electricity can be controlled by smart meters, all the records, transactions and settlements will be stored in the digital ledger. This can empower the individual user to trade their own electricity and energy prices will not need to be set to a fixed rate. In the distributed electricity market prices will be dependent on supply and demand. This will remove the need for a centralized grid, improve efficiency and reduce costs.
Grid+ Energy is a company that aims to help consumers save money when using renewable energy. They achieve this with the use of blockchain-powered smart software and hardware on the Ethereum network.
It is undeniable that blockchain holds great potential for a range of industries. The advantages of blockchain utilization for both business and consumers are becoming clearer to each over time, albeit slowly. Once the technology can be widely adopted, the benefits will become apparent and blockchain will slowly become universal. However, in many fields there are still traditional values and resistance to change that blockchain has yet to overcome.
Chelsea Cook , Client Service Specialist, Mustard IT