After the financial crisis of 2008, there have been many digital developments which promised to transform the financial sector for better, but none have gained as much momentum as Blockchain. The distributed ledger technology, most commonly associated with the cryptocurrency, Bitcoin, updates transactions, contracts and agreements in real time in a secure, transparent, highly resistant to outages, auditable and efficient way. According to PwC’s report 2017 on fintech, 55% of the businesses in financial sector are planning to internalize the technology by 2018.
Blockchain across industries
Although the most obvious application of Blockchain seems to be in the financial sector, there has been a gradual adoption among others sectors, namely- media, healthcare, insurance, aviation & social sector. This is validated by the investment made in blockchain related startups where ~$1 billion has been invested in more than 120 startups, half of which has been done in past 12 months. Blockchain’s ability to cut the middleman via a decentralized system promises to disrupt age-old concepts of currency, authority & ownership. This ability has potential uses to have far-reaching impact in almost every sector.
Food Supply Chain
The distributed ledger technology can improve trust and efficiency across the agricultural supply chain by improving food traceability and transparency. Blockchain can lead to cost savings in the back offices by giving the digital title to commodities and eliminating the double-data entry. It will give full traceability for the commodities by offering a chain of custody. There has been an increase in consumer demand for clean & organic food. Producers and manufactures are often seen struggling to verify the accuracy of data from the farm to the market and ultimately to consumer table. Currently, there are no easy and accurate means to verify the origins of a commodity such as palm oil which is plagued by issues of slave labor and pollution. Companies can use blockchain based solutions like Ambrosus to know where the food comes from and how it is produced. The interconnected system of quality assurance sensors records the entire history of food from farm to the consumer. To manage the relationship between various supply chain actors, smart contracts can be utilized which enables the automatic governance of food supply chain.
The supply chain space has been entered by bigger players like IBM too, which partnered with some of the biggest names in the global food supply chain to launch a food safety focused consortium based on blockchain. The group sees blockchain as a solution to improve transparency and food tracebility in the supply chain. Walmart partnered with IBM in 2016 in China to digitally track the movement of pork to ensure the safety standards. The trial showed that the tracking form to retailer’s shelf could be achieved in seconds rather than days or weeks. The ultimate goal would be to see all participants of the supply chain gain a permission access to data at every step from the origin to sale of the food product.
Technology, Media & Telecommunications
The media industry offers various avenues- targeted advertising, micro-transactions, coordination among multiple devices- to utilize the blockchain technology. Blockchain solutions help the advertisers to locate better and reach the targeted viewer. It is deployed to directly reward the advertising viewers thereby increasing viewer engagement and obtain improved metrics. Users access more relevant ads and viewing incentives while the advertisers obtain better data and reduced ad expenses by directly paying the host sites.
Low-cost micro-transactions can be processed without the fees that are required by existing payment networks, which can enable say a news website to charge its user per page or per article rather than a monthly charge. Blockchain offerings can be used to secure intellectual property and digital works like music and images. The distributed ledger functionality is a reliable and secure way to determine a product’s attribution and provenance. Sophisticated usage rights can be enforced with the digital block programmability. It can also foster coordination among multiple devices, thereby supporting the IoT applications whose proof-of-concept have been offered by IBM & Samsung.
One of the most obvious applications of blockchain seems to be alternative retail payment platform in the consumer and industrial products arena. ATMChain of China provides payment solution enabled by DECENT blockchain which reduces the cost of third-party transactions for the advertising agents. ATMChain provides smart contracts, automatic dividend transfers and transparency for media analysis & data reporting. It provides an overall ecosystem by allowing viewers to get a financial incentive, site providers to get rewards for hosting ad contents and better data as well as traditional exposure to advertising agents at a lower cost.
Healthcare and Lifesciences
Blockchain seems like a great choice to be integrated into healthcare industry because of its many aspects- security, efficiency and speed. The healthcare industry has found application of blockchain technology in securing the digital assets. Blockchain can be used to store health care records of patients such as client-physicians’ communications and medical bills for disputes and claims. The cryptographic security will enhance the security of such records while immutable and irrevocable nature of transactions will make claim processing efficient and dispute resolution simple. Patients can share their records with multiple providers while retaining control over the records using the blockchain technology. Alibaba in China has partnered with the government to secure data over blockchain platform. Factom, a blockchain based record-keeping service provider, has partnered with many providers of medical procedure ordering and billing services. IBM Watson Health is cooperating with US FDA to research blockchain applications towards the exchange of data in the industry. Blockchain can provide both accountability and cost efficiency in sensitive health care transactions. California-based companies like The Linklab and Chronicled are using blockchain in a pilot to track the movement of prescription drugs through the United States.
Aviation & Insurance Industry
Airlines are required to compensate travelers for flight delays or cancellations by law. But the process currently is far from favorable for the passengers. The process is such a nightmare that there are businesses that thrive on buying out claim and carrying out compensation process on someone’s behalf. But blockchain is capable of changing that if people can buy flight tickets with digital currency and airline will offer automated insurance as an add-on. Russian Airline PJSC Siberia Airlines, known as S7 has begun selling airline tickets on blockchain in partnership with Alfa-Bank. S7 has executed the service using blockchain smart contract through a letter of credit with Alfa-Bank. French Insurance company, AXA is using publicly available Ethereum based blockchain platform to offer automated compensation to air travelers in the event of a delayed flight. If the plane is delayed for over two hours, then the “smart contract” insurance offering compensates the passenger with a direct, automatic money reimbursement.
Blockchain also has a potential use in managing commercial aircraft. There are many disparate systems for managing the asset among manufacturers, operators, transporters and maintenance groups. The lack of standardization not only results in limited traceability but also increases the non-compliance costs considering the presence of about two to three million parts on a commercial aircraft. Managing the record can be made efficient if the participants in the aircraft parts supply chain submitted transcripts onto a purpose-specific ledger which will be accessible to only authorized participants. The manufacturer can start the blockchain for the particular asset, and each participant would add blocks of information to it, thereby reducing the information asymmetry.
Public & Social Sector
Blockchain finds its application in various public sector and the social sector. In education sector, it can be used to centralize the management of data from various multiple institutions and allowing them to reference and record data and digital manuscripts. It will be possible to disclose information to any third parties reliably as the secure system will make it difficult to falsify information and controls access to records. Sony has partnered with IBM to provide the service using Hyperledger to multiple institutions.
Blockchain is expected to be used in securing government-recorded citizen data. Indian state Andhra Pradesh has started a collaboration with cybersecurity firm WISeKey to securely store citizen data on a blockchain platform. The state is also looking at blockchain as a potential platform to store land registry and ration card data.
Blockchain and artificial intelligence are being used to locate the missing children who are victims of sex traffic. University of California, Berkely has developed a tool to track traffickers from legal advertisers by spotting common patterns in the suspicious ads using machine learning. This tool uses public information from Bitcoin which is used to pay for the ads to determine who placed the ad. The tool will assist in investigations of sex traffickers where funds generally move rapidly across financial instruments.
Blockchain is an extremely fast-moving and evolving phenomenon. It is quite difficult to know how or where the technology is going to impact most. But it is quite certain that it has potential to disrupt a lot of industries. Blockchain may one day enable a completely new type of organization by allowing to securely transfer value and allocate resources through smart contracts. The new type of “firms”- defined today as nexus of contracts can achieve speed and efficiency of spot markets while keeping its ability to replicate complex form of governance which is required to execute various tasks of the firm.
Written by Shitiz Synghal
Shitiz is a PGP 2016-18 student at IIM Ahmedabad