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Home » Blogs » Think Tank » Businesses Are Preparing for the Blockchain Revolution

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Businesses Are Preparing for the Blockchain Revolution

Blockchain
Photo: Bloomberg
March 5, 2020
Ivan Kot, SCB Contributor

Twelve years after its resurgence, bitcoin is still one of the hottest topics. In 2020, the first ever cryptocurrency is expected to pass its all-time high price. All-digital “alt currencies” such as Bitcoin, Ripple, and Ethereum have created an entirely new industry, with investors and businesses pouring resources into startups and related ventures.

As interesting as these new currencies are, the highlight of the show is the technology behind them: blockchain. It has the potential not just to create its own industries, but to reshape the way that consumers and businesses engage with and process vast amounts of data. Many companies, from bleeding-edge startups to multi-billion-dollar tech and finance giants, are investing in blockchain development.

However, while the opportunities may be compelling, businesses will have to contend with the inherent risks of being early adopters. As with any investment, business leaders need to have a thorough understanding of the technology, evaluate its risks, and estimate its potential returns.

Understanding the Potential

Blockchain refers to digital distributed ledger systems that make it easier to record and verify transactions, as well as to compile data. Most importantly, blockchain allows for distributed processing. By verifying and often making transactions public, blockchain becomes valuable for coordinating data processing among disparate parties, increasing oversight and transparency.

For companies that need to process huge amounts of data, such as medical records or financial transactions, distributed data processing is a game changer. Yet despite its huge potential, there are plenty of roadblocks on the way to widespread blockchain adoption. 

While the number of real-life blockchain implementation examples is still relatively small, the ones that have proved to be a success have already reshaped their respective industries. Sixty percent of CIOs surveyed for Gartner’s Blockchain Hype Cycle 2019 said they planned to adopt blockchain in the next three years. To better understand blockchain’s potential and how it contributes to breakthroughs in multiple industries, here are some real-world examples.

Blockchain Use Cases

Enterprises continue to discover countless new blockchain use cases and revisit the old ones. Visa B2B Connect uses blockchain to facilitate cross-border corporate payment processing. The system now operates without traditional intermediaries, which significantly reduces the time to settle funds while increasing security.

Following its launch in June 2019, Visa went from 30 global trade corridors to 62 in just four months, and aims to expand to more than 100 countries this year. The biggest factor in Visa’s success is its modern application programming interface (API), which allows joint customers to connect to the network with minimum efforts. A survey conducted by Visa reveals that 59% of companies expect to see revenue increase in the next five years due to faster payments and better transparency.

Slow payment collection via invoices has always been a major pain point for small and medium-sized enterprises. Crowdz, a blockchain-based invoice exchange service, is set to transform the receivables market by digitizing invoices and significantly speeding up cash flows for small and medium-sized enterprises. A former White House economist and now the platform’s chief strategist claims that more than 400 billion invoices are still manually processed. This results in often slow or unpredictable cash flow issues.

Crowdz’s revolutionary idea sparked interest among industry giants such as Barclays, generating $5.5 million in investment in 2018. In January, 2020, the Crowdz Invoice Xchange was released in its pilot version, allowing enterprises to sell invoices in an open marketplace.

Blockchain use cases expand far beyond the finance industry. IBM Food Trust, a blockchain-based platform, allows network participants to track food supply-chain data from source to retailers to end-consumers, as well as everyone in between. IBM’s solution addresses the major problem for grocery retailers globally: the need to remove every item from their shelves in case just one is affected. The Centers for Disease Control and Prevention estimates that over 48 million people get sick from foodborne illnesses each year.

Food Trust makes the global food supply chain more transparent and trustworthy, while providing significant business value by reducing waste and enabling much faster access to supply-chain information. Launched in late 2018, the Food Trust blockchain was joined by industry leaders including Nestlé, Unilever, Carrefour, Walmart, and Kroger. 

Blockchain has successfully found its use in marketing and advertising as well. The biggest drawback of traditional ad tech is the lack of transparency in its supply chain. There are plenty of fraudulent practices present in the industry. Most come down to fake ad impressions or ill-spent funds. It’s almost impossible to track how agencies spend their budgets and check the authenticity of ad clicks.

In late 2018, Toyota raised its site visits by 21% by teaming up with Lucidity, a blockchain-based analytics platform. The company worked closely with Toyota and its marketing agency Saatchi & Saatchi to identify fraudulent ad publishers that use bots to increase the number of ad clicks.

Smart Contracts 

Contracts are difficult to write up, manage, and track. Who owns the rights to what? Who is due what? Corporate managers and legal departments have to deal with these headaches all the time. With blockchain, the contract could be written up as a simple digital ledger. There, smart contracts can be set up to automatically track, record and then act upon data.

Royalty payments are a good example. A smart contract can be used to automatically pay license fees when due. With transactions verified on both sides, every party can be reassured that the terms have been met.

High Risk, High Reward

Investment is governed by an important maxim: the higher the risk, the greater the reward. This is generally true not just for stocks and other financial assets, but also for technology investments. Development and implementation of blockchain-based solutions are neither easy nor cheap.

Some companies and entrepreneurs will create revolutionary products and services built upon blockchain in the years to come. However, many projects and startups will inevitably fail. In mature technology fields, it’s easier to predict the outcome of a project, and use cases are often more tangible. Although blockchain has proved to be a viable solution across a variety of sectors, it’s still a risky bet in most cases.

The lack of regulation is a major concern hindering widespread blockchain adoption. In many cases, data-sensitive industries like healthcare can’t yet fully implement the technology due to legal roadblocks. For example, some of the basic blockchain principles directly contradict the General Data Protection Regulation’s (GDPR’s) “right to be forgotten.” As with every other disruptive innovation, legal authorities need more time to readjust to blockchain-led disruptions.

Despite many roadblocks on the way, blockchain continues to earn trust across a wide range of industries. Business leaders are finally recognizing its huge potential as one thing becomes certain: blockchain does work. Now it’s time for executives to understand how they can make it work for them. First-mover advantage is real, but only those with cautious optimism and meticulously calculated ROI will succeed.

Ivan Kot is a senior manager at Itransition, focusing on business development in verticals such as e-commerce, business automation, and tools such as blockchain for enterprises. 

Technology Data Management (Big Data/IoT/Blockchain)

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