Nov 21 2017
Since its introduction in 2009, deregulated cryptocurrency Bitcoin has brought the worldwide economy to the precipice of a currency revolution. Once nearly worthless, the value of one Bitcoin has swelled to be worth more than $7,000 in 2017 (according to CoinDesk). While Bitcoin may prove to be a passing fad, its underlying technology, blockchain, is sure to have a lasting effect on the economy in years to come.
Blockchain is a type of online database technology that is expected to transform the way industries operate in the near future. In its simplest form, it is a ledger that holds a list of transactions that automatically update across a line of independent computers. Developers and marketers key in on the increased efficiency, lower transaction costs and heightened security that comes with operating through the blockchain. As the percentage of services conducted online is expected to increase 7.3 percentage points over the five years to 2022, IBISWorld expects that the influence of blockchain technology is only beginning.
Logistics and Supply Chain
The development of blockchain database technology is making logistics or supply chain management (SCM) processes more transparent and reliable. Blockchain’s shared ledger for manufacturers, distributors and retailers enables a mechanism to accurately track the whereabouts of goods through the entire supply chain process. This tool is immensely beneficial to upstream and downstream businesses alike, as the technology promises to optimize logistics, prevent fraud and theft and ensure product safety to downstream markets.
A recent example that highlights the blockchain’s importance is Walmart’s partnership with IBM, a company that develops and markets blockchain database technology. Walmart intends to use the blockchain to increase its ability of preventing the outbreak of foodborne diseases in Walmart-sold food. For example, using the blockchain, Walmart will be able to identify the exact path traveled from farm to table of each individual product, which makes it easier to identify food products that have originated or passed through hazardous facilities. Once a threat is identified, Walmart will be able to quickly take products off their shelves and alert customers to the danger. As foodborne diseases affect nearly 600 million people each year around the world, the adoption of blockchain technology in the Supermarkets and Grocery Stores industry can greatly improve food safety and save hundreds of thousands of lives.
Purchasing a house, car or other high-priced products has historically been a time-consuming and complicated endeavor. Various mandatory forms for these exchanges are hosted on heterogeneous servers or file cabinets dispersed among over 3,000 courthouses and city halls across the United States, according to Fast Company. As a result, there is little continuity between servers, which decreases transparency and increases the potential for fraud. The implementation of a blockchain database could very well optimize the transfer process of high-value sales. For example, by developing a shared and secure database between two parties without the need of a third party, transfer documents can safely and securely be sent between buyers and sellers of real estate, cars or any other product. This will allow buyers and sellers to save money on transaction fees and increase efficiency through the entire process, as transactions are completed in real time, irreversible and verifiable.
There are currently several startups that are developing blockchain databases for real estate transactions, both commercial and residential, and companies that are working on projects to optimize the car buying and leasing processes. As more time and money are invested in this new technology, the Real Estate Sales and Brokerage industry will radically change, and the process by which buyers and sellers exchange high-priced items may become more affordable, secure and transparent.
Healthcare has much to gain from the implementation of blockchain technology, which can affect pharmaceutical manufacturers, wholesalers and retailers by allowing them to monitor products at each stage of the delivery process (IBISWorld reports: Brand Name Pharmaceutical Manufacturing, Generic Pharmaceutical Manufacturing and Pharmaceuticals Wholesaling). For medical providers, there is more than just money and efficiency at stake. While miscommunication causes $1.7 billion in damage, according to CRICO Strategies, it also results in as many as 2,000 lost lives. In many cases, these unfortunate events can be attributed to lost test results or improperly stored medical records. With a securely encrypted transaction on the blockchain, medical professionals would be able to readily access a patient’s diagnoses that were previously lost or unattainable. Patients would be given full access and control over their medical information and be able to choose whether or not to share that information with a medical professional.
A prominent example of the adoption of blockchain technology lies in the technologically advanced country of Estonia. In 2017, Estonia’s eHealth authority partnered with Guardtime, an Estonian-based software company that has developed a digital signature system based on blockchain technology. Guardtime, which is the first and only platform dedicated to ensuring the integrity and safety of data systems at an industrial scale, is well-equipped in managing, processing and protecting confidential patient information. Together, the two organizations are moving forward to accelerate adoption of blockchain-based transparency and auditability of patient healthcare records.
Blockchain technology is also expected to greatly affect the heavily entrenched financial services sector. Since the technology has the capacity to create an unforgeable and verified transaction, it has a promising future in changing the structure of financial services, especially in capital markets, which traditionally deal in terms of shares and bonds. This technology has spurred a new vehicle for raising or lending capital called crowdfunding, whereby a project raises small amounts of money from a large number of people, typically solely via the internet. In many cases, this funding has been accomplished by hosting an initial coin offering (ICO), which is a blockchain-powered campaign where a company can sell a right of ownership of a project in the form of a coin, like Bitcoin. ICOs are comparable to initial public offerings (IPO) in that they offer investors ownership of a company or entity in exchange for liquidity. Crowdfunding and ICOs have become increasingly popular recently and pose a small, but growing threat to a variety of incumbent players in the sector, including Commercial Banks and Investment Banking & Securities Dealing, in which both industries have traditionally relied on traditional lending systems with high barriers to entry to generate revenue. At the same time, other industries in the sector have a lot to gain from the blockchain’s ability to verify transactions, provide access to liquidity and create new financial instruments.
These industries and sectors are just some of the more prominent examples of those that will be positively affected by blockchain technology. This intricate database that is able to secure and verify transactions is highly applicable and will likely have a lasting impact on the 21st century economy. Even bureaucracies may shy away from their old methods of recordkeeping, implementing some measure of blockchain to verify anything from addresses to citizens’ tax records. That, of course, may take slightly longer than a nimbler startup or company within the technology sector adopting blockchain. Regardless, as the technology becomes more accepted in mainstream life, there will likely be more unforeseen opportunities to implement it more practically. It is important to look back on our history to even attempt to predict blockchain’s impact.