Most recent media coverage of blockchain technology has focused on cryptocurrencies, such as Bitcoin.
However, it is the underlying technology of blockchain that offers business and government enormous potential to reimagine existing processes and innovate with unique solutions.
The blockchain process, in essence, allows for transactions to be recorded in a distributed “ledger”. The blockchain may be public, or “permissionless”, or “permissioned”, in which case the participants are invited to join.
For example, stakeholders in a supply chain can own, operate and enforce unique rules for their own shared-blockchain. Participants can coordinate logistics, payments, financial terms and set contract rules.
The blockchain initiative by Maersk is a classic example of this. Around 20% of the cost of shipping a container is accounted for by documentation of some form or other. When international port authorities and supporting industry players embrace this initiative, all consumers will benefit from lower costs and improved efficiencies.
There is increased efficiency of industry processes and lower auditing costs as records can be instantly and independently verified. The ability to trace data from its source to the present is a powerful factor in reducing disputes and discouraging fraudulent activity.
Blockchain creates an immutable record, or an inviolate version of data, visible to all participants in a particular blockchain. This is a key benefit.
Any information sharing across organisations, which require trust, transparency, and efficiency, will likely benefit.
Compliance with pre-determined rules may be tracked easily. Business contracts, with pre-set rules for transactions between two or more parties to a blockchain can dramatically lower the risk of noncompliance and lower costs.
This concept is known as a “smart contract”. Many industries will benefit from blockchain technology in different ways. Some examples follow.
In the automotive industry, it will be possible to track the entire history of a vehicle from pre-production to sale, and potentially until its end-of-life.
The banking industry faces considerable disruption from blockchain technology as it threatens to disintermediate, or eliminate, many of the functions currently performed by financial institutions. Payment processing is, arguably, faster, more efficient and secure with blockchain and auditing complexity is reduced.
Cyber-security will be improved with the immutability of ledger data. The validity of data will be largely guaranteed and there will be no single point of failure. Blockchain technology also provides end-to-end encryption and privacy. Sensors within an Internet of Things network may also be protected with blockchain technology.
The energy sector would benefit from blockchain technology by enabling micro-transactions between participants in a local peer-to-peer energy grid. Users and suppliers of solar energy within a geographic area could, for example, trade with each other and sell the surplus energy to the national grid. The economics of the voluminous transactions, and their validation, would be economically viable.
As a global food supplier, New Zealand must embrace blockchain technology for the purpose of providing food traceability. Efforts in France, for example, will allow the tracking of individual chickens sold in a national supermarket chain. A major producer of turkeys is doing the same in the U.S. Consumers are increasingly insisting on knowing the provenance of their food, and are willing to pay a premium for that knowledge.
In the insurance industry, claims processing and contract efficiency are low-hanging fruit to reduce costs. Disputes could be reduced with the transparency of shared data.
The legal profession will need to apply new thinking to draft smart contracts. Smart contracts may help to determine the validity of wills and the allocation of inheritances.
The control of media rights may be improved with smart contracts being used for royalty payments. Copyright can also be better protected from infringement with blockchain technology.
The real estate industry will benefit from more transparency within agreements and smart contracts can be used for the release of funds.
The travel industry will benefit from improved passenger identification, boarding, passport, payment and other documentation which is digitised and verified.
There are many government-related high-potential benefits to be realised from the application of blockchain technology. Examples include record management, reduction in the risk of voter fraud and of tax fraud, together with improvement in the accountability of government officials and improvement in securing citizen identity management.
The education and healthcare sectors are prime candidates for improving qualified access to immutable records of an individual’s qualifications and medical history.
In conclusion, while the volatility of Bitcoin prices may have dominated the public’s consciousness with respect to blockchain technology, it is the powerful underlying capabilities that offers so much potential in the near future.
As seen in the National Business Review, 2nd July 2018