Here’s what blockchain’s tipping point means for business

Financing a big shipment? Ditch the fax machine and use blockchain
Financing a big shipment? Ditch the fax machine and use blockchain
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All disruptive technology has a “tipping point”—the moment when it moves from early adopters to widespread acceptance. Just as it was for smartphones in the 2000s, is blockchain approaching its tipping point?

Blockchain debuted in 2009 as the system to track dealing in the first cryptocurrency, Bitcoin. Essentially, it is a shared digital ledger technology that allows a continuously growing number of transactions to be recorded and verified over a network of computers. Since its emergence, organizations around the world have spotted blockchain’s potential to transform operations: private investments in blockchain companies topped $4.5 billion for the first nine months of 2017.

And across industries, business leaders are gearing up to adopt blockchain. Jacqueline Quintal, financial institutions practice leader, Aon, observed, “Nine months ago, business leaders simply wanted to understand blockchain and its potential uses. Now, seemingly, not a week goes by without a major company making an announcement about its blockchain pilots.”

Which industries will benefit most from blockchain? What use cases are being developed? And what new risks will blockchain create? Understanding these questions will prepare business professionals to harness exciting, emerging blockchain technology in their industry.

Blockchain across industries
Blockchain’s attributes makes it a secure and transparent tool with almost limitless potential. It functions as a decentralized ledger of all transactions across a network, meaning everyone on the network knows when a transaction occurs. It is tamper-proof and virtually instantaneous. Also, the chain consists of the history of transactions, so once data is saved, it can’t be changed or deleted.

Some of the most exciting blockchain applications currently being explored include:

  • Financial services: Functions that still rely on a paper trail are prime candidates for blockchain, which could streamline asset management settlements, insurance claims processing, Know Your Customer (KYC) efforts, and international payments, among other efforts.
  • Transportation and shipping: In the marine industry, many of the processes are paper-based and still use fax machines for transmitting documents to the dozens of stakeholders involved. Blockchain has the potential to speed up trade finance dramatically if all stakeholders use the system.
  • Healthcare: The healthcare industry is exploring the use of blockchain as a way to aggregate information. The technology could be used to give healthcare providers and other stakeholders secure, real-time access to error-free medical records.
  • Energy and utilities: Blockchain can serve as an inexpensive, transparent platform to record and validate financial or operational transactions across a distributed network of utilities and customers. Utilities from Austria to Brooklyn are experimenting with energy exchanges supported by blockchain.
  • Supply chain management: In sprawling global supply chains comprising hundreds of vendors and touch points, blockchain could track the journey of every component or order. Such applications could revolutionize the food supply chain, for example, especially in the event of a recall.

Barriers to adoption
Despite its potential, blockchain faces a number of obstacles that will need to be overcome before companies choose to adopt it on a broader scale. Its decentralized network runs counter to the current business emphasis on centralizing data or functions. Users and operators alike will need to shift their mind-set to embrace and trust the system.

Security is a major benefit, but its encryption and protocols can be intimidating. Since the general public largely doesn’t understand how the technology works, many still have concerns with data privacy and cyber security. As with many technologies, blockchain’s recent emergence has outpaced the ability of government regulatory agencies to issue clear guidance on its use.

And while many companies are considering blockchain uses, they aren’t in a rush to alter or jettison existing systems. Especially due to potentially high initial capital costs for enterprise-wide implementations of blockchain.

Preparing for blockchain
As companies begin to identify small-scale, easy-to-implement use cases in discrete parts of the business, identifying and mitigating any resulting risks will be essential to prepare for any blockchain integration.

Business leaders should view any initial use cases as part of their enterprise risk management. In Quintal’s experience, executives “are attuned to the business and risk implications of blockchain. And in many cases, blockchain, like other technology platforms and systems, can be covered under existing insurance programs.”

The next several years could see blockchain becoming an essential business tool, so understanding the latest developments and how it is being used will be critical.

For more information on trends creating unprecedented opportunity for organizations, visit The One Brief.