The Bitcoin buzz is more than just headlines about speculators making and then losing millions of dollars in a single day. It’s also about an emerging technology called blockchain. The application of blockchain in your industry is a conversation that is taking place at water coolers and boardrooms alike.
Worldwide spending on blockchain solutions is expected to reach 2.1 billion in 2018, according to IDC. Multiple industries are already implementing blockchain technology to create a better customer experience, reduce the cost of business and mitigate risk. If you are involved in the exchange of value or authenticity validation within your organization, it’s important that you participate – better yet, lead – the conversation about how blockchain will be applied to your business.
Blockchain is a technology for storing transactions or any other kind of data and can be further described in just three words: distributed, immutable and ledger.
It is distributed, or shared, because it works on a peer-to-peer basis and does not rely on a centralized third party like a bank to verify a transaction. Every participant has the same level of access and every transaction is reflected in each participant’s data within minutes or in some cases, seconds.
It is immutable because it theoretically cannot be altered. The blockchain technology creates a unique “fingerprint” of every transaction and then weaves that transaction fingerprint into a larger fingerprint. Thus, to alter any transaction, you would have to alter all transactions. This creates “trust”, which is essential to make a transaction in the first place.
It’s a ledger because it accounts for credits and debits (a summary of transactions). Ledgers have been at the center of commerce since ancient times. Up until recently, the internet basically turned paper ledgers into bytes. Blockchain wraps algorithms around the digital ledger to vastly enhance collaboration, establish trust and reduce administrative costs.
The finance industry, as you might imagine, will see the biggest changes first. Their costs and speed of transactions will fall dramatically: a stock trade settlement could go from taking days to mere minutes. Remittance and money transfers are also ripe for disruption. Today the average money wire fee is about 7.5% of the total amount sent while existing blockchain remittance companies are charging only 2-4%
Our food supply will also be impacted by blockchain technology. Walmart is already investing heavily into blockchain to mitigate the risk of food-borne illnesses in the meat they sell. Utilizing the immutable part of the blockchain feature, they can trace the source of a product throughout their supply chain. A distributor can also place a RFID tag on their merchandise and bill their customer automatically upon delivery.
Another application is for heavily regulated companies. These companies will be able to provide an auditor access to their general and sub-ledgers, all of which have been automatically compiled, in a secure and trusted manner. In the future, audits will take a fraction of the time and cost to businesses and regulators.
If you Google your industry, the odds are great that you’ll find an applicable use case study:
And the list goes well beyond traditional highly regulated industries, including:
- Social Media
- Music industry
- Marketing and AdTech
- Government
If you recall, the proliferation of the internet was dubbed “The Age of Information”. Today, pundits are labeling the next transformational technology, blockchain, as “The Age of Value”. How does your organization exchange and account for value? Perhaps the answer is the start of the blockchain discussion within your organization. I encourage all professionals to research more about it, network where it’s being discussed and start the discussion with a colleague over your next coffee or strategic planning meeting.
At Coherent Solutions we have been socializing, researching and implementing this technology both internally and with our clients. Feel free to reach out to me to discuss how this will impact your industry and your business and look for more blog posts and sponsored conferences from us on this topic throughout the year. Our goal is to keep you informed and ahead of this emerging technology. Let’s Innovate!