Blockchain Technology is threatening to redefine and completely transform and disrupt the financial sectors and other industries as we know it. It's another example of digital transformation and is the next disruptive technology. However, whilst Blockchain certainly represents huge potential and opportunity, the question is can it be applied practically?
One thing that is undisputed is that Blockchain has immersed itself into the mainstream media on a global basis and has sparked interest, debate and discussion over its future and the impact the adoption of the technology can have on society. But Blockchain technology could change the way many governments operate, mostly through an increase in both efficiency and data transparency.
If a government chooses to use Blockchain for contract management, identity management, and its many other uses, it creates a publicly available record of those actions. So we could soon be seeing the beginning of a new, radical transparency in government. The same applies to many financial institutions. But will governments and major banks want to become more transparent? Some financial institutions are partnering in an effort to redefine and evolve Blockchain's solutions and that has sparked excitement within that particular industry. Investment in the technology along with the cryptocurrency Bitcoin is hitting all-time highs.
Some fiscal analysts are asking what is really driving the technology and are the downsides of it being addressed? The technology behind Blockchain is very complex to say the least, and there is still a lot of confusion as to how it all works and how it all can be applied. There are many aspects of Blockchain that are of interest to the financial industry, for example, in the management of digital assets, certified data storage and the immutable nature of transactions. At the highest level, this technology could disrupt the financial industry and modify the way we work.
The digital world today looks very, very different from a few years ago. Few would've been able to predict that the world's biggest public transportation company owns no vehicles, and the world's biggest media company creates no content of its own, and the world's most valuable retailer has no inventory, and the world's largest accommodation provider owns no property. These are examples of digital disruption that is a reality in the world today. Digital isn't just about being digital for the sake of it. You have to really embrace what digital can really do for you. What we're seeing in the business world and also in the government sector is that digital initiatives are really disrupting the status quo. In the business sector we're seeing research which claims that about 72% of businesses are vertical to digital disruption in the next three years. That's not a small number, that's a massive number and indicates clearly that there is a revolution happening.
James Wallis, Vice President, Blockchain Markets and Engagement at IBM says that Blockchain is part of this digital transformation initiated on a global scale and outlined some of the research his company has conducted in relation to the technology.
Wallis said, "We believe very strongly at IBM that Blockchain is part of that digital transformation. We've seen this concept of early adopters, which we call Blockchain explorers. There are organizations that have been on the leading-edge for the last three years adopting the technology, doing proof of concept and doing pilots. With the research we've conducted, we've discovered that 1 in 5 of these explorers is trying to disrupt the market. In many cases we've found that they've disrupted their own market and their own business. A number of banks have identified that they're under threat from start-ups and they're under threat from many different angles, so they're all trying to figure out how can they disrupt their own business to remain a strong player in the marketplace."
Wallis added that people are experimenting with different business models and that replacing an existing business process with a more efficient one, which you can do with Blockchain isn't really disruptive. The question is what new models can you put into the market that will be game-changing for your organization? He disclosed interesting details from a survey IBM did last year which involved around 400 c-suite executives in relation to Blockchain and declared that the technology was not just designed to disrupt government and financial sectors.
Wallis said, "We did a survey in the middle of last year in which we introduced around 400 c-suite executives from around to world in an effort to understand what they have been really doing so far with Blockchain. At the start of the year there was about 8% doing something with Blockchain, but the prediction was that by the end of 2017 that number would've grown to 34%. Obviously we don't have the data yet on the final numbers for 2017, but going from 8% to 34% represents a massive jump. Blockchain isn't just a banking thing or a government thing which is what most people is focusing on, it affects every industry such as supply chain, manufacturing, electronics and insurance the list goes on and on is looking at Blockchain technology."
Wallis then outlined some of the best practices that are gaining significant traction. He outlined in detail three of the best practices currently being adopted and the benefits these practices will bring.
Wallis said, "We've started to see some best practices on the initiatives that are gaining traction. The first one is, particularly in a commercial world, you have to orchestrate this thing for economic advantage. Blockchain is a team sport, it's all about an ecosystem and if you have one participant in the ecosystem gaining at the advantage of other members then that's going to be a fail. Blockchain is about trying to raise the water levels for all the different participants. Secondly, you've got to establish a circle of trust, and maybe that includes competitors. You have to understand who the different players are that can make a Blockchain network effective to lift that economic value. One of the terms we use is an MVE (Minimum Viable Ecosystem) as oppose to what traditionally people would say is a Minimum Viable Product, but this isn't a product, this is an ecosystem. The third thing we picked up on is that it is a very dynamic environment that is moving very, very fast. You have to be able to adapt, you have to be fast and take advantage of the opportunities that come along."
Other experts opinion on Blockchain technology and the disruption it will have on industries vary, Christophe Van Cauwenberghe, Head of Payment Innovation, Retail Banking said, "A financial institution is not comprised of a single business line, but is made up of many different business lines. Some businesses within an institution may be more affected by Blockchain technology whereas others may not. It all depends on which business you are in and the business model you are following."
In addition to this, Anne-Claire Gorge, Global Head of Product Management & Structured Trade said, "There has to be dialogue and collaboration between all of the players in trade finance in order to apply Blockchain technology. By collaborating with other banks and other actors in the supply chain such as exporters, importers and shipping companies, insurance companies and the like we can develop a truly digital solution for trade finance."
It appears to be that the general consensus is that Blockchain technology is not a fad. It is an emerging technology that has the ability to disrupt the status quo, which fundamentally changes the way we live. Skepticism will undoubtedly continue to cloud the technology, but once it becomes clear it adds value by addressing specific needs it will be adopted on a mass basis. Blockchain technology is here to stay!