Ever since Homo Sapiens appeared some 200,000 years ago, they, or we if you prefer, have had one thing in common—a distrust of everything new and fear of the unknown.
We made tools, hunted, circled the unidentified threat and if we couldn’t kill it or eat it, we avoided it entirely. This Neanderthal-like approach has been taken by most of us toward blockchains. For some, it’s a technology as mystifying as the cryptocurrency it protects.
But lately, blockchains are being viewed by an expanding community as a potential game-changer for business and a new “disruptor,” revolutionizing the way we gather, store and distribute data on everything from food to medical records.
At this point, there is a huge amount of confusion in the business community about blockchains, which are usually seen as synonymous with the world of cryptocurrencies and therefore something in the Neanderthal spirit to be feared and beaten into submission with a club.
But before you start swinging that club and sharpening your spears let’s take a look at the relatively new phenomenon of blockchains, what they are and what they could do.
At its core, the blockchain is an electronic ledger on a network of connected computers that holds a record of transactions between different partiers. This creates a decentralized network, which is said to be more reliable and safer than other methods—specifically the cloud.
There’s no denying this is a complex issue. But think of blockchains simply as building blocks that hold the data and make transactions more transparent.
Blockchain has been described as the underlying operating system that makes cryptocurrency transactions possible. It stores the information and assets rather than having a central repository like a traditional bank. This has many in the financial industry crying regulatory foul or more to the point, unregulated foul—as if anyone cares whether bankers have feelings.
Making it all possible are so-called “smart contracts,” which are not contracts in the usual legal sense, but agreements that use a kind of digital fingerprint for authorized users to store information, boost transaction speed and really exchange anything of value. It is available to all participating parties in transactions and is virtually tamperproof because it stores data using encrypted keys that are nearly impossible to manipulate—at least until some teenage hacker from Estonia figures out a way in.
Blockchains for business are different than they are for cryptos — like Bitcoin. But they are highly effective in reducing overhead costs since transactions are recorded once and are then visible to all parties through a distributed network. As such, you always know who you’re doing business with.
Blackchains may still be in their infancy, but many leading businesses see the potential. IBM alone has worked on over 400 blockchain projects ranging from retail, financial services and healthcare, to media and supply chain companies.
Walmart is involved in a food safety pilot with IBM that enables the chain to trace products from the shelf back to the farm in a matter of minutes. It can identify potential dangers by bringing all food safety stakeholders together to collaborate. This blockchain represents a digital ledger that allows different segments of the food system to capture information about the product, what’s been done to it and where it’s been. The ultimate goal, according to Walmart executives, is not traceability but total transparency.
Walmart is also experimenting with storing payment data on a blockchain which may be safer than cloud storage and offer greater protection from data breaches and identity theft. Recently, the company also filed two patent applications with the U.S. Patent and Trademark Office for a “vendor payment sharing system” that includes authentication protocols.
Another collaborative project is Batavia, a blockchain-based financial platform developed by the Bank of Montreal, Commerzbank and others, which is involved in sending cars from Germany to Spain and textiles used in furniture production from Austria to Spain.
Eliminating Blood Diamonds
Berkshire Hathaway Richline Group’s Helzberg Diamonds has joined IBM in developing Trustchain, blockchain technology to track diamonds, gold engagement rings and precious metals to ensure the materials are ethically sourced. This could be live by the end of the year.
De Beers, the diamond unit of Anglo American, plans to create an industry-wide blockchain to track gems each time they change hands, starting from the time they are mined.
Maersk Shipping is developing blockchain applications in the supply chain space to track the movement of goods digitally—with greater efficiency and transparency among dozens of partners around the world by eliminating paper and using one global system.
Fortacast, a Singapore software company, is using blockchain technology to help companies automate finance and operations to achieve labor savings.
Companies including Airbnb, and Daimler have purchased blockchain startups. Others such as JP Morgan, American Express, and Visa have started their research.
Observers seem to agree that the full impact of blockchains may not be felt for three or four years. If you think this is just wishful thinking, consider the internet and how long it took from its infancy to become so ubiquitous in everyday life.
As research firm Gartner said, blockchains will lead to the reformation of entire industries as well as how the economy and society operates. Speakers at the World Economic Forum in Davos this year were equally enthusiastic noting that blockchains would give rise to a new era for the internet and lead to unprecedented opportunities for trade.
The point is that companies should begin to explore blockchain opportunities now rather than wait until they become disruptive forces.