How to make blockchain technology pay (clue: it’s not about Bitcoin)

John O'Sullivan
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On: 24 May 2018
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Blockchain technology

Blockchain technology is more than just an enabler for virtual currency.

The high level of security it provides for transactions also has the potential to be applied across the wider business landscape. Within just a few years it could be helping organisations enhance their supply chain accountability, find new sources of finance and more.

If you’ve heard about blockchain, the chances are it’s been in association with Bitcoin or one of the other virtual currencies making the news. It’s unlikely – unless you’re in the financial sector – that you’ve ever wondered how blockchain technology could help your organisation grow. Yet it can, eventually. Many analysts believe it will take another five years for commercial blockchain applications to appear, but there will ultimately be opportunities for businesses of all sizes to use the technology to boost efficiency, transparency and growth. Meanwhile, as we’re waiting for those opportunities to arise, it’s a good time to look at what blockchain is and what uses businesses could put it to.

Distributed anonymity.

For Bitcoin and other financial transactions, blockchain acts like an enormous ledger, distributed across a network of computers worldwide with complete anonymity. As it’s a peer-to-peer network, everyone within it can see the transactions that have occurred, but only those involved in a transaction can see its actual content. This removes the need for a central authority, and at the same time creates greater transparency.

Another way of looking at it is as a giant virtual Excel spreadsheet, where every cell is located at a different node on the network and can’t be changed. If anyone tries to change the contents of a cell, everyone else on the network will know about it because it affects all the other cells. This creates a very secure network, which is another great advantage of blockchain technology. It’s therefore no surprise that according to a 2017 PWC report on the Financial Services sector* 77% of executives asked said they expect to adopt blockchain as part of a production system or process by 2020.

77% of executives said they expect to adopt blockchain as part of a production system or process by 2020.

What may surprise you is the huge number of potential applications in other sectors too.

Not all transactions are financial.

Although blockchain was developed to facilitate and record financial transactions, it can actually record any type of transaction, which is essentially what all interactions between connected digital devices are. According to Statista**, the Internet of Things (IoT) will have an installed base of 31 billion devices by 2020, and over 75.4 billion by 2025, making IoT perhaps the greatest security challenge humanity has ever faced. If blockchain can allay people’s fears of their connected fridge spying on them or their voice-controlled home assistant eavesdropping on their conversations, it could go a long way to encouraging the development and wider adoption of IoT.

However blockchain also has applications more directly applicable to businesses and services. Take the supply chain, for example. A whiskey distillery in Adelaide, Australia recently instructed security specialists Adelphi (a Belfast-based business, incidentally) to trace and validate every single ingredient in its blended whiskey The Brisbane, and then to record them all with blockchain technology. This is a highly effective way to authenticate its blend and a high-security defence against counterfeiting.

This is a high-security defence against counterfeiting.

Protecting exports.

The same methods could be used by the many exporters we have in Ireland to reassure their customers they are receiving the products they ordered, down to the last detail. The recent major cattle exporting agreement with China, for example, could have benefited from blockchain technology to record the pedigree of each individual cow, right back to the farm and the field it came from.

In the same way, manufactured goods could be protected from counterfeiting by tagging them with an RFID or QR code with underlying blockchain record-keeping. No matter how well criminals match the look of the product, its packaging and its branding, they won’t be able to fake the blockchain data record of the genuine article. That level of security could be useful for many manufacturers, but for the makers of drug treatments or safety-critical car parts, for example, it could be invaluable for their customers’ safety and their own reputation.

Even contracts could be protected, with smart digital contracts made immutable, attestable and indisputable when they are recorded and stored using blockchain technology.

Protecting people.

The security that blockchain can provide for products is just as effective for protecting people – or their data at least. Hospital patients often have large hard-copy files that different clinicians or departments need to share. If these are digitised and protected with blockchain, relevant data will only be accessible by those with a legitimate interest and other data will be unavailable to them.

A similar approach would enable a national identity card to carry comprehensive information about the bearer – from their Department of Social Welfare benefit status to their electoral roll number – but with access to the data restricted to the relevant authorities and no cross-referencing possible unless authorised.

Show SME the money.

As the possibilities and implications of blockchain technology for SMEs become more evident, so too will the monetary ramifications – both positive and potentially negative.

On the positive side, blockchain’s peer-to-peer structure could prove invaluable for SMEs seeking financial backing. Why approach your bank and risk a refusal, when you can reach out to other businesses looking to make an investment and to cut out the middleman.

On the negative side, everyday blockchain commercial applications are several years away and too far off for anyone to ascertain their cost or return on investment, or to compile a business case. However the exponential growth of IoT represents a significant opportunity, which is tailor-made for blockchain and also for the businesses that seize the moment when it finally arrives.

*https://www.pwc.com/gx/en/industries/financial-services/fintech-survey/report.htm **https://www.statista.com/statistics/471264/iot-number-of-connected-devices-worldwide/

Interested in discovering more ICT trends? Visit Three’s Business Learning Centre.