Gartner’s 2018 survey of CIO’s found most companies do not yet have plans to adopt blockchain and only 1 percent have implemented the technology in one form or another. Most have heard of Bitcoin but beyond cryptocurrency many may not have a sense of potential use cases in their businesses.
But companies having a hard time figuring out how blockchain fits into their existing business processes may well soon be disrupted by startups leveraging digital ledgers in wholly new offerings. Increasing your blockchain awareness is key to reducing the threat of disruption and to including blockchain as as element in digital transformation for your organization.
In this article we provide a brief primer on what blockchain is, benefits of blockchain and then take a process view to illustrate the potential of what blockchain can do for you.
What is Blockchain?
First, for a brief introduction, check out this video by the Lisk Academy, an excellent open resource for information on blockchain. A blockchain is a secure, distributed transaction ledger in which each ledger entry, stored in blocks. Each block is connected to all other entries in the chain and cannot be altered. Blockchain ledgers exist on a decentralized network where no one computer, or node, connected to the network has control over the information on the blockchain. This is because blockchain validates data entries through consensus of network members. This lack of a central authority is why blockchain is often referred to as a “trustless” system.
Benefits of Blockchain
The decentralized nature of blockchain simultaneously solves for privacy, security and transparency. On a blockchain, the identity of a user is concealed through powerful cryptography. Data is simultaneously stored in many locations so no one version of the data can be hacked or corrupted. But along with privacy and security, blockchain systems provide end to end transparency.
Although there is broad consensus on the benefits of blockchain, there is significant questions on the cost and potential for savings. Advocates of blockchain point to the potential to reduce maintenance and compliance costs while others caution that challenges in scaling and storage challenges with blockchain technology. For more on this topic check out this article by Jason Bloomberg, founder of Intellyx.
For a balanced view of blockchain’s potential by an advocate that also takes into account practical challenges in implementation, check out this article by Arthur Iinuma, President and co-founder of ISBX, a leading blockchain development agency.
Blockchain and You
Often uses cases presented for digital transformation technologies like blockchain are industry specific. These can be very helpful in that we can immediately relate if we happen to be in the cited industry. They also tend to limit our imagination. Taking a process view enables better acuity in visioning new ways of working and new offerings.
- Contracts – One of the most frequently cited examples of blockchain uses are “smart contracts.” These contracts are referred to as smart because the terms are embedded in secure code, eliminating the need for a paper record and enabling activities to be taken automatically based on triggers in the terms of the contract.
- Payments – The most widely adopted initial use case of blockchain to date is for payments. Blockchain tokens, usually referred to as cryptocurrencies, offer real advantages for both cross-border and micro-payments. What makes blockchain payments different is that they are peer to peer instead of going through one or more institutions, such as a bank.
- Information and Records – The decentralized but secure nature of a blockchain network enables the possibility of sharing information freely throughout an ecosytem. The information shared could include records of activities performed. As information stored in blocks are appended to other blocks in the chain, these records could provide a trail of linked activities, a digital trail recording a path taken or how various components have come together to form a whole.
Each process component above has the potential to transform:
- Contracts that are paperless and can automate activities associated with contract terms
- Payments made peer to peer increase speed and privacy while eliminating fees
- Records that are secure, immutable and paperless that can be easily shared across all participating entities
Every business requires contracts, payments and records. Expect applications for these processes that exploit the capabilities of blockchain to reduce cost, secure information and increase speed. Business and operating models built around these components would transformed by converting that aspect of what they do to blockchain. Law firms are looking at adopting smart contracts. Financial institutions are beginning to offer clients a blockchain based system of exchange. Hospitals look forward to sharing records via a blockchain-based system. Expect industry specific platforms optimized for their requirements.
Putting these blockchain process components together – contracts, payments and records – opens up the possibility to transform a process end to end.
- For your supply chain – end to end transparency, automated contracts, low cost payments
- For your consumers – information on product provenance, where the ingredients originated
- For your ecosystem – low cost integration of data across a network of suppliers and users of information.
The more participants in a blockchain network the more value they receive at lower costs. This is both a strength of blockchain design and a challenge to its adoption. Like the implementation of EDI through the 80’s and 90’s it took time to get all the parties in a supply chain to adopt electronic exchange of data, but once they did the cost, speed and quality of their supply chain management was transformed. Buyers and suppliers will need to agree to participate in a blockchain-based system for recording their transactions and processing payments. Consumer product businesses will have to work with their suppliers to provide details on where and when ingredients were added. Healthcare groups will have to share in the costs of developing blockchain-based systems for integrating their records.
This will take time, but as communities come together to rethink the way they do business while leveraging the power of blockchain, one thing is certain – their way of working together will be radically different than how it is done today
For a free briefing on implications of Blockchain for your organization, contact us here.