I’ll admit it: much of the conversation around blockchain technology has been “inside baseball.” It’s understandable that even the savviest business person would focus on more immediate concerns and take a “wait and see” attitude toward blockchain.
Understandable, but foolish. Blockchain will disrupt your business by 2025—if not sooner! You need to prepare.
Blockchain technology is poised to change the world in ways that couldn’t have been imagined five years ago, much less at the dawn of the internet. By moving from a centralized model to a decentralized one, it will fundamentally transform the way transactions are conducted.
Blockchain disruption is moving swiftly—more swiftly than for other technology innovations. One reason is that it emerged during a massive, global digital transformation, so the digital infrastructure is already in place.
Interest and investment in blockchain technology has been growing dramatically, and MarketsandMarkets predicts a 61.5 percent annual growth rate through at least 2021. Meanwhile, a World Economic Forum report predicts that by 2027 at the latest, 10 percent of global GDP will be stored on blockchain-related technology.
As blockchain moves into more non-tech markets, the potential applications seem limitless. But the opportunity is not. The biggest question facing companies isn’t whether they will be left behind, but how quickly they need to act to stay relevant.
First movers will have the advantage. Laggards will have the regrets. “The businesses who don’t adapt to the decentralized world of the future will soon become businesses of the past,” warns Mohit Mamoria, co-founder and CEO of GOD Token.
But before exploring some of the ways blockchain is transforming business, let’s review what it is—and isn’t.
What is blockchain?
Blockchain is a digital method of making, recording, and validating transactions. Think of it as a tool to keep data in an encrypted distributed ledger. It was designed as the distributed accounting platform for cryptocurrencies. But it’s about so much more than Bitcoin.
Here are some of the basics to understand:
- It’s decentralized. No single authority can approve transactions or set specific rules to have transactions accepted; participants in the network must achieve consensus. Transactions are “peer to peer,” not mediated by a third party.
- It’s immutable. Once something is submitted to the chain, it can’t be updated, deleted or changed. The data is synced and stored on all nodes worldwide.
- It’s more secure than the status quo. There’s no centralized repository for a hacker to access. That doesn’t mean it can’t be hacked. It’s just a lot harder. To make one change, the culprit would have to hack all nodes worldwide and change the information in all computers simultaneously. It would be hard to do that unnoticed.
- It supports smart contracts. Smart contracts are computer programs that act only after specific conditions are met. Like a traditional contract, a smart contract defines the obligations being agreed to. Unlike a traditional contract, it can automatically enforce those obligations. Thor Olavsrud offers this simple example in CIO: “The days of getting a pizza in 30 minutes or less or it's free may be long gone, but blockchain could enable its return. It could even enable a sliding scale.”
- It’s not one single thing. Many different technologies can legitimately be called blockchain, and those technologies can support all sorts of applications. Moreover, there are three basic types: public, private—for instance, inside a company—and permissioned/consortium. Permissioned blockchains are partly private, but can include multiple organizations who work in a similar sector.
In theory, blockchain technology can be applied to any transaction involving value, such as money, property, etc... Don and Alex Tapscott, authors of Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World have dubbed blockchain “the first native digital medium for value, just as the internet was the first native digital medium for information.”
It makes sense then, that the financial services industry is leading the way. But today, many other industries and sectors are embracing blockchain technology, including supply-chain management, the diamond trade, and commercial real estate.
Four interesting areas to watch are healthcare, the Internet of Things, energy, and the auto industry.
Allowing interoperability in the healthcare industry
Healthcare leaders across sectors are embracing blockchain, recognizing that it’s poised to transform healthcare. The possibilities range from clinical trials, credentialing, and precision medicine to patient identification and data security.
Interoperability may be the lowest-hanging fruit. Electronic health records are generally siloed and often don’t communicate with each other—in other words, there’s no interoperability.
Providers don’t get critical information about allergies, drug lists, conditions, etc... That increases errors and costs and decreases the quality of care. It’s a problem blockchain technology can to solve. In the future, medical information could be stored on a community-wide ledger, giving clinicians and hospitals secure access to a patient’s complete history.
Increasing access doesn’t just benefit the patient and the provider. In recent years, we’ve seen exponential growth in health data. Decentralization allows de-identified patient data to be stored in a community-wide shared ledger; a clear audit trail ensures accountability. It can increase access to data on a large scale, advancing population health. Access to data can also increase efficiencies.
