What is Blockchain and Why is it Disrupting Every Industry?
By now most of the business world know that blockchain is something they need to be paying attention to, but how many really know what this revolutionary technology is all about and how it will change the way their industry operates?
“Revolution” is the right word for blockchain technology because it is not necessarily about certain companies gaining the advantage but, at least potentially, about broad benefits being felt across multiple sectors. “As with all major paradigm shifts, there will be winners and losers. But if we do this right, blockchain technology can usher in a halcyon age of prosperity for all,” says media theorist and author, Don Tapscott.
The key elements of blockchain are transparency and trust. These two elements are core to the efficient functioning of businesses in every sector, so there is little surprise that blockchain has already created huge value since its inception.
“Trust is foundational to all businesses, and Blockchain enables entities to seamlessly establish trust and transparency at scale. Today, The total market capitalization for the world’s crypto-currencies, led by Bitcoin on Blockchain, is more than $100 billion,” explains Vala Afshar, Chief Digital Evangelist at Salesforce.
Afshar recently interviewed his colleague at Salesforce, Brett Colbert, to explore blockchain and its growing use in a wide variety of industries. Colbert is the Solutions CTO and Vice President of Enterprise Architecture at Salesforce, previously IT CTO, and has been researching blockchain for more than three years, as well as discussing the topic with customers and the industry’s thought leaders. Afshar started by asking him the basic question: What is blockchain?
A Blockchain is a digital, distributed transaction ledger, with identical copies maintained on multiple computer systems controlled by different entities. Blockchain owes its potential to its many valuable characteristics: Reliable and Available, Transparent, Immutable, Irrevocable, and Digital.
In his book ‘Blockchain Revolution,’ Don Tapscott offers up another, somewhat simpler definition and explains the often confused link between blockchain and bitcoin or other crypto-currencies:
Bitcoin or other digital currency isn’t saved in a file somewhere; it’s represented by transactions recorded in a blockchain—kind of like a global spreadsheet or ledger, which leverages the resources of a large peer-to-peer bitcoin network to verify and approve each Bitcoin transaction. Each blockchain, like the one that uses Bitcoin, is distributed: it runs on computers by volunteers around the world; there is no central database to hack. The blockchain is public: anyone can view it at any time because it resides on the network, not within a single institution charged with auditing transactions and keeping records. And the blockchain is encrypted: it uses heavy-duty encryption involving public and private keys–like the two-key system to access a safety deposit box–to maintain virtual security.
So in each definition the focus is on an incorruptible record keeping system, transparent by being public and un-hackable due to its distributed nature. Blockchain is not just about financial record keeping, it has demonstrated its potential to enhance the management of almost all databases, making it a disruptive force in a broad spectrum of sectors according to Colbert:
Blockchain is a disruptive technology because of its ability to digitize, decentralize, secure and incentivize the validation of transactions. A wide swath of industries are evaluating blockchain to determine what strategic differentiators could exist for their businesses if they leverage blockchain.
Whether we are buying and selling, registering ownership, sending packages around the world or even confirming identities, blockchain will help us do it better. That means more efficient, more automatic, quicker, and with fewer errors; qualities that can provide clear and fundamental improvements for almost any industry that has sought to adopt it. Colbert offers some examples:
Land Use – Ownership and history of property currently requires the investigation of many different document sources such as Grantor-Grantee index, Land Records or Deed Records. The goal is to find any records related to property liens, easements, covenants, conditions and restrictions (CC&Rs), agreements, resolutions and ordinances. This is a time consuming and laborious process in which it’s easy to miss important information. Sweden is leveraging blockchain to track land registries called the Lantmäteriet. They estimate a taxpayer savings of $106 million per year based on reduction of fraud, eliminating paperwork and accelerating the process.
Identity – Across the globe we use passports to identify people, which are paper-based identity cards similar to your driver’s license and therefore counterfeitable. ISIS is reported to have the ability to manufacture fake passports. In 2013, almost 40 million “travel” documents were reported as lost or stolen since 2002, according to Interpol. Dubai is working on a digital passport with a London-based company called ObjectTech. The digital passport is based on Blockchain. “This is an identity that is fit for the digital age,” said Paul Ferris, co-founder and chief executive of ObjectTech. “Not only will it make international travel quicker and safer, but it also gives people back control of their personal digital data.”
