How Blockchain Technology Is Upending These Five Industries

By Stephanie Walden, Contributor

Today, blockchain and distributed ledger technology (DLT) technology has become part of boardroom discussions in just about every field, and it’s likely to be a key driver of Industry 4.0. Globally, the enterprise blockchain market is expected to grow from around $2.5 billion in 2016 to $19.9 billion by 2025, with a compound annual growth rate (CAGR) of 26.2 percent.

Already, blockchain business is booming. There are a slew of startups emerging to aid in blockchain deployment, industry-specific practical application, and API development. Companies like Coinbase have emerged as trusted marketplaces for buying and selling digital currency. Ripple and BitPay are two startups working toward proliferating global payments via blockchain. There’s even an entire group of media-based startups dedicated to disseminating blockchain news and information, which includes companies like CoinDesk, Pymnts, and Bitcoin Magazine.

“Blockchain is sometimes a tricky word to unpack—people have different interpretations of what it means,” said Helen Disney, CEO and founder of Unblocked, a hub for blockchain events, education, and information. “But essentially, blockchain is just a distributed, secure database.”

“Blockchain is sometimes a tricky word to unpack—people have different interpretations of what it means. But essentially, blockchain is just a distributed, secure database.”

—Helen Disney, CEO and founder of Unblocked

To better understand the technology, it’s helpful to break it down into potential use cases. Below are a few scenarios that represent how blockchain integrates into societal frameworks—and is upending global economy as we know it.

Retail

The mangoes at the grocery store may claim to be fresh and organic, but how can shoppers know for sure? Fortunately, digital leaders believe blockchain and distributed ledger technology (DLT) will transform this transparency.

DLT’s core properties like immutability, security, and real-time tracking make it well-suited for specific processes like supply chain management. This is perhaps the most impactful effect that blockchain will have upon the retail industry.

In the past couple of years, major corporations like Walmart and Maersk have experimented with blockchain for things like tracking produce and cargo. In 2017, Maersk found that more than 80 percent of goods were transported via ocean shipping—yet as much as 20 percent of the total cost went toward administrative management, such as trade documentation.

By reducing these types of administrative barriers through blockchain technology that streamlines procedures, companies could increase global trade. As Maersk stated in January 2018, the technology “will address the need to provide more transparency and simplicity in the movement of goods across borders and trading zones.”

And these new procedures are not limited to shipping. Particularly within industries that have had ethically questionable supply chains, such as the diamond industry, the technology can transform entire processes. Everledger is one company attempting to develop a “traceability initiative” built upon blockchain. The Diamond Time-Lapse Protocol maps a diamond’s lifetime journey from source to buyer.

Cryptocurrency transactions also come into play in the online commerce world. Sites like Overstock.com and Expedia accept Bitcoin as a valid method of payment at checkout and the list of major retailers that accept cryptocurrency payments continues to grow. As more companies explore DLTs, it’s clear that blockchain will establish an eminent role in 21st century retail.

Social Good and Government

There are many use cases for blockchain technology in the realm of social good. For one, organizations are harnessing blockchain for humanitarian aid. Building Blocks is using DLT to provide Syrian refugees in Jordan with documentation and a way to purchase food and supplies via cashless exchange. Other international organizations, like the Irish Red Cross and the United Nations, are also experimenting with DLT to fuel digital identity programs.

Government and supranational entities are also investigating how blockchain may be useful on a political scale. Nations from Canada to Singapore have started dabbling with DLT for things like voter registration. And one private company founded in 2015, Democracy.Earth, hopes to support a “borderless, peer-to-peer democracy” through its blockchain-based voter identity program and data storage services. (The company aims to create a truly independent democratic platform, disassociated from prying eyes of corrupt leaders and watchful governments.)

While it’s perhaps overkill to state that there is a causal relationship between blockchain adoption and economic benefit, there is proven correlation at the very least: In 2016, the Republic of Georgia rolled out a robust land-titling initiative powered by blockchain. The next year, the company was named one of the top 10 countries in the world for ease of doing business.

Banking and Law

According to the Harvard Business Review, blockchain may do to the overarching financial institutions what the internet did to media: “unlock an explosion of creative and entrepreneurial activity.”

As blockchain continues to gain traction, banks will feel pressure to reform. Credit Suisse is one big bank on board with blockchain. Earlier in 2018, the company completed a $29.6 million securities lending transaction using blockchain-powered software—one of the first examples of capital markets using blockchain for a large-scale exchange. Recently, the company rolled out syndicated loans powered by DLT systems.

