The technology is being adopted beyond Bitcoin, from fashion to finance.
Most people familiar with blockchain first heard about it in the context of Bitcoin. But the technology has uses beyond cryptocurrency that could impact industries from finance to fashion, potentially affecting the entire global supply chain. Today, major players are beginning to explore blockchainâ€™s potential uses in security, record-keeping and more.
Ginni Rometty, the CEO of IBM, has compared blockchainâ€™s transformative power to that of the internet itself. â€śToday, blockchainâ€”the technology behind the digital currency bitcoinâ€”might seem like a trinket for computer geeks,â€ť Rometty penned in a November op-ed for the Wall Street Journal. â€śBut once widely adopted, it will transform the world.â€ť
Essentially a database for mapping digital transactions, a blockchain records â€śblocksâ€ť of data and links them to other transactions in a chain. Blockchain records are nearly impossible to modify once created, and are open to public review. The records are created in a peer-to-peer network that is not stored or maintained by a central administratorâ€”whatâ€™s known as a â€śdistributed ledger.â€ť By design, blockchain ledgers are uniquely efficient, secure, and transparent, making them ideal for record-keeping and accounting.
â€śThis is how technology goes and actually solves some really deep issues that otherwise are very hard to solve, involving having to depend upon a trusted third party,â€ť says Brian Behlendorf, executive director of Hyperledger, an open source community to advance blockchain technology that counts Intel, the Wanda Group, and J.P. Morgan among its 100 members. â€śNow we can actually trust in a commonly shared network of informationâ€”a common shared ledger. And then we can build interesting applications on top of that shared ledger.â€ť
While these uses of blockchain are mostly implemented behind the scenes, effects do trickle down to consumers. â€śThey will notice when things like bank wires take five minutes to close rather than 20,â€ť says Behlendorf, â€śor when their medical records are suddenly presented to them in the form of a portable wallet, rather than something they have to put extra effort in to get moved from one provider to another.â€ť
Globally, the finance industry has so far been among the leaders in exploring new uses for blockchain. The World Economic Forum estimates that 80% of top global banks will have launched projects by next year, ranging from rapid digital payments to secured currencies. The CLS Group, a clearinghouse that processes nearly $5 trillion in currency exchanges per day, is beginning to explore moving its trades to blockchain. Behlendorf suggests that by 2020, blockchain will be â€śbest practicesâ€ť for any asset exchange.
What industries will blockchain disrupt next? Below are examples of industries that are already exploring the new technology.
Rometty estimates that blockchain could generate â€śmore than $100 billion of efficiencies annually if applied to global supply chainsâ€”a staggering number.â€ť Blockchainâ€™s secure transaction records could help major companies save money while also offering consumer benefits like improved food safety.
For one way this might play out, look to Walmart. This fall, Walmart began testing blockchain technology on pork products in China. The companyâ€™s hope is that blockchain will help to address issues of contamination more efficiently.
â€śIt gives them an ability to have an accounting from origin to completion,â€ť Marshal Cohen, an analyst at NPD Group, told Bloomberg. â€śIf thereâ€™s an issue with an outbreak of E. coli, this gives them an ability to immediately find where it came from. Thatâ€™s the difference between days and minutes.â€ť
Product recalls are often a lengthy and expensive process for retailers, often resulting in pulling entire batches off shelves. Blockchainâ€™s consolidated ledger can digitally track data like batch number, processing information or shipping details to better identify contaminated products. It could even be used to pinpoint outbreaks before they start by recording information about storage temperature or factory conditions.
Blockchain could also ensure traceability for high-value goods such as diamonds. The Kimberley Process, a global watchdog for â€śconflict diamonds,â€ť certifies 99.8% of the worldâ€™s diamond output. The system, however, is rife with errors and fake certifications.
Earlier this year, the organization launched a pilot program to trial a blockchain-based tracking system. The system records diamond movements and creates an indisputable record with digital certification. â€śIf they get it implemented pervasively, it should be possible with an app to scan a diamondâ€¦and get a verifiable, trustworthy history of where that diamond changed hands, all the way back to the mine that it came out of,â€ť says Behlendorf.
Although not a sustainability issue per se, the Kimberly Process case shows how blockchain technology can be used to create more accountability within the supply chain. Because users can also add text to blockchain records, a product ledger could contain a detailed and accurate history. Other uses could include tracking carbon footprint, or labor conditions.
Blockchain can be used to create digital, streamlined public ledgers, which could potentially transform the way bureaucracies operate. Blockchain records could save money on paperwork, make public records more transparent, and protect records from corruption, according to advocates of the technology.
A new project from Bitland in Ghana is trialing a service that allows consumers to register land titles on a public blockchain, aiming to increase the integrity of public records. The Sweden National Land Survey has also launched a trial program to speed up property deals, which currently rely on physical documents.
â€śDigital contracts also reduce the risk of registering incorrect information and the inability to get title deed, the confirmation from the land registry of ownership of the land,â€ť the agency outlined in its documents. â€śThe proposed solution would make Sweden the front runner in this field.â€ť
Although blockchain is often conflated with Bitcoin, it can be used to create other digital currencies. As some societies move toward cashless economies, government-backed cryptocurrencies have been touted as a secure digital alternative to cash.
In West Africa, a digital currency backed by the regionâ€™s central bank recently launched in Senegal, with plans to expand to nine other countries. The eCFA is a legal, blockchain-based currency accepted on par with the countryâ€™s physical currency, the CFA Franc. Cryptocurrencies are an optimal solution to problems specific to developing nations, including widespread counterfeiting and lack of access to physical banking services in many regions. Tunisia is currently the only other country to offer a blockchain-based alternative to its national currency, launched in late 2015.
According to the Financial Times, central banks including the Bank of England are also considering how to launch their own secure cryptocurrencies.
Fashion and retail
Fashion brands are showing that blockchain also has potential creative applications. At this fallâ€™s Shanghai Fashion Week, designer Babyghost teamed with blockchain company BitSE to embed a unique blockchain ID into each item on the runway. The blockchain ledger included an interactive memory, like a video of who modeled the piece in New York or a unique photo from a Babyghost location representing the productâ€™s â€śsoulâ€ť that viewers could access with an app.
â€śThis event illustrates that fashion brands, especially high-fashion brands, need to keep the consumer in mind and give them more than a product,â€ť BitSE COO Sunny Lu told Bitcoin Magazine. â€śThe customer wants to know that the connection between them and the brand is real, and that their products are real.â€ť
Blockchainâ€™s transaction ledger is perhaps the most secure tool available today to verify authenticity, a major concern in the luxury goods sector. According to a survey conducted by J. Walter Thompsonâ€™s SONARâ„˘ division, 98% of Chinese millennials worry about whether their purchases may be counterfeit, showing the huge value to be unlocked by high-tech security measures.
For more on blockchain technology, see â€śCashless labsâ€ť (#87) and â€śBlockchain luxuryâ€ť (#98) in The Future 100: Trends and Change to Watch in 2017.