Global Logistics and Shipping – The second largest port in Europe, Belgium-based Port of Antwerp, announced a blockchain pilot to automate and streamline the port’s container logistics operations. “According to the terminal authority, moving containers from point to point often involves more than 30 different parties, including carriers, terminals, forwarders, haulers, drivers, shippers and more. This process results in hundreds of interactions between those parties, conducted through a mix of e-mail, phone and fax.” Maersk is investigating blockchain to track global trade and shipments.
Automotive – German automaker Daimler AG has issued a corporate bond worth €100m as part of a Blockchain pilot project. “According to Daimler, the entire transaction cycle – from origination, distribution, allocation and execution of the loan agreement, to the confirmation of repayment and of interest payments – was automated digitally through the blockchain network. Lending technical support were the IT subsidiaries of Daimler and LBBW, which also adopted the Blockchain’s cryptographic signature to prevent manipulation of transactions.” Jan Brecht, Daimler’s CIO said, “We see blockchain as a promising technology, not fully mature yet, but continuously growing. Now is the right time to get into it, build up knowledge and form a network of like-minded people to share experiences.”
Aviation – Accenture’s head of Aerospace and Defense said about Blockchain, “I really see this coming in a couple of years”, speaking at the Paris Air Show in June 2017. “Through the lifecycle of the engine, the original parts, the replacement parts and configuration are all being tracked, and it is being done by a number of different companies. “Blockchain is in effect a single federated ledger that everybody who uses and touches that engine could use it as a single point of truth of what has happened to the engine,” he explained. “It is something we can see clearly in terms of the benefits and we effectively have a patent pending on how to leverage blockchain in the aftermarket.”
Manufacturing – The manufacturing industry uses QR codes and bar codes to identify products. These methods are notoriously insecure given the ease at which someone can copy or duplicates these codes. According to the Organisation for Economic Co-Operation and Development (OECD), the “imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, or around 2.5% of global imports.” Imagine if luxury goods were tracked in an immutable blockchain.
Prescription Drugs – Worldwide sales of counterfeit medicines could top US$ 75 billion this year, a 90% rise in five years, according to an estimate published by the Center for Medicine in the Public Interest in the United States of America (USA). The FDA’s Drug Supply Chain Security Act, signed into effect in November 2013, creates a requirement to ‘develop an electronic, inter-operable system to identify and trace certain prescription drugs as they are distributed in the United States.’ A San Francisco-based startup called Chronicled has launched a ‘track and trace’ pilot using blockchain to build an electronic, inter-operable system to identify and track prescription drugs as they are distributed in the United States.
Finance – Visa has a blockchain effort called “Visa B2B Connect” partnering with Chain to analyze the possibility of optimizing near real-time funds transfer system for high value bank-to-bank and corporate payments. A company called Ripple is working with banks to optimize how they send money around the world, with the goal of new revenue models, lower processing costs and better overall customer experience. IBM Global Finance is working on one of the largest blockchain implementations.
Government – The US Navy’s Naval Innovation Advisory Council (NIAC) will spearhead the testing of Blockchain technology in their 3D printing in order to help securely transfer data during the manufacturing process.
Banking – According to an Accenture survey, “Nine in ten executives said their bank is currently exploring the use of Blockchain.” Some of the focus is on transforming payments at scale and reducing the risk of failure.
Blockchain as a Service – Several enterprise software vendors have announced Blockchain as a Service offerings in which customers can leverage blockchain in a cloud environment.
The list goes on and will continue to expand as more business sectors discover the profound impact blockchain can have on the way they keep records.
Earlier this year Mojix announced an alliance with Microsoft to offer a Blockchain-enhanced version of its solution so that members of an enterprise supply chain can view their transactions related to RFID tag reads via Blockchain-empowered smart contracts. Microsoft’s Project Manifest will leverage Mojix’s market-leading IoT platform, which is currently being integrated with the ethereum blockchain to help factories, distribution centers and retailers track goods using radio frequency identification (RFID) devices.
Every business, institution, government and individual keeps records in one way or another, then consider our push into the internet of things era. We are now collecting data from anything and everything, be it an RFID-enabled supply chain or a smart buildings environmental control system. All of this data needs an organized, reliable database and blockchain offers the perfect solution according to Don Tapscott:
With this global peer-to-peer platform for identity, reputation, and transactions, we will be able to re-engineer deep structures of the firm for innovation and shared value creation. How about these billions of connected smart things that will be sensing, responding, sharing data, generating and trading their own electricity, protecting our environment, managing our homes and our health? And this Internet of Everything will need a Ledger of Everything.