If we’re talking about doing away with intermediaries, we can’t ignore health insurance. In a now-famous LinkedIn post, Bruce Broussard, president and CEO of Humana, predicted that blockchain technology would disrupt the health insurance industry.
“With transparency and automation, greater efficiencies will lead to lower administration costs, faster claims, and less money wasted. Blockchain enables claims to be paid without an intermediary, since health plan members are connecting directly with their providers.”
Startups and incumbents alike are moving quickly in the healthcare space. Gem launched the Gem Health Network, a blockchain network for the global companies across the continuum of healthcare. Tierion built a platform for data storage and verification in healthcare; both startups recently partnered with Philips Healthcare.
Creating a ledger of things for the Internet of Things
Blockchain technology could be the solution to the security, privacy, and reliability concerns related to the Internet of Things (IoT). Conceivably, without a central control system, connected devices would be able to communicate with each other autonomously to conduct software updates, bugs, or energy management. If that happens, the current centralized IoT model would be obsolete.
Startups and incumbents are looking to build blockchain technology into an IoT platform, according to an August 2017 report from CB Insights.
Making the energy industry more efficient
Nearly two years ago, PwC made the case that “blockchain technology has the potential to radically change energy as we know it, by starting with individual sectors first but ultimately transforming the entire energy market.” Applications range from executing energy supply transactions and asset management to metering and billing.
Today, power and utility companies across the globe are exploring various ways to implement blockchain technology.
“Blockchain has grabbed the attention of the heavily regulated power industry as it braces for an energy revolution in which both utilities and consumers will produce and sell electricity,” members of Oliver Wyman’s energy practice write in the Harvard Business Review. “If they can seize the moment, centralized incumbents may turn out to be the true disruptors, ushering in a new era of decentralized power.”
Tracking long term transaction history in the automotive industry
EY (formerly Ernst & Young) predicts we’ll see a blockchain for the entire automotive ecosystem: Ownership, financing, registration, insurance, and service transactions could all be tracked together. Meanwhile, research firm Frost and Sullivan forecasts that by 2025, the penetration rate of blockchain technology into functional areas (e.g., retailing/leasing, supply chain logistics, smart manufacturing, etc.) will top 37 percent.
Several projects and collaborations are emerging. For example, Toyota has partnered with MIT’s Media Lab to leverage blockchain “to foster a digital environment where users – both businesses and consumers – may securely share driving and autonomous vehicle testing data, manage ride-share and car-share transactions and store vehicle usage information that could be used in the setting of insurance rates.”
New partners, new connections, existing infrastructure
Blockchain development isn’t just creating new ways of doing business; it’s fostering new ways in thinking and collaborating.
“Success in blockchain adoption will depend not on who has the best technology or app, but who can build the strongest network,” according to Fast Forward: Rethinking enterprises, ecosystems and economies with blockchains, a 2017 report from IBM. “Play for the long term — consider the blockchain as the new business environment and collaboration the optimal way of working.”
IBM has been following its own advice, building partnerships across various industries, including ones with Maersk, Nestle, and Wal-Mart.
What’s interesting is that none of these partnerships is starting from scratch. There’s no need to reinvent the wheel. Instead, understand how blockchains can extract further value from current technologies, such as big data analytics and cognitive computing, counsel the authors of the IBM report.
Those leading the charge are looking at current lines of business and identifying opportunities. The EY report offers similar advice:
“Ask yourself: how will my company make money in a market where all transactions are transparent, secure and validated, industrial assets are shared among market participants, customers have even more information than they do today, and regulatory compliance and tax collection occur in real time, at the moment transactions take place?”
It sounds exciting, right? The IBM and EY reports may appear to frame the blockchain opportunity as a carrot. But just as there are rewards for early adopters, there are penalties for laggards. A Harbor Research report says:
“Regardless of the market, innovators are already asking how blockchain will fundamentally change their place in the world. These players will be poised for rapid change and are aligning to capitalize on the efficiencies blockchain offers. Laggards will find it increasingly difficult to compete with more nimble, efficient disruptors, and stand to lose a tremendous share of the markets they once controlled.”
Blockchain will disrupt your business by 2025—perhaps even sooner. It’s time to prepare. Start with this decision tree about how to choose the best blockchain for your business.