To ensure banks’ continued relevancy, a variety of consortiums have popped up, bringing financial giants and fintech companies together to collaborate on commercial applications that leverage DLTs. R3, for example, consists of more than 60 large financial institutions, and is driving blockchain investigations for things like clearing and settlement, trade finance, and identity verification.

Smart contracts, which facilitate credible transactions of money, products, or services without the need for third-party oversight, also have the potential to redefine B2B industries (and upend traditional law firms). Businesses and individuals may one day perform transactions that range from escrow deals to mergers and acquisitions primarily using blockchain-powered platforms. Smart contracts will also likely permeate early-stage startups and small businesses, who may eventually find the technology more affordable than investing in in-house legal counsel to protect IP. Vancouver-based Etherparty is one startup currently allowing users to build their own smart contracts via pre-made templates.

Cybersecurity

Startups with a focus on cybersecurity are also reshaping how people will store sensitive data. Blockchain may ultimately lead to more robust cyber-defense mechanisms as data moves to systems secured by DLT.

Since blockchain technology is innately less susceptible to hacking due to its distributed nature, it’s a natural fit for secure mobile wallets such as the platform devised by Edge Security. The company wants to make “large scale data breaches a thing of the past.” Companies like Civic are also dabbling in the blockchain-for-cybersecurity space, focusing on how DLTs can play a role in multi-factor authentication.

According to a whitepaper by Deloitte on blockchain and cybersecurity, end-to-end encryption of data on a private blockchain may provide organizations with relatively high levels of protection when it comes to data confidentiality and access control. Mumbai-based Block Armour is one organization addressing this opportunity: It offers a product called Software Defined Perimeters, which blends private, permissioned blockchains with Transport Layer Security (TLS) and Software-Defined Networks (SDN) technologies. This effectively “ring-fences” a company’s sensitive data and provides exclusive access to authorized users.

Venture Capital and Fundraising

Raising money via ICO is en vogue in today’s startup ecosystem: Between January of 2017 and March of 2018, ICOs provided startups with about 3.5 times the amount of capital as did traditional VC firms, according to TechCrunch. (Initial coin offerings, or ICOs, are emerging fundraising mechanisms that mimic IPOs, except ICOs are based upon underlying crypto tokens instead of traditional valuation methods.)

Cryptocurrency philanthropy, for fundraising purposes, is also generating buzz. Organizations like United Way and the Wikimedia Foundation have begun accepting donations via Bitcoin and other cryptocurrencies.

There are also companies like Alice, an “impact management platform” that’s built on the Ethereum blockchain, which aims to bring greater levels of transparency to social funding. Alice helps ensure that organizations raising money only receive donations if they meet pre-set “goals,” like building a certain number of homes or delivering a set amount of aid packages. This means that donated funds are conditional and fundraisers are held accountable—unlike with traditional methods of charitable giving, whereby donors often have only vague ideas about what their dollars are accomplishing.

How Business Leaders (and Regulators) Are Preparing for the Future

For Disney, the biggest blockchain challenge business leaders will face is lack of education. “People naturally fear what they don’t fully understand, and they shouldn’t implement projects until they know what the risks may be,” she said. “I think a lot more time needs to be invested in getting a grasp on the whole evolving landscape of blockchain, DLT, and cryptocurrencies.”

As such, startups will likely evolve as early as this year as the market becomes more saturated. “It’s very hard to make blockchain predictions—they usually turn out wrong—but it looks like 2018 will be a year of consolidation for blockchain startups as the market becomes more crowded,” said Disney.

This year may also be one of regulation, as national governments take greater interest in token-generation events and ICOs. Until recently, the regulatory landscape regarding crypto has been somewhat of a digital Wild West, but governments around the globe—particularly the United States, South Korea, and China—are keeping close tabs on ICOs and weighing options for regulating cryptocurrencies to ensure that platforms don’t violate securities laws and that crypto-earnings are properly taxed.

For businesses just getting their feet wet in the world of blockchain, Disney suggests investing in small pilots and proofs of concept to demonstrate business cases in a low-risk environment. This, she explained, may eventually encourage advancement to larger, real-world applications of the technology.

Still, Disney warned against positioning blockchain as a cure-all that will solve all that ails business or societal ails: “It’s important to ask, ‘What is it about my problem that blockchain will solve?’ rather than, ‘I want to solve something using blockchain.'”